Continental Airlines v. Santiago

Summary

This case involved the validity of termination clauses in sales agency agreements between foreign airlines (Continental Airlines and Air Micronesia) and a Filipino sales agent (Arpan Air). The airlines terminated their agreements invoking a contractual provision allowing termination without cause upon 90-day notice. Arpan challenged this as violating Presidential Decree 1789, which requires foreign corporations to have just cause for terminating agreements with Filipino entities. The Supreme Court ruled that the termination clause was valid, finding that Arpan was estopped from challenging the provision after voluntarily entering into the agreements with full knowledge of the applicable law and accepting benefits for two years. The Court clarified that PD 1789 does not void such contracts but merely provides grounds for regulatory action by the Board of Investments. The decision established important precedents regarding foreign corporation compliance with Philippine regulatory requirements and the enforceability of discretionary termination clauses in commercial agreements. The Court also rejected claims of oral modifications to the compensation scheme, emphasizing adherence to written contract terms under the Parol Evidence Rule.