Chapter V
FOUNDATIONAL CONSIDERATIONS OF
CONTRACT LAW, PROPERTY LAW
AND PENAL LAW
All that we have maintained so far about the nature of
law is “foundational” for all branches of law. It will be bome
in mind, however, that I also argued for the “analogy of law,”
for while the enactments of the legislature, the conventions
between nations and the dictates of a tribal leader are all
“law,” there being no reasonable basis for discriminating
against one or the other, they share some aspects and differ
in others. The laws that gover the different concerns of
human society too may have different origins (our Philippine
law on contracts is an amalgamation of civil law principles
with some common law ingredients thrown in for good
measure; our law on negotiable instruments was the same as
that of the United States prior to the Uniform Code of
Commerce) and hence may rest on different considerations.
It is for this reason that it is worthwhile to examine some
foundational considerations of at least three set s of laws.
A. The Law on Contracts
Restatement Second, 1, for purposes of American law,
defines a contract as a “promise or a set of promises for the
breach of which the law gives a remedy, or the performance
of which the law in some way recognizes as a duty.” “Quite
to the point, it has been remarked that the definition is
circular: a contract is a legally enforceable promise, and a
promise is legally enforceable only if it is a contract. (17 Am
198FOUNDATIONAL CONSIDERATIONS OF CONTRACT 199
Law, Property Law aND PENAL Law
Jur 2d 24) This infirmity, notwithstanding, when juxtaposed
with the definitions we find in the Philippine Civil Code as
well as in the Spanish Civil Code, differences in emphases,
even in perspective, become evident. I have already cited the
Philippine definition of a contract, expressed in Article 1305
of the Civil Code, calling atiention to the very elusive re-
quirement of a “meeting of minds.” This is not too distant
from what the Spanish Civil Code provides.
Titulo Il, Cap, Prim. 1.254
El contrado existe desde que una o varias perso-
nas consienten en obligarse, respecto de otra u otras, a
dar alguna cosa o prestar algun servicio,
The Spanish Civil Code calls attention to the consent
persons give in obliging themselves in regard to a prestation,
a point the famous English law professor, P.S. Atiyah (The
Law of Contract 3d 2), calls attention to as characteristic of
contracts. Obligations arise from different sources but,
assuming an organized society that has effectively quelled
arbitrary impositions by some of its members on others, |
think it is safe to say that obligations are imposed by law. In
this regard I share the view that the specifications of our Civil
Code, i.e., that obligations arise either from law from con-
tract, from quasi-contract, from delict or from tort, are
reducible to law, for that a quasi-contract, for example, can
give tise to a claim is so only because the law so prescribes.
Contracts and their terms are, for their part, the law between
the contracting parties, and that this is so must be attributed
to an organic law or a constitutional mandate that gives such
legal weight to contracts.
Generically, contracts are agreements and it does not
need much argument to show that it is within the freedom of
the person to enter into agreements with another. It must,
however, be concomitantly noted that a society that brings its
collective force to bear on the enforcement of contracts is a200 A PxiosopHy oF Law
society that has conferred “sacrality” on contracts. It is easily
conceivable that a society should be otherwise. Historians of
law tell us of early Communist attempts to do away with the
regime of contracts. Contracts as we know them then exist
within a legal system where people are free to choose the
obligations they assume. Contracts can then be said to be
self-imposed obligations. (Atiyah: 2) We must add to this the
social decision to honor contracts in such measure as to use
the coercive powers of the body-politic to see to the fulfill.
ment of the terms of a bargain.
“Pacta sunt servanda” — natural-law theorists would
hold this to be a dictate of synderesis, the first principles of
practical reason. It seems to be so peremptory that its oppo-
site (that agreements are not honored) strikes us as humanly
unacceptable. Yet we can conceive of an order of things so
thoroughly individualistic that each member of society stops
at nothing to maximize values for himself, even if this should
take the form of deception, i.e., making promises to extract
favors from others, with the mental reservation that one does
not keep his side of the bargain. But does not deception in
this regard presuppose a prior understanding that promises
are to be kept? I think then we can safely claim that keeping
promises is so elemental a demand of intersubjective being
(of being-with others) that we can call it “natural.” The moral
dimension is certainly relevant here. The fact, however, that
early in human history, oaths were devised that called on
God to witness one’s premises (and implicitly, to guarantee
their observance) also indicates the ever-present conscious-
ness of the fragility of the human promise. To speak then in
law of the “Sacrality” of a contract is to allude to the recourse
to an order higher than the mere good-will of another man
for the enforcement of its terms. Within a secularized legal
system, however, “sacrality” refers to the weight of the law
and of the legal system that stands behind a contract.FOUNDATIONAL CONSIDERATIONS OF CONTRACT 201
Law, Property Law AND PeNnaL Law:
Of the economic and social factors underlying the de-
velopment of contract law, it is commonly recognized that the
division of labor and the growth of the institution of credit
played key roles. Where one must transfer goods or services
to be benefited in tum by the goods and services of others,
agreements involving legal protection have to be forged. Of
course, it is not the exchange of itself that is the subject-
matter of contract law but the promise or the set of promises
underlying the exchanges. Since credit always looks to the
future (future payment), a promise is unavoidable, and once
more, a legal regime capable of dealing with promises of this
sort had to emerge. Farnsworth puts the matter in the follow-
ing way:
The germ of promise was credit, The simplest form
of credit transaction is the loan of money. From the loan
it was but a short step to the sale on credit, in which per-
formance on one side is deferred, the buyer merely
promising to pay while the seller immediately performs.!
Philosophically, the law of contracts rests on the as-
sumption that every man is free to enter into binding agree-
ments with others; similarly assumed is the doctrine that
where he so binds himself, he is in fact bound. This freedom
to enter into contracts, however, had to be a social institution
as well, for subjective freedom always calls for its objective
conditions and the objective condition of an atmosphere that
could foster contracts was “laissez faire” under which the
State desisted from interfering in the affairs of individual
citizens.
It is clear, however, that “agreement” cannot be merely
subjective. That which is subjective, conceived of as “interior
or mental” is elusive and inquiries into the contents of “mind”
conceived of as a person's interiority have seldom been
+ | Famsworth 9202 A PuitosopHy oF LAW
fruitful. Society and social expectations cannot rest on the
vagaries of an epistemological investigation from which
unanimity is not expected at all. What we therefore look to is
‘a combination of conduct and words that lead reasonable
person to believe that there has been an agreement. | shall
put the transformation in the following way:
(i) Did the parties agree?
Putting it this way, however, seems to call for an investi-
gation into the activities of “will” of the contracting parties.
“Will”, having been traditionally conceived of as a faculty of
the soul, is not susceptible of empirical verification. The status
changes favorably when the question becomes:
(ii) Did the parties say and do that which is legally re-
quired so that an agreement may be construed? It then
becomes the task of the law to spell out which words and
actions give rise the presumption that a contract has been
perfected. In actual fact, evolving jurisprudence has achieved
this. What results then is that as the “inner ruminations” of a
party becomes less relevant and objective, verifiable stan-
dards become determinative. The freedom to contract
remains preserved; all that a person has to do is to refrain
from the words and the actions that are legally taken to be
indicative of a contract.
Results have somehow been paradoxical. In a bid to
safeguard the intention of the parties, the law has established
certain “protective measures” (e.g., the Parole Evidence Rule,
the Statute of Frauds) which sometimes produce the curious
outcome that notwithstanding the intention of the parties to
so contract, the State is not willing to guarantee the enforce-
ment of the agreement. Consider parties who enter into a
contract involving real estate. The Statute of Frauds requires,
for enforceability, that such a contract be reduced to writing
(in the Philippines, to a public document) so that the inten-
tion of the parties may be protected from incursions ofFOUNDATIONAL CONSIDERATIONS OF ConTRACT 203
‘Law, Property Law AND Penal Law
forgetfulness and obscurity. The result though is that where
patties lacking the sophistication to understand such a
requirement as the Statute of Frauds truly intend to contract,
notwithstanding their intention, there is no enforceable
contract!
‘One more development has to be taken account of: con-
tract-formation in our days is not merely the result of the
intention of the parties but also of the implementation of
public policy. Because we do not countenance the unjust
enrichment of one party at the expense of another, the
doctrine of frustration has evolved. In Philippine contract law,
the provisions on force majeure and fortuitous events serve as
examples. Contracts involving employment will furthermore
rest not only on the bargain between employer and employee
but on compliance with labor and social legislation. Contracts
involving marriage embody policies of State and its interest in
the stability of martiage as a social institution.
With good reason have courts in different jurisdictions
been hesitant to enforce the provisions of “contracts of
adhesion” (when all the aces are stacked in favor of the party
(drafting the contract) — especially as “standardized forms”
While it seems that for the sake of expediency, such forms
should exist, it is important that efforts be made to see that
the terms of such a contract are not inequitably lop-sided. |
then support the proposition that unless the Passive party,
eg., the passenger in a common cartier, has been made to
advert particularly to some odious provision, the same should
not be held to be applicable against such a party when a
claim involving the contract is litigated.
B. The Law on Property
The theory of “estates” in property law, which our civil
law system did not adopt, makes the Crown the ultimate
owner of all land. What we did inherit from the civil law
system, however, is the theory of “jura regalia,” which, like204 A PxiLosopHy OF Law
‘common law, holds that all land is from the Crown — and so,
transposed into a democracy, by the State. All that transact-
ing parties transfer or convey are proprietary interest called
“estates.” In some way, the doctrine of “escheat” of property
in favor of the State supports this view.
In this context, it is useful to discuss the Christian theory
of property and its ownership. The earth and its goods are the
common patrimony of all. Towards the realization of human
becoming, all have the right to use the goods of the earth.
Seas and rivers, air and sunshine and other such basic
elements of human living must then remain beyond the
commerce of man. The right to use is conferred by the
natural obligation to become human, to achieve humaniza-
tion. The right to property is the right to hold property to the
exclusion of others. It has been argued that the right to own is
an extension of the right to use, in the sense that it enables
the owner to use the property in a more efficient manner. It
also follows from the fact that I labor to produce something
that I am entitled to own what I may have produced. A
contrary holding results in what has been called “alienation”
by some social philosophers. | echo 19th century church
doctrine in asserting that itis the right to private property that
allows each man the degree of freedom that can allow him to
be himself. It does happen, however, that ownership and
exclusive use become hindrances to the use by others of what
should otherwise be common patrimony. Thus, under a
system of land tenure where ownership of land is concen-
trated in a few families of noble descent leaving the majority
mere tenants of the land without ever having a chance to
‘own, there is social injustice that demands rectification, and
the derivative right — the right to own — must yield to the
more primordial right: the right to use. Coupled with this is
the view that “capital exists for the sake of labor.” Obviously
this philosophical principle is intelligible only when man is
understood as “homo faber” — the fabricating being, the
being who achieves selfhood by labor. Man as “homoFOUNDATIONAL Cot
NSIDERATIONS OF CONTRACT 205
Law,
/, PROPERTY LAW AND PENAL Law
laborans” is not only a statement of fact. It is an ontological
claim: to b
e man is to wrest from the earth what I need to
work is a right and that which makes work possible must be
made available to man, the worker. Resources that are idle
then are immorally claimed by their owners, especially when
this makes it impossible for others to labor.
{tis in this light that the agrarian reform provisions of the
Constitution ought to be read. To secure for all the basic
Bp outces of the nation is the reason behind the inalienability
of natural resources and the requirement that any person,
claiming ownership of a portion of the public domain, must
be able to show title from the State. The exclusion of alicne
from ownership also rests on the same philosophical premise,
It is also obviously absurd to suppose that what is contem,
Plated is a system that allows property rights to be enjoyed by
a fragment of the population at the expenses of others. Even
in regard to what is known as intellectual property — the
Products of human genius and inventiveness protected by
Copyright, patent, unfair competition and anti-dilution laws —
the conviction that society as such must profit prevails. The
very reason that certain exclusive rights vest in an author or
an inventor is to spur ingenuity and inventiveness for the
good of society.’ Because authors and inventors are promised
certain monopolies, limited and regulated by law, they are
encouraged to be more productive so that society may
benefit from their authorship and invention. It is thus a
guiding principle of intellectual and industrial property that
only those products of mind and imagination will eam for
their creators privileges that have somehow been made
* cf, Boorstyn, Copyright Law 2-3206 A PuitosopHy oF Law
available to the public for its advantage. Thus it is, for
example, that “secret inventions” cannot claim patent
protection and the author who does not register his works can
win no damages from an infringer, although he certainly may
ask the court to enjoin the infringement. There is, claims
Jeremy Bentham, an intrinsic connection between law and
property, for when one takes away law, property ceases to be
secure.’ Just as the law brings the coercive force of organized
society to bear on contractual obligations, so will the law
protect property. Man did attain a loftier plain of evolution
when he passed to a mote organized manner of securing his
property rights what he formerly had to accomplish merely by
brute force. The very concept “property,” however, is not
unanimously defined. Tolentino starts his treatise on property
thus:
Property is an economic concept, meaning a mass
of things or objects useful to human activity and which
are necessary to life, for which reason they may in one
‘way or another be organized and distributed, but always
for the use of man. The tight to property is clearly differ-
ent from property and is defined as ‘the juridical tie by
virtue of which a person has the exclusive power to re-
ceive or obtain all the benefits from a thing . . *
Tolentino thus identifies “property” with the things
owned. Browder, Cunningham and Smith, following Ben-
tham, however insist:
For the lawyer, “property” is not a “thing” at all,
although “things” are the subject of property. Rather, as
Jeremy Bentham asserted, propery isa legally protected
‘expectation . . . of being able to draw such or such an
< ae in Cribbet and Johnson, Principles of the Law of Property at 4
“2 Tolentino at 1FOUNDATIONAL CONSIDERATIONS OF CONTRACT 207
Law, Property Law AnD PeNat Law
advantage from the thing’ in question ‘according to the
nature of the case’ 5
I do not think it imperative to settle the difference. For
most practical purposes, there will not be much harm in
identifying the thing owned with “property,” provided that is
not the thing alone that is considered, but the thing as
modified by the claim or the expectation of a party whose
claim or expectation is protected by law.
One argument made above for private property was for
the mote efficient use of natural resources. Posner then lays
down three requirements so that this objective may be
attained:
(i) Universality: all the resources should be owned or
‘ownable, except those so abundant that efficient
use does not call for private ownership;
(ii) Exclusivity: which is meant to give owners an in-
centive to incur the costs required to make effi-
cient use of the resources owned by them;
(iii) Transferability: without which resources cannot
be transferred to more productive states or more
efficient hands.®
C. Penalty
That the law must involve penalty seems to be implied
in the Scholastic definition of law as an “order” or an “ordi-
nance.” While a request may be denied with impunity, and
suggestion may be ignored without even so much as an
acknowledgment, he who transgresses against the law has the
sword of Lady Justice to fear. To deny the law any punitive
5 Browder, Cunningham and Smith, Basic Property Law
at2 and 3.
in Browder, Cunningham and Smith, 4.a
208 ‘A PHILOSOPHY OF LAW
force would be to deny it of what characterizes it—its coercive
power, Of course, we look forward to the day that the earth
shall be peopled only by men of goodwill, and then all need
of penalty shall cease, but until that day, then I think that we
‘can concede without much difficulty that the law has to be
able to punish as a “malum necessarium.”
Hans Kelsen has been among the widely read scholars
‘on jurisprudence. He calls his theory a “pure theory of law”
because he wants it to be a science of the law as it actually is
and not as it ought to be. Kelsen speaks of the principle of
retribution as the principle to react upon a certain human
behavior with reward or punishment. A legal order com-
mands behavior by attaching a disadvantage, a sanction or a
penalty, to the opposite behavior. So while it may not seem
productive cooping convicts in penitentiaries or locking them
up in prison cells, these measures are the “disadvantages”
that the legal order attaches to the opposite of the behavior it
commands. Without attaching the disadvantage, say of
imprisonment, to theft, the law could not be said to command
honesty (at least as far as the avoidance of theft goes). Thus
Kelsen says: “Therefore, one may say that a certain behavior
is ‘commanded’ by a social order and — in case of a legal
order — is legally commanded, only insofar as the contrary
behavior is a condition of a sanction.” Law therefore is an
“order of human behavior,” and more characteristically, “a
coercive order.” Morals may threaten with a haunting con-
science or the ire of God or the loss of eternal life, but the
sanctions of law are socially immanent and determined by
organized society itself. Of course, it should be demanded
that we be human and humane even when meting out
sanctions and the constitutions of the world are then to be
admired that rule out “cruel and inhuman punishment” — as
does the Philippine constitution. The issue of the death
penalty calls for a protracted discussion that I prefer not to get
into here, Let it suffice to say that the demand for statistical
proof that the death penalty has a deterrent effect is, to my
&FOUNDATIONAL Cos
NSIDERATIONS OF ConTRACT
Law, Property G i
LAW AND Peat Law
mind, “artificial.” That e
with certainty that th
ished by death deters
rare breed that does
very man fears death should establish
e threat that one’s crimes will be pun-
a wrong-doer and should one be of that
Kelsen, with good reason,
k Points out that in so attaching
sanctions to proscribed behavior, the legal community is in
fact claiming a monopoly of force for the exervive of fore
other than in ways prescribed by the law is a condition ite
for the imposition of sanctions. The “salvaging” of a drug-
pusher by vigilantes is itself a crime, whereas the execution of
a death-convict is the legal fulfillment of a mandate. That the
first is illegal and that the second is legal is a difference in
“pedigree”: carrying out the death sentence can be traced to
an order of a court that has become final and executory,
which in turn rests on a penal code, whose existence is in turn
an enactment of a legislature that is in tum created by a
Constitution and authorized to pass such a law. The murder-
ous act of vigilantes cannot claim the same pedigree. That
Constitutional provisions generally do not carry sanctions for
their non-observance does not argue against the position just
established. What it does show is the foundational role of a
constitutional provision: a constitutional provision authorizes
the enactment of coercive orders. The convict is ordered
imprisoned by the court that is in turn ordered by penal laws
(for should a judge refuse to enforce penal law, he exposes
himself to its sanctions) which in tur emanate from a legisla-
ture that orders the executive to see to the implementation of
the law (and the executive is impeached if he does not do
So); the powers of the legislature in turn emanate from a
Constitution that so authorize it, Regressus ad infinitum non
datur. The fountainhead is a constitution that authorizes and
that, under a democracy, carries with it the commitment of a
People to abide by it.210 A PHiLosoPHy oF LAW
Kelsen gives three reasons for the necessary connection
between penalty and law.
(1) Only by including the element of coercion into the
definition of law is the law clearly distinguished from any
other social order.
(2) Coercion is a factor of great importance for the
cognition of social relationships and highly characteristic of
the social orders called “law.”
(3) By defining law as a coercive order, a connection is
accounted for that exists in the case most important for the
cognition of the law, the law of the modem state . . . which is
essentially a coercive order.’
Coercion sounds harsh, but it is the triumph of man to
be able to submit himself to a regime of law that orders and
commands and that guarantees him at least the minimum
(but a significant minimum, it is) of the objective conditions
necessary for his humanization. Like any human institution,
the law is ambivalent. We can hope that it will be humanizing
in most respects; but we must be prepared to deal with its
rough edges as man struggles with the idea of justice and with
the ideal of being-human. The law is a step, quite paradoxi-
cally, in the direction of Lao-tzu’s lead (who would have
nothing to do with coercion) who taught: “He who conquers
others has physical strength, but he who conquers himself is
truly strong.” (Tao Te Ching, Poem XXXII).
D. Balancing Equities: Dealing with Terrorism and
Upholding Human Rights: A Philosophical-
Juridical Perspective Why Equities Need To Be
Balanced
1. The end does not justify the means. The more atro-
cious the assault is the stronger the temptation to unbridled
7 in Schuchman 173-195