1. Edna was hired as a domestic helper in Hongkong by Dragon Services, 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 a
salary of US$1,000.00 a month. It was submitted to and approved by the POEA. However, when she
arrived in Hongkong, she was asked to sign another contract by Dragon Services, Ltd. which reduced
her salary to only US$600.00 a month. Having no other choice, Edna signed the contract but when she
returned to the Philippines, she demanded payment of the salary differential of US$400.00 a month.
Both Dragon Services, Ltd. and its local agent claimed that the second contract is valid under the laws
of Hongkong, and therefore binding on Edna.

Is their claim correct? Explain. (10)

Answer: No, the contention of Dragon Services, Ltd. and its local agent is not correct. In the case of
Bank of America, NT vs. American Realty Corporation, it was held that when foreign laws, judgments
or contracts are contrary to a sound and established public policy of the forum, the said foreign laws,
judgments or orders shall not be applied. The forum herein are the Philippine courts, thus, Philippine
laws governs and it is the very Constitution of the Philippines that provides for the protection of labor.
The Constitution provides that State shall, “afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment opportunities for all.” The second contract
being contrary to our laws and public policy is void.

2. On 8 December 1991 Alma purchased from the Manila office of Euro-Aire an airline ticket for its
Flight No. 710 from Dallas to Chicago on 16 January 1992. Her flight reservation was confirmed. On
her scheduled departure, Alma checked in on time at the Dallas airport. However, at the check-in
counter, she discovered that she was waitlisted with some other passengers because of intentional
overbooking, a Euro-Aire policy, and practice. Euro-Alre admitted that Alma was not advised of such
policy when she purchased her plane ticket. Alma was only able to fly two days later by taking another
airline.

Alma sued Euro-Aire in Manila for breach of contract and damages. Euro-Aire claimed that it cannot
be held liable for damages because its practice of overbooking passengers was allowed by the U.S.
Code of Federal Regulations. Alma on the other hand contended that assuming that the U.S. Code of
Federal Regulations allowed Intentional overbooking, the airline company cannot invoke the U.S.
Code on the ground that the ticket was purchased in Manila, hence, Philippine law should apply,
under which Alma can recover damages for breach of contract of carriage. Whose contention is
correct. Decide and discuss fully. (10).

Answer: Alma’s contention is correct. As the tickets were purchased in Manila, the contract of
carriage was therefore executed in the Philippines. Under the rule of Lex Loci Contractus, the law of
the place where the airline ticket was issued should be applied by the court where the passengers are
residents and nationals of the forum and the ticket is issued in such State by the defendant airline.
Thus, applying Philippine laws, which provides that overbooking of flight amounts to fraud or bad
faith, Alma can recover damages because the contract of carriage herein was breached through bad
faith.

3. The Japan Air Lines (JAL), a foreigner corporation licensed to do business in the Philippines,
executed in Manila a contract of employment with Maritess Guapa under which the latter was hired
as a stewardess on the aircraft flying the Manila-Japan-Manila route. The contract specifically
provides that (1) the duration of the contract shall be two (2) years, (2) notwithstanding the above
duration, JAL may terminate the agreement at any time by giving her notice in writing ten (10) days in
advance, and (3) the contract shall be construed as governed under and by the laws of Japan and only
the court in Tokyo, Japan shall have the jurisdiction to consider any matter arising from or relating to
the contract.

JAL dismissed Maritess on the fourth month of her employment without giving her due notice.
Maritess then filed a complaint with the Labor Arbiter for reinstatement, back wages, and damages.
The lawyer of JAL contends that neither the Labor Arbiter nor any other agency or court in the
Philippines has jurisdiction over the case in view of the above provision (3) of the contract which
Maritess voluntarily signed. The contract is the law between her and JAL. (10)

a) Whose contention is correct? Decide with reasons.

Answer: JAL’s contention is not correct. The Philippine courts can have jurisdiction over the case. In
the case of HSBC v. Sherman, it was held that a State can assume jurisdiction when there is a
reasonable basis of exercising it. In this case, that reasonable basis is the fact that the contract was
executed in manila. Since the contract was executed in Manila, Philippine laws should apply as to its
intrinsic validity.

On the issue of whether or not Maritess’ contention that she is entitled to reinstatement, back wages,
and damages, if I were to decide the case, I will rule in favor of Maritess. In the case of Pakistan
International Airlines Corp. vs. Ople, the Supreme Court held that while a contract freely entered into
should be respected, since a contract is the law between the parties, the governing principle,
however, is still that parties may not contract away applicable provisions of law especially peremptory
provisions dealing with matters heavily impressed with public interest. Philippine laws relating to
labor and employment are impressed with public interest, therefore, the 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. Maritess, therefore is entitled to her claims as the second provision of
the contract is invalid in accordance with Philippine labor laws.

b) Where under a State’s own conflicts rule that domestic law of another State should apply, may the
courts of the former nevertheless refuse to apply the latter? If so, under what circumstance?

Answer: Yes, the domestic law of another State, though may be applied by a State following its own
rules on conflicts of law, may still be disregarded by the latter if such laws are contrary to the latter’s
adherence to public order, public policy and even good custom.