Pakistan International Airlines Corporation vs. Hon. Blas F. Ople.

G.R. No. 61594 September 28, 1990

FACTS:

Pakistan International, a foreign corporation licensed to do business in the Philippines, executed two contracts of employment with private respondents for their services as flight stewardesses. The contract had a term of three years but also with the stipulation that, notwithstanding any provisions to the contrary, the employer reserves the right to pre-terminate it at any time. Before the expiration of the three-year term, Pakistan International sent notices of dismissal to private respondents.  Farrales and Mamasig filed a case for illegal dismissal and recovery of wages and other benefits.

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. 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.

ISSUE:

Whether or not the stipulation in the contract as to the right of the employer to terminate employees at any time should be respected.

HELD:

NO. Parties may not contract away applicable provisions of law especially peremptory provisions dealing with matters heavily impressed with public interest. The principle of party autonomy in contracts is not absolute.

A contract freely entered into should, 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.”

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.

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