A potestative condition for the fulfillment of an obligation is a void condition.

Contracts must bind both contracting parties, and its validity or compliance cannot be left to the will of one of them.

Case Title: Luis G. Gemudiano, Jr., Petitioner v. Naess Shipping Philippines, Inc., et al., Respondents

Date of Promulgation: January 20, 2020 | G.R. No. 223825

FACTS: Petitioner applied with Naess Shipping for possible employment as seaman. He underwent the mandatory pre-employment medical examination (PEME) where he was declared fit for sea service. Naess Shipping executed a contract of employment engaging the services of petitioner for a period of six months with a gross monthly salary of P30,000.00. It was stipulated that the contract shall take effect on March 12, 2013. Subsequently, petitioner and respondents executed an Addendum to the contract of employment (Addendum) stating that the employment relationship between them shall commence once the Master of the Vessel issues a boarding confirmation to the petitioner.

On March 8, 2013, petitioner received a call informing him that respondent cancelled his embarkation. Thus, he filed a complaint for breach of contract against respondents before the National Labor Relations Commission. In his Position Paper, petitioner alleged that respondents' unilateral and unreasonable failure to deploy him despite the perfected contract of employment constitutes breach and gives rise to a liability to pay actual damages.

Respondents, on the other hand, argued that petitioner's employment did not commence because his deployment was withheld by reason of misrepresentation – that he did not disclose the fact that he is suffering from diabetes mellitus and asthma which render him unfit for sea service. They claimed that the Labor Arbiter (LA) has no jurisdiction over the petitioner's complaint for breach of contract, invoking the absence of employer-employee relationship.

ISSUE: Whether an employer-employee relationship exists in this case.

RULING: Yes. There is no doubt that there was already a perfected contract of employment between petitioner and respondents. The contract had passed the negotiation stage or "the time the prospective contracting parties manifest their interest in the contract." It had reached the perfection stage or the so-called "birth of contract" as it was clearly shown that the essential elements of a contract, i.e., consent, object, and cause, were all present at the time of its constitution. Petitioner and respondents freely entered into the contract of employment, affixed their signatures thereto and assented to the terms and conditions of the contract (consent), under which petitioner binds himself to render service (object) to respondents for the gross monthly salary of P30,000.00 (cause).

Under Section D of the Addendum, "the employment relationship between the Employee on one hand and the Seaman on the other shall commence once the Master has issued boarding confirmation to the seaman." True, the parties to a contract are free to adopt such stipulations, clauses, terms and conditions as they may deem convenient provided such contractual stipulations should not be contrary to law, morals, good customs, public order or public policy. But such is not the case here. The above condition in the Addendum is a condition solely dependent on the will or whim of respondents since the commencement of the employment relations is at the discretion or prerogative of the latter's master of the ship through the issuance of a boarding confirmation to the petitioner. This is referred to as a "potestative condition". When the so-called "potestative condition" is imposed not on the birth of the obligation but on its fulfillment, only the condition is avoided, leaving unaffected the obligation itself.[1] Moreover, the condition imposed for the commencement of the employment relations offends the principle of mutuality of contracts ordained in Article 1308 of the Civil Code which states that contracts must bind both contracting parties, and its validity or compliance cannot be left to the will of one of them.

Consequently, the employer-employee relationship between petitioner and respondents should be deemed to have arisen as of the agreed effectivity date of the contract of employment, or on March 12, 2013. It is settled that an employer-employee relationship exists between respondents and petitioner.

[1] Romero v. Court of Appeals, G.R. No. 107207, November 23, 1995.

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