Obligatory force of contracts

Contracts have the force of law between the parties and must be complied with in good faith.[1] A contracting party’s failure, without legal reason, to comply with contract stipulations breaches their contract and can be the basis for the award of damages to the other contracting party.[2]

[1] Panlilio v. Citibank, N.A., G.R. No. 156335, November 28, 2007, 539 SCRA 69, 82-83; citing CIVIL CODE, Art. 1159.

[2] In RCPI v. Verchez, et al., G.R. No. 164349, January 31, 2006, (citing FGU Insurance Corporation v. G.P. Sarmiento Trucking Corporation, 435 Phil. 333, 341-342 (2002), the Supreme Court held:

“In culpa contractual x x x the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof. A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered. xxx”