Exceptions to the General Rule: Liability Amidst a Fortuitous Event

Christian Andrew Labitoria Gallardo[1]

In the year 1159, an Irish Archbishop named Malachy went to Rome where he suddenly received a strange vision about the future, including the names of the 112 future Popes. Guess who is the 112th Pope in his vision? Well, it’s no less than the current Pope of the Catholic Church- Pope Francis. According to the prophecy of Archbishop Malachy, who eventually became a Saint, after the reign of the 112th Pope will the “seven-hilled city be destroyed and the dreadful Judge judge the people”. Of course this account is widely disputed with some claiming that it is not even written by the righteous Saint himself. However, if we follow this account, the years before the End will bring with it many disasters and calamities. And the best way to prepare for it is, of course, to know the rights and obligations in cases of loss due to fortuitous events.

As discussed in the previous article, fortuitous events are unexpected or unavoidable phenomena, and its general effect is to excuse a person from complying with his OBLIGATIONS TO DO OR GIVE A SPECIFIC THING. In this article however, I will discuss the different exceptions to the general rule, in which parties may still be held liable for obligations to do or to give a specific thing despite the occurrence of a fortuitous event.

When the law provides

The first exception providing for non-excuse despite the happening of the fortuitous event is when the law itself provides so. There are various provisions in the Civil Code which provides for these circumstances. To cite a few, under the Civil Code, when a debt of a specific thing arises from a criminal offense, the happening of a fortuitous event will not excuse the debtor from complying his obligation.[2] For example, in order to bribe a customs official to look past my declaration of “used toys” on my new Vostok watches import, I promised to give him the hammered 1930s Silver 925 ring with Larimar and Painite that I was wearing. In such a case, even if I lose the ring through a fortuitous event, I will still be held liable for the value of such.

Another provision of the Civil Code mandates that a borrower who lost a specific thing through a fortuitous event shall nonetheless be liable if he devoted the thing for a use not agreed upon by the parties.[3] A good example of this would be when I borrow a friend’s fully restored Benz W105 to be used as a bridal car for my cousin’s wedding, but I instead used it for a personal date with my girlfriend. In case it encounters a flashflood during my date thereby wreaking havoc its engine and transmission (and my relationship as well), I would still be held liable as I devoted it for a use not agreed upon.

Photo from: Zennonn.com

When the parties so stipulate

Since the parties are free to make any stipulations in the contract provided that it is no illegal or goes against existing morals or public policy, they may provide for a stipulation stating that the happening of the fortuitous event will not exempt them from complying with their respective obligations. Such a stipulation is generally valid and binding between the parties as long as it is reasonable.

When the nature of the obligation provides

Despite the absence of any express agreement providing for non-excuse even in the case of the happening of a fortuitous event, there are certain obligations in which this assumption of risk is implied from the very nature of the obligation itself. An example of this is the obligation of the common carrier in transporting its passengers in which, even if not provided for in the ticket of the passenger, common carriers are generally liable even for fortuitous events unless it proves that “extraordinary” diligence was performed to avoid any mishaps.

Rebus Sic Stantibus

The Civil Code likewise provides that when the difficulty of the service is beyond that expected by the parties, non-compliance with obligation may be excused.[4] This relies heavily on evidence however, and courts generally do not apply this provision. The parties to the contract are presumed to have assumed the risks of unfavorable developments and it is only in absolutely exceptional changes of circumstances that equity demands assistance for the debtor.[5] Thus, in one case, it was held that the occurrence of the 1997 Asian financial crisis shall not operate to allow the lessee to preterminate the 5-year lease contract.[6] Accordingly, the mere inability to fulfill one’s obligation under the contract shall not discharge the contract itself.[7]

So when was this doctrine used by the court? In 1994, a telephone company entered into a contract with an electric cooperative for the use of the latter’s light posts for an indefinite period in exchange for the free use of 10 telephone connections. After 10 years, the electric cooperative filed for a reasonable compensation for use of posts, claiming that it was too one-sided in favor of the telephone company and that the telephone cables strung on the post became too heavy which ultimately resulted into the posts being broken by typhoons. The court in this case applied the doctrine of rebus sic stantibus in holding that the telephone company should pay the electric cooperative just compensation for the use of its posts since the latter did not foresee that the cables to be attached by the former would eventually be too heavy. It must be noted however that this principle is rarely used by the court, reserved as it is only for extreme circumstances to promote justice and equity.

The extraordinary nature of fortuitous events calls for extraordinary measures. While indeed its exact date of happening is impossible to foresee (lest you claim that you have inherited the talents of Nostradamus and similar prophets), preparation for which is not really that impossible. We, at the Sangalang and Gaerlan, Business Lawyers, offer advice on how to legally prepare and react at fortuitous events. Go join our group on the link below for free legal advice

https://www.facebook.com/groups/businesslaborforum/

Cover photo from: The Public Domain Review

[1] Christian Andrew Labitoria Gallardo is a recent graduate of the Ateneo School of Law with a Juris Doctor degree, and is currently an associate of the Sangalan and Gaerlan, Business Lawyers, a law firm specializing in labor, corporate and business law. You may reach him through a phone call or message (09157042132) or via email (andrew.gallardo@paladinslaw.org). [2] Art 1268, Civil Code of the Philippines. [3] Art 1942, Civil Code. [4] Art 1267, Civil Code. [5] Comglasco Corporation v Santos Car Check Corporation, G.R. No. 202989 (2015). [6] Id. [7] Central Bank v CA, 338 Phil. 691 (1997)