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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
A contract of adhesion is defined as one where one of the parties imposes a ready-made form of contract which the other party may accept or reject, but which the latter cannot modify. (South Pachem Development, Inc. vs. Honorable Court of Appeals, G.R. No. 126260, December 16, 2004)
What is the nature of the contract of adhesion?
One party prepares the stipulation in the contract, while the other party merely affixes his signature or his “adhesion” thereto, giving no room for negotiation and depriving the latter of the opportunity to bargain on equal footing. These types of contracts have nonetheless been declared as binding as ordinary contracts, the reason being that the party who adheres to the contract is free to reject it entirely. Thus, such agreement is not per se inefficacious. (South Pachem Development, Inc. vs. Honorable Court of Appeals, G.R. No. 126260, December 16, 2004)
It bears stressing that a contract of adhesion is just as binding as ordinary contracts. It is true that we have, on occasion, struck down such contracts as void when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing, Nevertheless, contracts of adhesion are not invalid per se; they are not entirely prohibited. The one who adhere to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. (Vicente Cabanting vs. BPI Family Savings Bank, G.R. No. 201927, February 17, 2016)
How to construe a contract of adhesion in case of ambiguity?
Corollarily, should there be any ambiguity in a contract of adhesion, such ambiguity is to be construed against the party who prepared it. If, however, the stipulations are not obscure, but are clear and leave no doubt on the intention of the parties, the literal meaning of its stipulations must be held controlling. To reiterate, contracts of adhesion are not prohibited even as the courts remain careful in scrutinizing the factual circumstances and the situation of the parties concerned in the case to determine the respective claims of contending parties on their efficacy and enforceability. (South Pachem Development, Inc. vs. Honorable Court of Appeals, G.R. No. 126260, December 16, 2004)
When is the contract of adhesion considered void?
The only occasions in which the Court has struck down contracts of adhesion as void have happened only when the weaker party has been imposed upon in dealing with the dominant bargaining party as to be reduced to the alternative of taking it or leaving it, being completely deprived of the opportunity to bargain on equal footing. Thus, the validity or enforceability of the impugned contracts will have to be determined by the peculiar circumstances obtaining in each case and by the situation of the parties concerned. (Villa Crista Monte Realty Corporation vs. Equitable PCI Bank, G.R. No. 208336, November 21, 2018.)
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