- Statute
- Civil Code
- Article
- Art. 1306
- Topic
- Statutory provision
- Status
- In force
- Book
- BOOK IV Obligations and Contracts
- Title
- TITLE II CONTRACTS
- Chapter
- CHAPTER 1 General Provisions
- Year
- 1949
- Cited by
- Multiple Supreme Court decisions
The provision
Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. (1255a)
Intellegal Wiki · In plain terms
Parties are free to agree on any stipulations, clauses, terms, and conditions they find convenient, provided these are not contrary to law, morals, good customs, public order, or public policy. This is the principle of autonomy of contracts. Its limits are why courts strike down, for example, unconscionable interest rates or agreements against public policy.
An editorially maintained plain-language explanation of this provision — not legal advice.
Intellegal Wiki · How the courts apply it
In Rosemarie Q. Rey v. Cesar G. Anson, the Supreme Court held: Freedom of contract is not absolute (Article 1306); monthly interest of 7.5% and 7% (90% and 84% per annum) is excessive, unconscionable, and void ab initio even if voluntarily assumed, and overpayments are recoverable via solutio indebiti.
One leading Supreme Court case applying this provision.
Key points
Parties may establish any stipulations, clauses, terms, and conditions they deem convenient (autonomy of contracts), provided they are not contrary to law, morals, good customs, public order, or public policy.
Cases applying this article
- Rosemarie Q. Rey v. Cesar G. Anson
- Sylvia Lichauco de Leon v. The Hon. Court of Appeals
- Bermon Marketing Communication Corporation v. Spouses Lilia M. Yaco
- Valenzuela Hardwood v. Court of Appeals
- Amparo Gonzalez v. Primitivo Trinidad
- Spouses Tagumpay N. Albos v. Spouses Nestor M. Embisan
- Heirs of Manuel Uy Ek Liong v. Mauricia Meer Castillo
- Spouses Florentino T. Mallari v. Mallari
Other Supreme Court decisions also apply this article.