CHAPTER III CONTRACTS Conflict of Laws in Contractual Relations A contract is an agreement among sev ies involvi the delivery of a product or the ree ee the establishment of a contract, the parties are free to stipulate the terms and conditions of their relationship. These terms and conditions become the law of the contract which the parties are pound to observe. For a contractual relation to induce a conflict of laws scenario, it is imperative that the contract involve. a foreign element. This foreign element could take the form of an alien individual becoming a party to the contract or the parties choosing a foreign law as their choice of law. It could’also happen that the places of execution and performance are different from each other. ‘A conflicts situation usually involve international contracts where the parties have their establishments in different states.' Otherwise, the contract is only local when the relationship of the parties and all other relevant elements, regardless of the chosen law, are connected only with that: State? ‘Contracts are subject to the law stipulated by the parties to be their choice of law. In the absence ofa stipulation, the default law js the law of the place where the contract is executed or the lex loci contractus. Even if there is a choice of law stipulated in the contract, the law of the place of performance, will always find applicability to ensure that local laws thereof are not violated or public policy infringed by the execution of the contract. Choice of Law in International Commercial 3See The Hague Principles on r gue Conference on Private International Law. Contracts, Art. 1(2) (19 March 2018), Has 4d. 87 Scanned with CamScannerae the parties to a contrag, orms ‘and conditions ag 4 ot contrary to law, moray? iblic policy.” The parties are fre} pe hat will gover” thei contrac jerms and con” prise the & moment O i 7 Partigg ulations comPUES tS These stipulations, 5 jr contractual. 7 "constitute the law betwveq fed i case of dispute. The parties to ¢, on these terms and no derogation gh, ‘tleae are contrary to law, good orde,_ mn the form of Te ill be ore! the part are expected € fll " be allowed except only when or public policy- Bagong Filipinas Overseas Corporation Vv. National Labor Relations Com G.R. No. L-66006, February 28, 1985 i ipboard employment ts: Pancho entered into a ship! loym cea gih-Hine Kong-based firm Bagong Filipinas Overseas Corporation. Pancho was hired to work as an for a period of 12 months with a oiler in the M/V Olivines gross monthly wage of US $195. During the term of the contract, Pancho had a cerebral stroke necessitating his repatriation to the Philippines, where he eventually died. The National Seamen Board awarded his widow, Proserfina, P20,000 as disability compensation benefits. Upon appeal, the National Labor Relations Commission NLRC’) awarded her $621 times 36 months or its equivalent in Philippine currency by applying Hong Kong law in the computation of benefits, Issue: Whether Hong K i ig Kong law employment contract. governs i or the shipboard Pancho's wife? award of benefits to Held: The shipby the award of benefit and employment contract governs Scanned with CamScannerCONTRACTS 89 We hold that the shipboard employment contract is controlling in this case. The contract provides that the beneficiaries of the seaman are entitled to P20,000 “over and above the benefits’ for which the Philippine Government is liable under Philippine law.” Hong Kong law on workmen's compensation is not the applicable law. The case of Norse Management Co. vs. | National Seamen Board, G.R. No. 54204, September 30, 1982, 117 SCRA 486 cannot be a precedent because it was expressly stipulated in the employment contract in that case that the workmen's compensation payable to the employee should be in accordance with Philippine Law or the Workmen's Insurance Law of the country where the vessel is registered “whichever is greater.” Atienza v. Philimare Shipping 176 SCRA 325 (1989) Facts: Joseph B. Atienza worked as Third Mate on board the MV Tibati for the stipulated compensation of US $850 a month from January 20, 1981 to January 20, 1982. His employment was covered under the Crew Agreement, which provided for insurance benefits “as per NSB Standard Format” and was validated and approved by the National Seamen Board on January 14, 1981. Atienza died while working on the vessel in Bombay, India. His father claimed for death benefits in the amount of $30,600, which was computed at the rate of 36 months times the seaman’s monthly salary plus 10% thereof pursuant to the Workmen’s Compensation Law of Singapore. Philimare disputed the amount and argued that the death benefits were limited to P40,000 pursuant to Section D(1) of the NSB Standard Format. The Philippine Overseas Employment Administration (POEA’) ruled in favor of Philimare and held Philippine law to be the applicable law. Issue: Whether Atienza’s death benefits should be computed based on Singapore or Philippine law? Scanned with CamScannerAN CONFLICT OF Laws Held: It should be computed baseg on Phil, law, Ping ur ruling is that Norse is not ®Dplicg the pie petition. The ee is a in tha we \ was specifically stipulated by the Patios in iy eo, ment that “compensation shall © Paid to a, Ploy ae with and subject to the limitations : vee Workmen's Compensation Act of the Philippines or at Workmen's Insurance Law of the registry Of the y, whichever is greater.” That was why the highey b “hefits Prescribed by the foreign law were awarded. B Ontrasy uo auch stipulation appears in the Cre en 2. The petitioner oitett the Standen Format prescribed only the minimum benefits and does Rot preclude the parties from stipulating for higher hePensation. That may be true enough. But fre Patties in this case ain not provi benefits as the partie, did in the Non e . NO stipulation in the Crew. Agreement of, January 3, 198] lat the employee would be entitled to whi evel insurance benefits Were offered by either Philippine law Pakistan Internationa GR. No. 61594, September 28, 199 Scanned with CamScannerCONTRACTS, 5. DURATION oF EMPLOYMENT AND PENALTY This agreement is for a period of three (3) years, but can be extended by the mutual consent of the parties, XXXXXEXXK, 6, TERMINATION XXX Notwithstanding anything to contrary as herein provided, PIA reserves the right to terminate this agreement at any time by giving the EMPLOYEE notice in writing in advance one month before the intended termination or in lieu thereof, by paying the EMPLOYEE wages equivalent to one month's salary. XXXXXXXXX 10. APPLICABLE LAW: This agreement shall be construed and governed under and by the laws of Pakistan, and only the Courts of Karachi, Pakistan shall have the jurisdiction to consider any matter arising out of or under this agreement. Respondents trained in Pakistan and began working as flight attendants for PIA, with base station in Manila and flying assignments to different parts of the Middle East and Europe. With one (1) year and four (4) months remaining in their contracts of employment, PIA terminated the services of private respondents “effective 1 September 1980, conformably to clause 6 (b) of the employment agreement [they had] executed with [PIA].” Private respondents subsequently instituted a complaint for illegal dismissal and non-payment of benefits and bonuses against PIA with the Ministry of Labor and Employment (‘MOLE”). Acting on the complaint, MOLE Regional Director Francisco L. Estrella ordered their reinstatement with full back wages or, in the alternative, the payment to them of the amounts equivalent to their salaries for the remainder of the fixed three-year period ir employment contracts. The MOLE held that Scanned with CamScanner 91CONFLICT OF LAWS sivate respondents had attained the status of rogulg, cance ‘and that the stipulation limiting the periog racl 3) years was 2 el ment contract to three « null a ee f the provisions of the Labor Code id as violative o! f aa ae mplementing rules and regulations. On appea}, MOLE Deputy Minister Vicente Leogardo, Jr, adopted ndings < d conclusions of the Regional the findings of fact an‘ cl Director and affirmed the latter's award. Issues: 1, Whether the principle of party autonomy in contracts is absolute? 2. Whether Pakistani law is the applicable law? Held: Both no. The terms and conditions of the contract are subject to public policy considerations, Pakistani law cannot be applied as it violates the labor laws of the Philippines. 1. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of employment with private respondents Farrales and Mamasig, arguing that its relationship with them was governed by the provisions of its contract rather than by the general provisions of the Labor Code. Paragraph 5 of that contract set a term of three (3) years for that relationship, extendible by agreement between the parties; while paragraph 6 provided that, notwithstanding any other provision in the Contract, PIA had the right to terminate the employment agreement at any time by giving one-month’s notice to the employee or, in lieu of such notice, one-month’s salary. 2. A contract freely entered into should, of course, be respected, as PIA argues, since a contract is the law between the parties, The principle of party autonomy in contracts is not, however, an absolute principle. The rule in Article 1306 of our Civil Code is that the contracting parties may establish such stipulations as they may deem convenient, “provided they are not contrary to law, morals, good customs, public order or public policy.” Thus, counter-balancing the principle of autonomy of contracting parties is the equally general rule that provisions of Scanned with CamScannerConTRACTS 93 applicable law, especially provisions relating to matters affected with public policy, are deemed written into the contract. Put a little differently, the governing principle is that parties may not contract away applicable provisions of law especially peremptory provisions dealing with matters heavily impressed with public interest. The law relating to labor and employment is clearly such an area, and parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other. It is, thus, necessary to appraise the contractual provisions invoked by petitioner PIA in terms of their consistency with applicable Philippine law and regulations, 3. Examining the provisions of paragraphs 5 and 6 of the employment agreement between petitioner PIA and private respondents, we consider that those provisions must be read together and when so read, the fixed period of three (3) years specified in paragraph 5 will be seen to have been effectively neutralized by the provisions of paragraph 6 of that agreement. Paragraph 6 in effect took back from the employee the fixed three ()-year period ostensibly granted by paragraph 5 by rendering such period in effect a facultative one at the option of the employer PIA. For petitioner PIA claims to be authorized to shorten that term, at any time and for any cause satisfactory to itself, to a one-month period, or even less, by simply paying the employee a month's salary. Because the net effect of paragraphs 5 and 6 of the agreement here involved is to render the employment of private respondents Farrales and Mamasig basically employment at the pleasure of petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to prevent any security of tenure from accruing in favor of private respondents even during the limited period of three (3) years, and thus to escape completely the thrust of Articles 280 and 281 of the Labor Code. 4. Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies, firstly, the law of Pakistan as the applicable law of the agreement and, secondly, lays the venue for settlement of any dispute arising out of or in connection with the agreement “only fin] courts of Karachi, Pakistan.” The Scanned with CamScannerFLAWS conriict snvoked to prevent t be inv! : sagraph 10.00) oy Jaws and ee ce oF Pa iTpIMG ge, eo ae ne fication y of this CAS) oy PIA and private the applic’, matter eon petitio rigut. that. the ul je interest and that d regulations much affer ippine laws and reg a icable Phin ‘ties agreeing Upon Fhe otersiee APPS sory bY the Fe chip. Neither may én ir rel w to gover ee Mause of paragraph 10, Mioner invoke te. the sole venue for the petition re rarachi cows Me ntractine Patties f dispute; the relevant alates of. iny of 5, a bstantive contacts ake ultiple and sul eT se will show ihe aml and Sine courts, on the nn Philippine law © snip between the parties, 8 a ge roa t only exeaited in upon the other: © ‘rformed here, at least the Philippines; it we crew philippine citizens jally; private re : 7 Be eat, while petitioner, although a foreign and respondent ged to do business (and aciually O18 corporation, 0 te net in the Philippines; lastly, business) and hence resident 1 vines 3 ‘vate ts were based in bee eaaea) flights to the Middle East and jee! a spe. Burope. All the above contacts point to the Philippine courte and administrative agencies as @ Proper forum for the resolution of contractual disputes between the parties. Under these circumstances, paragraph 10 of the employment agreement cannot be given effect so as and courts of the jurisdiction to oust Philippine agencies vested upon them by Philippine law. Finally, and in any event, the petitioner PIA did not undertake to plead and prove the contents of Pakistan law on the matter; it must therefore be presumed that the applicable provisions of the law of Pakistan are the same as the applicable provisions of Philippine law. Cou hee a Stolt Achievement MT, the United States Gut of Appel re fused to entertain a suit against the US-based segs aes crewmember on the ground that paragraph arising from thee Contract provided that “claims and disputes is employment” are subject to arbitration in the o ocanno tionshiP 270, (204 Scanned with CamScannerCONTRACTS 6 Philippines. The appeals court junked Fratici Franc ¥ it si i i rier ot eagborattl be ace age aaa NLRC instead of resorting to court action for the settlement thereof, In addition, existing laws and those as regulations promulgated by ‘administrative eared ead incorporated in the contract, They, too, form part of ‘the contract as additional terms and conditions thereof. And the incor; ration of the law as another term of the agreement will not violate the non-impairment clause of the Constitution.' While new laws may impose additional burden on the parties, they cannot be labeled as an impairment to bring it within the scope of the protection provided by the Constitution. The non-impairment clause of the Constitution operates only in limited instances and this situation is not one of them. Choice of Law Stipulations ‘The principle of autonomy of contracts allows the parties to stipulate the law that shall govern their contractual relations. A choice of law stipulation will greatly aid in the achievement of the objectives of the parties in entering into a contract. Parties may providea foreign law, or a local Jaw, for this purpose, depending on what suits their interest. In addition, the parties may also provide that two or more foreign laws govern their relationship, aes hat a foreign law/s and local law/s be made applicable to their contract. The parties may provide that the stipulated law may have general or limited applicability. If the parties do not specify their chosen law, the chosen Jaw wi concerns:* (a) interpretation; obligations arising from the contract; erformance, the extent of the applicability of jl] normally apply to the following (b) rights and (©) performance including the assessment of damat and the consequences of non-pt ges; (@ the various ways of extinguishing obligations, and prescription and limitation periods; “Tolentino v. Secretary of Finance, 235 SCRA 630. Supra, n. 1, at Article 9. iid Scanned with CamScanner(©) validity and the consequences of invalidity Of the gy, (burden of proof and legal presumptions; and (®) pre-contractual obligations. Waiver of Renvoi ‘To prevent complications, parties may even application of renvoi in case the same This simply means that rules of priv no application once a foreign law is ¢ a complicated doctrine since it usuall to the TOTALITY of foreign law in obligations. Hence, the need to exclud law and just focus on a segment of tI held in Orbus Neich Med. Co. v. Bosto 2d 106, 114 (D. Mass. 2010): This court, however, is the parties’ addition of the the conflicts of law provisions” canon in the interpretation of and phrase must be presume: with a purpose, and must effect whenever reasonably finds that the phrase “without laws provisions” unambiguo intention to exclude consider Provisions in determining whi aspects of a dispute arising us d us!) To begin with, the “without regard for the confine itself Pertaining to th had intended t plain conflicts to only those e choice of subs} not at liberty to dis; phrase “without re eee, | CONFLICT OF LAWS a, Waiy is provided for by a foreigs, hs ate international law wen. chosen by the parties. Reid ly mandates the parties 78 determining their rights > : le rules of private intomagie™4 he foreign law in questigs, a n Scientific Corp., 694 F. Supp, regard gard to as BSC has done. “It ig a contracts that every word to have been employed be given a meaning and possible.” And thi t regard for the conflicts of iS court. 'Y expresses the parties’ ration of all conflicts of law ich law to apply to various inder the CDA, language of the phrase 8 of law Scanned with CamScannerCONTRACTS é to govern all aspects of their dispute, without regard to their substantive or procedural nature, Any other conclusion contradicts the plain language of the choice of Jaw provision, : Moreover, the contrary conclusion—that “without regard to the conflicts of law provisions" only excludes consideration of the choice of law rules pertaining to substantive law—would render the phrase a meaningless redundancy. Had the choice of law provision merely said “this agreement is governed by the laws of Massachusetts,” it clearly would have conveyed to this court that the parties intended for Massachusetts’ substantive law to apply to disputes arising under the contract. The parties needed go no further to express such an intention. But, importantly, the language of the CDA did go further. And this court must give meaning and effect to that additional language. It can fathom no other way to do so, but to interpret it as a statement of the parties’ intention that this court disregard all conflicts bf law provisions that might otherwise apply, in favor of straightforwardly applying Massachusetts law to all issues arising out of the contractual dispute, whether procedural or substantive. There is a growing trend also of excluding conflict of law provisions in choice of law stipulations in contracts. For example, Mnticle 8 of The Hague Principles on Choice of Law in International Commercial Contracts specifically provides that “fa] choice of law Gos not refer to rules of private international law of the law chosen by the parties unless the parties expressly provide otherwise.” The oe aon for this is to avoid the complexity ofthe application of conflicts resem ules that point to another law when the parties specifically intended a particular law to govern their contractual relations. ‘A choice of law stipulation is not, however, mandatory. Most ‘hat are to be performed locally, do agreements, especially those 1 i coaneaty the aw applicable since the mindset of the parties are already focused on the local minds are fixed on tl natural, since it will a foreign law if they ex law, Otherwise stated, the parties’ ne local law as the law of their choice, This is but tthe parties would be thinking of be absurd thal ould be thinking tract in a particular jurisdiction. ecuted a cont Scanned with CamScannerCONFLICT OF LAWS 98 ed by the nationa) is generally governed Phin law ti contrat lo 18 ‘of the Civil Goi ofthe eee, ie a es, OF bad ‘tig of the parties. atamily rights and duties on citizene on re i inding up “Jaws relating to! ersons are binding : 2 and legal capacity of Piiving abroad. Thus, there is a need to jogt eT ini tracting par" jlippines, even in determining a cont arty capa to a cot " arty would point to the ley cna the nt tional law would become loci contractus, i inapplicable. hes to Contractual Conflicts of Law inci ddressing the iss ically three principles a une issue of sate la ae sentractual disputes. These three principles ee Capacity applicable | eienne the place where the contr, i -tus, or the law of . ‘act is oan seats behind this approach is that the Parties’ mindsets are usually focused on the law of the place of execution when they enter into contracts. Without specifying any choice of law, it is understood that the parties wanted the local law to govern their contractual relation. The law of the place of execution is the default law based on the presumption that the parties would have specified a particular law if they did not want local law to govern their contractual relationship. Erie Insurance Exchange v. Edmund D. Heffernan II 925 A.2d 636 (Md. 2007) Facts: Two minors, Mallory Heffernan and Curtis Jones, were passengers in a vehicle driven b ) y another minor, John McMahon, Jr. While driving in‘ the State of Delaware with hi engers, McMahon fell asleep and collided wi trailer. All of them Pare the collision, man’s parents held a eer Family Auto Policy jay with Erie Insurance nee ee eee in Maryland to land residents. Thi auto Be cy included underinsu cove ‘ he mount of $300,000 per per: 100 per accident the Scanned with CamScannerCONTRACTS 99 motrists coverage. It must be noted that the vehicle driven by Mr. McMahon was an underinsured motor vehicle with respect to the Erie policy. The parents of the minor He Erie i the Circuit Court for Baltimore Siig Maryland, sete damages pursuant to the underinsured motorists coverage. Erie subsequently removed the case to federal court, Erie contended that Maryland law should be applied, including Maryland’s cap on non-economic damages which would drastically reduce the damages that the parents could recover. The Erie policies provided that Erie would pay damages “that the law entitles you” to recover from the owner or operator of an underinsured motor vehicle. Issue: Whether Maryland law or Delaware law governs the claim of the Heffernans? Held: Delaware law is applicable. 1. This case calls for the construction of two identical phrases within two separate insurance policies issued by Exie to the Heffernans. Specifically, the policies provide that Erie will pay damages “that the law entitles you" to recover from an ninsured/underinsured motorist. in a conflict-of-laws situation, a court 2, Generally, t the nature of the problem must determine at the outse presented to it for solution, specifically, if it relates to torts, contracts, property, or some other field, or to a matter of substance or procedure. ‘Accordingly, we first address the nature of an action by an insured against his own insurer for uninsured motorist benefits. The action by the insured against the insurer is @ contract action. Pecovery is based upon the element of tortious conduct, jin this case, the negligence of a third party. 8 Th Alletate. dng... v- Hart, 82% Md. 526, 611 A.2d 100 (1992), the issue before the Court was whether the household exclusion provision in a Florida automobile insurance policy should be enforced in light of Maryland's public policy against household exclusion clauses contained in such policies. We noted that “jn deciding questions of interpretation and validity of Scanned with CamScannerconfLict OF LAWS inarily should arts ordinarily «ans, Maryland co re the contract contract provision®s jurisdiction ancl of lex loci apply the I oe 10 a noede thatthe was made Tete HeTerman che HefTernans by ramobite insurance POV A xcuted in Marviand and ued, delivers ntract. To that end, fa choice a Maryland conti’ ld apply Maryland law ‘i yf th interpretation and validity of Ons Otte to the Heffernans. Brie to oe ed to interpret the validity 4, Here, we are Mot ae questions of coverage, of a contractual ae Tieability of the appropriate ‘The question oe ee a e ta esues of tort liability ana cape ams the nature of the problem Eriples to fort rather than contract principles, we wpe aia site of law principles, namely, the law of the Pl eae e accident to answer the question. In that regard, Delaware js the place of the tort and the place of injury. 5. Maryland law is clear that in a conflict of law situation, such as the one presented in the case sub judice, “where the events giving rise to a tort action occur in more than one State, we apply the law of the State where the injury-the last event required to constitute the tort occurred.” Laboratory Corp. of America v. Hood, 395 Md. 608, 614, 911A.2d. 841, 845 (2006). This principle is lex loci delicti. Consistent with the principle of lex loci delicti, because the automobile collision occurred in Delaware, under Maryland law, a Maryland Depecage is defined as “lal court’s application of different state laws to different stones in a legal dispute; choice of law on an issue-by- Cee aout aoe aha Dictionary 469 (8th ed. 1999), ta determine what the claimants sre entien ee ‘imants are “entitled to recover” m an action for uninsured motorist benefits. 6. We conclude, ' 0 » Pursuant to Maryland |; action by an insured against his ineuaaes basta au Brie was i therefor Scanned with CamScannerCONTRACTS 101 recover,” reference tort law, where the accident occurre issues of fault and damages, the substantive tort law of d applies, generally, to the Government v. Frank G.R. No. 2935, March 23, 1909 __ Facts: Defendant Frank entered into i plaintiff Insular Government of the Philippine | Tee work as a stenographer in the Philippines. The contract was executed in the State of Illinois, USA, and contained a provision that in case of a violation of the terms of the contract by the defendant, he will become liable to the plaintiff for the amount incurred by the plaintiff in transporting defendant from Chicago to Manila and the one-half salary paid to defendant. Before the expiration of the contract, the defendant left the service of the plaintiff and refused further compliance with the terms of the contract. Plaintiff sued the defendant for damages with the Court of First Instance of Manila. Defendant put up the special defense of minority by alleging that he was a minor under Philippine law at the time the contract was'entered into. Issue: Whether the defendant can put up the defense of minority as against plaintiff's claims? Held: No. The defendant alleged in his special defense that he was a minor and, therefore, the contract could not be enforced against him. The record discloses that, at the time the contract was entered into in the State of Illinois, he was an adult under the laws of that State and had full authority to contract. It is not disputed—upon the contrary the fact is admitted—that at the time and place of the making of the contract in question the defendant had full capacity to make the same. No rule is better settled jn law than that matters bearing upon the execution, interpretation, and validity of a contract are determined by the law of the place where the contract is made. (Scudder v. Union National Bank, 91 U. $., 406. .) Matters Scanned with CamScannerCONFLICT OF LAWS ith ite performance are regulated by the 1g, rovaiing a the place of performance. Masiara Fespectiy e a remedy, such as the bringing of ult imissibility oe evidence, and statutes of limitations, . ae Upon the Jaw of the place where the suit is brought (Idem), j celebrationis, or the law of the place wig contigs pe tiestel or celebrated. The reason pihiod this Dring is that since a contract is to be performed in a Partiul ar place ory Me it is but proper that the law of that state prern the relationship i the parties. It is but natural that the law of the place of perfoy, amet governs contractual disputes since parties to a contract are ex cent to follow and comply with the laws where they are operating i performing their obligations. Otherwise, there is a great chance S - they will be in violation of the law of the place of performance, whist can also become a ground for invalidation of their contract or yer ie performance of the contract impossible or very difficult, 3. State of the most significant relationship rule, or law of the place with the most connection to the dispute. This is basically . matter of convenience and practicality as it seeks to apply the lay of the place that has the most connecting factors to the contract. The more factors connecting the case to a particular state, the easiey it will be to determine the rights and obligations of the Parties to the contract. This approach is embodied in Section 188 of Restatomen, (Second) of Conflict of Laws which provides the following: Section 188. Law Governing In Absence Of Effective Choice By The Parties (1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in §6. (2) In the absence of an effective choice of law by the parties, the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include: (a) the place of, contracting, (b) the place of negotiation of the contract, (©) the place of performance, Scanned with CamScannerc ONTRACTS 103 (d) the location of the contract, and (©) the domicil, residence, incorporation and parties, subject matter of the Nationality, plaeo of place of business of the ‘These contacts are to be relative importance with res) (8) If the place of ne place of performance are it evaluated according to their pect to the particular issue, As enunciated in Section 188, the connecting factors to be considered are the place of contracting, the place of negotiation of the contract, the place of performance, the location of the subject matter of the contract, and the domicil, residence, nationality, place of incorporation, and place of business of the parties. This approach, therefore, takes into account the previous two approaches of lex loci contractus and lex loci celebrationis. The drawback to this approach, however, is its complexity and tendency to create confusion as one will have to list and examine the connecting factors of a state to a pending contractual dispute. This approach is unlike the previous two approaches where one just applies the law of the place of performance or execution. In re KMH 169 P.3d 1025 (2007) Facts: Kansas resident SH, an unmarried female lawyer, wanted to become a parent through artificial insemination from a known donor. The donor, another Kansas resident named DH, agreed to provide the sperm for the insemination. The inseminations were performed on SH in Missouri, although they made and agreed on the insemination in Kansas. They did not enter into a written contract regarding the insemination. SH delivered two twins months after the inseminations were performed. SH then filed a CINC petition concerning the twins, seeking a determination that DH would have no parental rights. DH filed his (iii Scanned with CamScannerconmscroriawe 104 i Jed a separate paternit same time. fil rate : answer and. at in is financial reepensipi ty id action ackn ye Sring PAN ns, Both © ate en anjons were amolidated by the court: paternity # ion to aismiss the paternity suit. The hmit their memorandum ico of law @ jtutionality of K.S,4, este to paternity nnd parental rights and Jating of the motion to dismiss. K.S,.4_ vided to a licensed ‘The donor of eral insemination of @ Oa 15 wife is treated in omer ae of thereby concei greed to in writing by the donor an‘ noted that Mis ity for 2 kno’ .d that paternity is ved, unless a! d the woman. Itmustbe souri has no statute barring ‘on of paternil "wn sperm donor for man ant proved by tic test.” ted SH’s motion to dismiss, nd that DH had no a presumpti an unmarried WO! “consanguinity or gene’ The judge then gran Taw governed a ruling that Kansas 4 Jegal or parental rights over the twins. Issue: Whether Kansas. Jaw or Missouri law governed the CINC and paternity suits between SH and DH? Held: Kansas law applied. re relevant to a choice-of-law 1. Various factors a) determination, including the procedural or substantive the residence of the nature of the question involved, ities involved, and the interest o! its law applied. As long as Kansas h: pai or [a] significant aggregation of contacts...to ensure f the State in having as “significant contact that the choice of Kansas law is not arbitrary or unfair, constitutional limits are not violated.” Also, to the extent this case is viewed as a contractual dispute, Kansas courts apply the Restatement (First) of Conflict of Laws a ae (1934), and the doctrine of lex loci contractus, i-€-» a re a of the state where the contract is made governs: ntract is made where the last act necessary for its formation occurs. _—< Scanned with CamScannerCONTRACTS 105 2. In addition, we note that Ka e often leaned toward a lex fori. or Ine of de fone approach, opting to apply Kansas law absent a clear showing that another state's law should apply. Moreover, our Court of Appeals has recognized in a ease focused on the legitimacy of a child that, “{iJn our current mobile society, place of conception of child carries little weight fin choice of law determination].” Instead, “[w]hether a child is legitimate is determined by the local law of the state which, with respect to the particular issue, has the most significant relationship to the child and the parent”; considerations include “the relative interests of those states in the determination of the particular issue,” “the protection of justified expectations,” “the basic policies underlying the particular field of law,” and the “certainty, predictability and uniformity of result.” Restatement Pero of Conflict of Laws § 6, § 287(1) & comment d 1969). 3. Here, the parties are Kansas residents. Whatever agreement that existed between the parties was arrived at in Kansas, where they exchanged promises supported by consideration, and DH literally delivered on his promise by giving his sperm to SH. The twins were born in Kansas and reside in Kansas, The only fact tying any of the participants to Missouri is the location of the clinic where the insemination was performed. 4, Under these circumstances, we hold that Kansas law applies and that significant contacts and a significant aggregation of contacts with Kansas make application of our law to the parties’ claims not only appropriate but also constitutional. This choice is neither arbitrary nor unfair; neither party would have been justified in expecting Missouri to have a controlling interest as to any dispute between them. Depecage In Buchanan v. Doe,’ the concept of depecage has been explained to be: /a.-1993)(quoting Robert A. Leflar, American Conflicts Law § Scanned with CamScannerconFts cr oF LAWS 106 ired the ney quires w which has recently rocess whereby excl technique Se phis refers rising out ofa single set fraepeenne tie case aisiNg Or, OF different me of “epoca ; a eas edi 2 te a cour of facts ay be ways been the a Sn Ine ah i or is meld to be ae other law, ie when estions by SM qural had substantial sharacterized 28 S das always been efit substantive jssues cout different states, understood 00 under the laws of @ifireN’ Boor ry OF ee neing considerations 18 they Zhai ey come hi apply 0 te oily increased discussion and analysis o area is th the old technique. wrance D. Heffernan II; th, i ange v. Edmund ‘ the Scie ras ae more reiterated and applied. The court cancept of depo sland aw in interpreting the policy’s contractual in rico plied Delaware lav in determining tort liability, aoe the court utilized the doctrine of lex loci contractus in holding bath .d the contractual provisions, but applied ‘Maryland law governe pr appli pa Lie or Delaware law, in determining the tort liability of the insurer. The court in Hrie first determined the applicable law with respect to the insurance policy and when it finally found Maryland law to be the applicable law, it looked to Marylands approach to determining liability in tort cases. It so happened that ‘Maryland followed the theory of lex loci delicti in torts cases that, eventually, Delaware law was applied since it was the law of the place where the delict occurred. Pursuant to depecage, there was thus an application of the laws of different states in the resolution of the dispute between the Heffernans and Erie. Philippines Follows Lex Loci Contractus vices, Inc, Flerida Ruch Rome the Supreme Court, speaking thru Justice is jurisdict;, » declared that “lex log} contractus governs in nequivocal declaration means is 926 4.24 636 at, 200 ‘GR. No. 129584, December 1998, Scanned with CamScannerCONTRACTS 107 that our courts are obliged to apply the lat of the contract in case a conflict of laws dispute concerning contracts is brought to the courts. It cannot be otherwise, as applying lex loci celebrationis or state of the most significant relationship will result in the application of the law of a different state. Hence, if a contract js executed in the Philippines, and the contract specifies no choice of Jaw, the governing law will be Philippine law. W of the placo of execution Triple Eight Integrated Services, Inc. v. NLRC G.R. No. 129584, December 3, 1998 Facts: Private respondent Osdana was recruited by petitioner for employment with the latter’s principal, Gulf Catering Company (“GCC”). Petitioner and private respondent signed a Contractor-Employee Agreement, which provided that she would be employed as a waitress for twelve (12) months with a salary of two hundred eighty US dollars ($280). Osdana left for Riyadh, Saudi Arabia, commenced working for GCC, and was assigned to the College of Public Administration of the Oleysha University. She was made to wash dishes, cook pots and utensils, and perform janitorial work and other tasks which were unrelated to her job designation as waitress. Osdana suffered from numbness and pain in her arms that led to her confinement at the Ladies Villa, a housing facility of GCC. Osdana later resumed work, this time as Food Server and Cook at the Hota Bani Tameem Hospital until she was again confined at the Ladies Villa for no apparent reason. When she retumed to work, she was re-assigned to the Oleysha University where she was made to work long hours and under harsh conditions. This caused her to develop Bilateral Carpal Tunnel Syndrome that led to her hospitalization. She underwent two surgical operations and was later discharged from the hospital. However, she was subsequently dismissed from work and was not given her separation pay nor was she paid her salaries, When she returned to the Philippines, Osdana filed a complaint with the POEA against the petitioner for unpaid and underpaid salaries, salaries for the unexpired portion of the employment contract, moral and Scanned with CamScanneres, as Well a8 the 8 Tindlor imposition op mn tner THC Case Wag potlanch of the NLRC tion “ares, Who ruled in and ass wet a or Arbiter a favo! ne edant. ‘the NLRC al med the decision of e \. favor of OF : = vhat Inw governs private. respondent 2M 0 oa from employment 2 ent’s i ine awe applic’: . philippine law apP! 2 Held: PPP tos good faith on the part ner attributes 8°" as the concern for 1. Petition 1 being (sic) of private ; i, claiming of its principal, claiming sical the welfare and ve her employer to take the painful responder "yminating her from the service an having decision 0! Philippines at its expense. The = ae to risk the aggravation of the dlnese of private respondent, which could have been the logical consequence were private respondent allowed to continue with her job. The Court notes, however, that aside from these bare allegations, petitioner has not presented any medical certificate or similar document from a competent public health authority in support of its claims. On the medical certificate requirement, petitioner erroneously argues that private respondent was employed in Saudi Arabia and not here in the Philippines. Hence. there was a physical impossibility to secure from 4 Paiiprne public health authority the alluded medical cured within a aa respondent's illness will not be of six months. oF ae se misses the Point, as counsel ent states in the C at s t e Comment. T! PLY prescribes a certification by a com Ss ioe ; ipetent public health authori authority,” 4 Mot a Philippine public health sd, i lana was Physically unfit to continue i If, indeed, 0, er employment, hey «oy ent, her emph 4 certi ‘ployer cou, . 3 ification to that effect. fro 7 aor a aang petent public RE Scanned with CamScanner109 health authority in Saudi Avani i complaint for illegal dismiseal, M°*°bY heading off any The requirement for a me Article 284 of the Labor Code ca; otherwise, it would sanction the unilateral and arbitra: determination by the employer of the Bravity or etanvet the employee’ 8 illness and thus defeat the publi i the protection of labor, facet dical certificate under nnot be dispensed with; 2. Petitioner likewise attempt: i medical certificate requirement, by Soniaaee ee tee Osdana Was working in Saudi Arabia, her employment was subject to the laws of the host country. Apparently, petitioner hopes to make it appear that the labor laws of Saudi Arabia do not require any certification by a competent public health authority in the dismissal of employees due to illness, Again, petitioner's argument is without merit, First, established is the rule that lex loci contractus (the law of the place where the contract is made) governs in this jurisdiction, There is no question that the contract of empl Defenses to Jurisdiction and Choice of Law Conflict of laws involves three phases and they are jurisdiction, choice of law, and recognition and enforcement of judgment. These three phases are separate from each other that a defense in one phase is not a defense in other phases, For example, the doctrines of lex loci celebrationis and lex loci contractus are not grounds to question the jurisdiction of the court. In like manner, the defense of forum non conveniens cannot be used as a defense to choice of law disputes. Thus, it is important to analyze the reall issues in a conflicts problem for the purpose of utilizing the appropriate approach to a contractual dispute. Otherwise, the use of certain theories in conflict of laws may be deemed improper. Scanned with CamScanner| 110 Hasegawa ve Kitamura mber 23, 2007 9.149177, Nove eon Engineering Consulta pe im i ne oe a oa mnt CICA") with respondent Minory Contra, 2 Japanese national permanently residing in Rita ippines. The aBreemn provided that respondent was to extend professional services to Nippon for a wear starting om “April 1, 1999. Nippon then assigned ient to work as the project manager in various e Philippines. 0, petitioner's general manager, Kazuhiro Hasegawa, formed respondent that the Kanuhir vould no longer bo renewing his TCA and company yjoes would be utilized only wntil March 31 2000. Respondent requested a negotiation conferenc ’ pontNinpon insisted that his contract was for a fixed 7 that had already expired. oo - Respondent subsequently cific performal : FED Gout of Lipa ee fe saistet wi at atte the complaint for lack jurisdiction, etcetera a cents isdiction, asserting that the Se nr ital in tas pibpet onic of Japan following the princi ee af 1d the proper courts andro contracts. The ‘ower Si eee celebrations miss, a decisi ourt denied the moti: to die, decision which was afirmed b ct fod gcd The CO held that the by the Coury rations princi ie te it the sedis oa eae serenars in the pleadings was the valiit rae put in issue. T) ity of the wi application of the paola toe ene the lowe ins C1] . rr ce i: pl of ler loci solutionis, Issue: Wh _,/Ssue: Whethe A Philippine courts in the subject matter jurisdicti Principles of lex loci civil cases may bi Jurisdiction of i celebrations, lex loc ae ten the ; t contractus, the state of th le most signi: non convenione “nificant relationship rul 3 ip rule, or forum conrLict OF LAWS GR. Nt respond projects in th On February 28, 2001 int sued ‘petitioners for Held: N the juriedicn eee ate - , nO} Philippine oot ‘ounds for questioning Scanned with CamScannerCONTRACTS mi 1. To elucidate, in the judicial resolution of conflicts problems, three consecutive phases are involved: jurisdiction, choice of law, and recognition and enforcement of judgments, Corresponding to these phases are the following questions: (1) Where can or should litigation be initiated? (2) Which law will the court apply? and (3) Where can the resulting judgment be enforced? 2. Analytically, jurisdiction and choice of law are two distinct concepts. Jurisdiction considers whether it is fair to cause a defendant to travel to this state; choice of law asks the further question whether the application of a substantive law which will determine the merits of the case is fair to both parties, The power to exercise jurisdiction does not automatically give a state constitutional authority to apply forum law. While jurisdiction and the choice of the lex fori will often coincide, the minimum contacts for one do not always provide the necessary significant contacts for the other. The question of whether the law of a state can be applied to a transaction is different from the question of whether the courts of that state have jurisdiction to enter a judgment. 3. In this case, only the first phase is at issue: jurisdiction. Jurisdiction, however, has various aspects. For a court to validly exercise its power to adjudicate a controversy, it must have jurisdiction over the plaintiff or the petitioner, over the defendant or the respondent, over the subject matter, over the issues of the case and, in cases involving property, over the res or the thing which is the subject of the litigation. In assailing the trial court’s jurisdiction herein, petitioners are actually referring to subject matter jurisdiction. 4. Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority which establishes and organizes the court. To succeed in its motion for the dismissal of an action for lack of jurisdiction over the subject matter of the claim, the movant must show that the court or tribunal cannot act on the matter submitted to it because no law grants it the power to adjudicate the claims. 5. In the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is not properly Scanned with CamScanner~ 2 CONFLICT OF LAWS ve by law with jurisdiction to hear the subjo ee -sy for, indeed, Civil Case No. 00-0264 for pont = performance and damages is one not capable of pecuniary éstimation and is properly cognizable by the RTC of Lipa City. What they rather raise as grounds to question subject matter jurisdiction are the principles of lex fog celebracionis and lex contractus, and the state of the most significant relationship rule. ‘The Court finds the invocation of these grounds ‘unsound. Lex loci celebrationis relates to the law of the place of the ceremony or the law of the place where a contract is made. The doctrine of lex contractus or lex loci contractus means the law of the place where a contract is executed or to be performed. It controls the nature, construction, and validity of the contract and it may pertain to the law voluntarily agreed upon by the parties or the law intended by them either expressly or implicitly. Under the state of the most significant relationship rule, to ascertain what state law to apply to a dispute, the court should determine which state has the most substantial connection to the occurrence and the parties, In a case involving a contract, the court should consider where the contract was made, was negotiated, was to be performed, and the domicile, place of business, or place of incorporation of the parties. This rule takes into account several contacts and evaluates them according to their relative importance with respect to the particular issue to be resolved. 6. Since these three principles in conflict of laws make reference to the law applicable to a dispute, they are rules proper for the second phase, the choice of law. They determine which state’s law is to be applied in resolving the substantive issues of a conflicts problem. Necessarily, as the only issue in this case is that of jurisdiction, choice-of-law rules are not only inapplicable but also not yet called for. 7. Further, petitioners’ premature invocation of choice-of-law rules is exposed by the fact that they have not yet pointed out any conflict between the laws of Japan and ours. Before determining which law should apply, first, there should exist a conflict of laws situation — Scanned with CamScannerCONTRACTS 113 requiring the application of th when the law of a foreign country is invoked to provide the proper rules for the solution of a case, the existence of such law must be pleaded and proved, he conflict of lawa rules, Also, 8. It should be noted that when a conflicts case, one involving a foreign element, is brought before a court or administrative agency, there are three alternatives open to the latter in disposing of it: (1) dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction over the case; (2) assume jurisdiction over the case and apply the internal law of the forum; or (3) assume jurisdiction over the case and take into account or apply the law of some other State or States. The court’s power to hear cases and controversies is derived from the Constitution and the laws. While it may choose to recognize laws of foreign nations, the court is not limited by foreign sovereign law short of treaties or other formal agreements, even in matters regarding rights provided by foreign sovereigns. Neither can the other ground raised, forum non conveniens, be used to deprive the trial court of its jurisdiction herein. First, it is not a proper basis for a motion to dismiss because Section 1, Rule 16 of the Rules of Court does not include it as a ground. Second, whether a suit should be entertained or dismissed on the basis of the said doctrine depends largely upon the facts of the particular case and is addressed to the sound discretion of the trial court. In this case, the RTC decided to assume jurisdiction. Third, the propriety of dismissing a case based on this principle requires a factual determination; hence, this conflicts principle is more properly considered a matter of defense. Accordingly, since the RTC is vested by law with the’ power to entertain and hear the civil case filed by respondent and the grounds raised by petitioners to assail that jurisdiction are inappropriate, the trial and appellate courts correctly denied the petitioner's motion to dismiss. Scanned with CamScanner