In 1978, Bobby borrowed Pl,000,000.00 from Chito payable in two years.

The loan,
which was evidenced by a promissory note, was secured by a mortgage on real
property. No action was filed by Chito to collect the loan or to foreclose the
mortgage. But in 1991, Bobby, without receiving any amount from Chito, executed
another promissory note which was worded exactly as the 1978 promissory note,
except for the date thereof, which was the date of its execution. (2) Can Chito
foreclose the real estate mortgage if Bobby fails to make good his obligation under
the 1991 promissory note?

- No. The mortgage being an accessory contract prescribed with the loan. The
novation of the loan, however, did not expressly include the mortgage, hence, the
mortgage is extinguished under Article 1296 of the NCC. The contract has been
extinguished by the novation or extinction of the principal obligation insofar as
third parties are concerned.
DON, an American businessman, secured parental consent for the employment of
five minors to play certain roles in two movies he was producing at home in
Makati. They work at odd hours of the day and night, but always accompanied by
the parents or other adults. The producer paid the children talent fees at rates
better than adult wages.
But the social worker, DEB, reported to the OSWD that these children often
missed going to school. They sometimes drank wine, aside from being exposed to
drugs. In some scenes, they were filmed naked or in revealing costumes. In his
defense, DON contended all these were part of artistic freedom and cultural
creativity. None of the parents complained, said Don. He also said that they signed
a contract containing a waiver of their right to file any complaint in any office or
tribunal concerning the working conditions of their children acting in the movies.

Is the waiver valid and binding? Why or why not? Explain. (5%)
- The waiver is not valid and is not binding.

Although the contracting parties may establish such stipulation, clauses, terms
and conditions as it may deem convenient, they may not do so if such are
contrary to law, morals, good customs, public order or public policy (Article 1306,
New Civil Code). The parents' waiver to file a complaint: concerning the working
conditions detrimental to the moral well-being of their children acting in the
movies is in violation of the Family Code and Labor Laws.

The Chile Labor Law is a mandatory and prohibitory law and the rights of the
child cannot be waived as it is contrary to law and public policy.

Hence, the waiver is not valid and binding

Alma was hired as a domestic helper in Hong Kong by the Dragon Service, Ltd.,
through its local agent. She executed a standard employment contract designed
by the Philippine Overseas Workers Administration (POEA) for overseas Filipino
workers. It provided for her employment for one year at salary of US$1,000.00 a
month. It was submitted to and approved by POEA. However, when she arrived in
Hong Kong, she was asked to sign another contract by Dragon Service, Ltd., which
reduced her salary to only US$600.00 a month. Having no other choice, Alma
signed in the contract but when she returned to the Philippines, she demanded
payment of the salary differential of US$400.00 a month. Both Dragon Service,
Ltd., and its local agent claimed that the second contract is valid under the laws
of Hong Kong, and therefore binding on Alma.
Is their claim correct? Explain.
- Their claim is not correct.

A contract is the law between the parties but the law can disregard the contract
if it is contrary to the public policy. The provisions of the 1987 Constitution on
the protection of labor and social justice (Section 10, Article II) embody a public
policy of the Philippines. Since the application of Hong kong law in this case is in
violation of that public policy, the application shall be disregarded by our Courts.

[Assuming that the second contract is binding under the Hong Kong law] Since
the case is being litigated in the Philippines, the Philippine court as the forum
will not enforce any foreign claim obnoxious to the forum's public policy. There
is a strong public policy enshrined in our Constitution on the protection of labor.
Therefore, the second contract shall be disregarded and the first contract will be
enforced.

Jo-Ann asked her close friend, Aissa, to buy some groceries for her in the
supermarket. Was there a nominate contract entered into between Jo-Ann and
Aissa? In the affirmative, what was it? Explain.
- Article 1868 of the New Civil Code provides that by the contract of agency a
person binds himself to render some service or to do something in representation
or on behalf of another, with the consent or authority of the latter.

Jackie, 16, inherited a townhouse. Because she wanted to study in an exclusive

school, she sold her townhouse by signing a Deed of Sale and turning over
possession of the same to the buyer. When that the buyer discovered she was still
a minor, she promised to execute another Deed of Sale when she turns 18. When
Jackie turned 25 and was already working, she wanted to annul the sale and return
the buyer's money to recover her townhouse. Was the sale contract void, voidable
or valid? Can Jackie still recover the property? Explain. (4%)

- The contract of sale was voidable on the ground that Jackie is incapable of giving
consent at the time of the execution of the sale. (Article 1390 and Article 1327)
Jackie can no longer recover the townhouse unit because if a contract is voidable
on the ground of minority, the action to annul it must be filed within four (4)
years from attainment of the age of majority. Since Jackie was already 25 years
old, the action has clearly prescribed because she should have filed it before she
reached the age of 22. (Article 1391, Civil Code)