PARMANAND SHEWARAM vs.

PHILIPPINE AIR LINES, INC

G.R. No. L-20099 | July 7, 1966

NATURE: action to recover damages

FACTS: On November 23, 1959, Shewaram was a passenger in PAL flight No. 976/910
Zamboanga-Manila route. He checked in three pieces of baggages - a suitcase and two
other pieces. The suitcase was mistagged by PAL personnel for Iligan instead of Manila;
thus when Sewaram arrived in Manila, his suitcase did not arrive with him.
He made a claim in Manila and since the only baggage left for the flight was a suitcase, it
was given to him. However, he refused contending that it was not his as all his clothes
were white and the Transistor Radio and a Rollflex camera were not found inside the
suitcase, and moreover, it contained a pistol which he did not have nor placed inside his
suitcase. The suitcase was later known to belong to a certain Del Rosario which was
supposedly bound for Iligan.
Shewarams suitcase arrived in Manila on November 24, 1959, sans his Transistor Radio
and the Rollflex Camera.He then made demand for these two items or for their value but
PAL did not comply.
PAL admitted that there was a mistake in tagging Shewarams suitcase. Tampering was
also apparent when such suitcase, upon arrive in Manila, can be opened easily despite
Shewaram had it under key; that there was space where the two items in question could
have been placed. PAL, however contend that it had authority to open passengers'
baggage to verify and find its ownership or identity.
Shewaram filed an action for damages at the municipal court of Zamboanga City.for
failure of PAL to observe extraordinary diligence in the vigilance and carriage of his
luggage. The municipal court ruled in his favor ordering PAL to pay P373.00 as actual
damages (transistor radio cost P197.00 and the camera cost P176.00), P100.00 as
exemplary damages, P150.00 as attorney's fees, and the costs of the action.
PAL appealed to the CFI of Zamboanga City. CFI modified the judgment by eliminating
the award of exemplary damages. PAL appealed to the Supreme Court.
PALs main contention is that its liability should be limited to the amount stated in the
conditions of carriage printed at the back of the plane ticket, which are also found in
Domestic Tariff Regulations No. 2 which was filed with the Civil Aeronautics Board. A
particular condition reads:
The liability, if any, for loss or damage to checked baggage or for delay in the
delivery thereof is limited to its value and, unless the passenger declares in advance a
higher valuation and pay an additional charge therefor, the value shall be
conclusively deemed not to exceed P100.00 for each ticket.

So, PAL argues, since Shewaram failed to declare a higher value for his luggage, and pay
the freight on the basis of said declared value, he can not demand payment from the
appellant of an amount in excess of P100.00.
ISSUE: Whether PALs pecuniary liability shall be limited by the conditions of carriage
printing at the back of the plane ticket.
RULING: NO. Decision appealed from is AFFIRMED, with costs against the appellant.
RATIO: Article 1750 of the New Civil Code provides for requirements before a common
carrier can claim a limitation of its pecuniary liability in case of loss, destruction or
deterioration of goofs.:
A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under
the circumstances, and has been fairly and freely agreed upon.
The requirements of said article have not been met. The fact that those conditions are
printed at the back of the ticket stub in letters so small that they are hard to read would
not warrant the presumption that the appellee was aware of those conditions such that he
had "fairly and freely agreed" to those conditions. Also, the trial court has categorically
stated in its decision that the PAL admits that passengers do not sign the ticket. Thus,
Shewaram is not, and can not be, bound by the conditions of carriage found at the back of
the ticket stub.
The liability of the appellant in the present case should be governed by the provisions of
Articles 1734 and 1735 of the New Civil Code:
ART. 1734. Common carries are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
ART. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as required in Article 1733.
The liability of the PAL is clear it must pay the value of the transistor radio and the
camera.
Other bases of the Supreme Court for its decision:

Ysmael and Co. vs. Barreto held that carrier can not limit its liability for injury to or
loss of goods shipped where such injury or loss was caused by its own negligence.
Corpus Juris, volume 10, p. 154, says ( in summary):
"Par. 194, 6. Reasonableness of Limitations. The validity of stipulations limiting
the carrier's liability is to be determined by their reasonableness and their conformity
to the sound public policy.The exemption must be just and reasonable, and he
contract is freely and fairly made.
"Par. 195. 7. What Limitations of Liability Permissible. In the absence of statute,
whatever limitations against its common-law liability are permissible to a carrier, it
cannot limit its liability for injury where such injury or loss is caused by its own
negligence.
"Par. 196. bb. Considerations on which Rule Based. The rule is based on public
policy. The shipper and the common carrier are not on equal terms; the shipper is
entirely at the mercy of the carrier unless protected by the higher power of the law
against being forced into contracts limiting the carrier's liability. Such contracts are
wanting in the element of voluntary assent.
"Par. 197. cc. Application and Extent of Rule Negligence of Servants. No
contract limitation will relieve the carrier from responsibility for the negligence,
unskillfulness, or carelessness of its employer.
KONINKLIJKE LUCHTVAART MAATSHAPPIJ N.V., (KLM ROYAL DUTCH AIRLINES)
vs.
THE HONORABLE COURT OF APPEALS, CONSUELO T. MENDOZA and RUFINO T.
MENDOZA
G.R. No. L-31150 | July 22, 1975

NATURE: action for damages

FACTS: In March 1965, spouses Mendoza approached Philippine Travel Bureaus (agent
for international air carriers like KLM and Aer Lingus) branch manager Tirso Reyes to
consult for a world tour. A tentative itinerary of 35 legs flying on different airlines was
made. The longest segment of the trip will be via KLM. Since, they like to visit Lourdes,
France, they opted for the Barcelona-Lourdes route with knowledge that only Aer Lingus
serviced it.
Upon approval of the itinerary, Reyes went on to make reservations, including KLM.
KLM secured seat reservations for spouses and their daughter and niece. When they left
the Philippines, they were issued KLM tickets for their entire trip. However, their coupon
for the Aer Lingus portion (Flight 861 for June 22, 1965) was marked "RQ" which meant
"on request".
In Germany, they went to a KLM office and obtained a confirmation from Aer Lingus of

seat reservations on flight 861. In Barcelona airport, they were checked in for their trip to
Lourdes, France, however spouses were soon ordered by the Aer Lingus manager to be
off-loaded. They were brusquely shoved them aside with the aid of a policeman and who
shouted at them, "Conos! Ignorantes Filipinos!". Their daughter and niece however were
allowed to take the plane.
Their request for another means to get to Lourdes was denied. However, a stranger
advised them to take a train. They reached Lourdes the next day after having endured
third class accommodation, no food service and draft winds as they wore only minimum
clothing, their luggage having gone ahead with the Aer Lingus plane. They spent $50 for
that train trip ( their plane passage was worth $43.35).
Spouses filed a complaint for damages against KLM as principal of Aer Lingus with the
CFI Manila arising from breach of contract of carriage and for the humiliating treatment
of the Aer Lingus manager in Barcelona. CFI ruled in spouses favor awarding the
following damages: $43.35 or its peso equivalent as actual damages, P10,000 as moral
damages, P5,000 as exemplary damages, and P5,000 as attorney's fees, and expenses of
litigation. Both parties appealed to the CA. CA increased the damages ordering KLM to
pay unto the spouses the sum of $43.35 as actual damages; P50,000 as moral damages;
and P6,000 as attorney's fees and costs.
KLM made and appeal to the Supreme Court by way of certiorari.
Both the KLM and the spouses Mendoza used provisions of the Warsaw convention to
argue their contentions.
KLM used Article 30 to provide that the liability should be with the carrier who
performed the transportation during which the accident or the delay occured - Aer Lingus.
Also, on the inside front cover of each ticket the"Conditions of Contract" states that the
liability of carrier for damages shall be limited to occurrences on its own line and that
carrier issuing a ticket or checking baggage for carriage over the lines of others does so
only as agent.
Spouses argued, however, that Article 30 has no application because this case did not
involve an accident or delay, but a willful misconduct on the part of the KLM's agent, the
Aer Lingus. They based their claim under Article 25 which provided that the carriers
liability cannot be limited or exempted if the damage is caused by his willful misconduct,
as well as, if the damage is caused under the same circumstances by any agent of the
carrier acting within the scope of his employment. In addition to, the conditions of
contract in their tickets which excused KLM from liability appears in very small print, to
read which, as found by the CA, one has to use a magnifying glass. The same conditions
also indubitably shows that their contract was one of continuous air transportation around
the world: ... Carriage to be performed hereunder by several successive carrier is
regarded as a single operation.
ISSUE: Whether KLM is liable for damages

RULING: YES. CA judgment AFFIRMED, at KLM's cost.

RATIO:
The defenses of KLM cannot be maintained.
Article 30 is not applicable as it presupposes the occurrence of either an accident or a
delay, neither of which took place at the Barcelona airport. Aer Lingus, through its
manager there, refused to transport the respondents to their planned and contracted
destination.
The condition that expressly limited the KLM's liability for damages only to occurrences
on its own lines is not acceptable as such was printed in letters so small that one would
have to use a magnifying glass to read the words. It would be unfair and inequitable to
charge the spouses with automatic knowledge or notice of the said condition so as to
preclude any doubt that it was fairly and freely agreed upon by the respondents when they
accepted the passage tickets issued to them by the KLM. KLM was chargeable with the
duty and responsibility of specifically informing the respondents of conditions prescribed
in their tickets or, in the very least, to ascertain that the spouses read them before they
accepted their passage tickets. There was not any effort by the KLM officials or
employees to discharge in a proper manner this responsibility to the spouses.
The passage tickets provide that the carriage to be performed by several successive
carriers "is to be regarded as a single operation," is incompatible with the theory of the
KLM that the spouses entered into a series of independent contracts with the carriers.
Spouses dealt exclusively with the KLM which issued them tickets for their entire trip
and which in effect guaranteed to them that they would have sure space in Aer Lingus
flight 861. Spouses naturally had the right to expect that their tickets would be honored
by Aer Lingus to which KLM had indorsed and in effect guaranteed the performance of
its principal engagement to carry out the scheduled itinerary previously and mutually
agreed upon.
The breach was even aggravated by the discourteous and highly arbitrary conduct of an
official of the Aer Lingus which the KLM had engaged to transport the respondents on
the Barcelona-Lourdes segment of their itinerary. It is but just and in full accord with the
policy expressly embodied in our civil law which enjoins courts to be more vigilant for
the protection of a contracting party who occupies an inferior position with respect to the
other contracting party, that the KLM should be held responsible for the abuse, injury and
embarrassment suffered by the spouses at the hands the Aer Lingus.
PAN AMERICAN WORLD AIRWAYS, INC. vs. JOSE K. RAPADAS and THE COURT
OF APPEALS
G.R. No. 60673 | May 19, 1992

NATURE: action for damages

FACTS: On January 16, 1975, Rapadas was waiting in line to board PanAm Flight No.

841 Guam-Manila with a ticket and baggage claim stub when he was ordered by a
handcarry control agent to check-in his Samsonite attache case. Rapadas protested since
his co-passengers were permitted to handcarry bulkier baggages. Rapadas stepped out of
the line to go to the end to try if he can get through without having to register his attache
case. However, the handcarry control man noticed him and ordered him again to register
his baggage. Rapadas has no choice but accede in order not to miss the flight. He gave his
attache case to his brother who was around and checked it in for him. However, its
contents or the value of its contents were not declared.
Upon arriving in Manila, Rapadas had all of his checked-in baggages except the attache
case. Since Rapadas felt ill, he sent his son, Jorge to request for the search of the attache
case. PanAm exerted efforts to locate the luggage through PAN AM-MIA Baggage
Service.
Rapadas personally followed up his claim. He called up Mr. Panuelos, the head of the
Baggage Section of PanAm several times. He also sent letters demanding and reminding
his claim. He received a reply from PanAms counsel offering to settle the claim for the
sum of one hundred sixty dollars ($160.00). Rapadas refused and instead filed an action
for damages alleging that PanAm discriminated or singled him out in ordering that his
luggage be checked in and that PAN AM neglected its duty in the handling and
safekeeping of his attache case. He demanded for the value of the lost attache case and its
contents at US$42,403.90 since the loss led to his failure to pay certain monetary
obligations, failure to remit money sent through him to relatives, inability to enjoy the
fruits of his retirement and vacation pay earned from working in Tonga Construction
Company and inability to return to Tonga to comply with then existing contracts. PanAm
acknowledged responsibility for the loss but asserted that the claim was subject to the
"Notice of Baggage Liability Limitations" which formed part of the passenger ticket and
was.conspicuously posted in its offices for the guidance of the passengers.
The trial court ruled in favor of Rapadas. On appeal, the Court of Appeals affirmed the
trial court decision ordering PanAm to pay the equivalent peso value of the amount of
$5,228.90 and 100 paengs, nominal damages in the amount of P20,000.00 and attorney's
fees of P5,000.00, and the costs of the suit. Hence, PanAms petition for review.
PanAm contends that its liability for the lost baggage of respondent Rapadas was limited
to $160.00 since the latter did not declare a higher value for his baggage and did not pay
the additional charges.
ISSUE: Whether or not a passenger is bound by the terms of a passenger ticket declaring
that the limitations of liability set forth in the Warsaw Convention shall apply in case of
loss, damage or destruction to a registered luggage of a passenger.
RULING: YES. Petition GRANTED and CA decision is REVERSED and SET ASIDE.
PanAm is ordered to pay damages in the amount of US$400.00 or its equivalent in
Philippine Currency at the time of actual payment, P10,000.00 in attorney's fees, and
costs of the suit.

RATIO:
The notice appearing on page two of the airline ticket reads:
If the passenger's journey involves an ultimate destination or stop in a country other than
the country of departure the Warsaw Convention may be applicable and the Convention
governs. Although the trial court rejected the evidence of the PanAm of a stipulation
particularly specifying what amounts it had bound itself to pay for loss of luggage, such
notice is sufficient in showing the applicability of the Warsaw limitations.
Liability limitations in the Convention can be availed when the baggage check is
combined with or incorporated in the passenger ticket which complies with its provisions.
In the case at bar, the baggage check is combined with the passenger ticket in one
document of carriage.
The Supreme Court reminded its ruling in Ong Yiu v. Court of Appeals where a plane
ticket is considered as a contract of adhesion:
A plane ticket is what is known as a contract of "adhesion", in regards which
it has been said that contracts of adhesion wherein one party imposes a ready
made form of contract on the other, as the plane ticket in the case at bar, are
contracts not entirely prohibited. The one who adheres to the contract is in reality
free to reject it entirely; if he adheres, he gives his consent. (Tolentino, Civil
Code, Vol. IV, 1962 ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's
Journal, January 31, 1951, p. 49) And as held in Randolph v. American Airlines,
103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein v. Trans World Airlines, Inc.,
349 S.W. 2d 483, "a contract limiting liability upon an agreed valuation does not
offend against the policy of the law forbidding one from contracting against his
own negligence.
Considering, therefore, that petitioner had failed to declare a higher value
for his baggage, he cannot be permitted a recovery in excess of P100.00 . . . (91
SCRA 223 at page 231)
Sweet Lines vs. Teves was also quoted by the Supreme Court:
While contracts of adhesion are not entirely prohibited, neither is a blind
reliance on them encouraged. In the face of facts and circumstances showing
they should be ignored because of their basically one sided nature, the Court
does not hesitate to rule out blind adherence to their terms.
xxx
The reasons behind stipulations on liability limitations arise from the
difficulty of establishing with a clear preponderance of evidence the contents of
a lost valise or suitcase. Unless the contents are declared, it will always be the

word of a passenger against that of the airline. If the loss of life or property is
caused by the gross negligence or arbitrary acts of the airline or the contents of
the lost luggage are proved by satisfactory evidence other than the self-serving
declarations of one party, the Court will not hesitate to disregard the fine print in
a contract of adhesion.
The passenger is expected to be vigilant insofar as his luggage is concerned. Rapadas
refused to register the attache case and chose to take it with him despite having been
ordered by the PANAM agent to check it in. Rapadas manifested a disregard of airline
rules on allowable handcarried baggages. Prudence of a reasonably careful person also
dictates that cash and jewelry should be removed from checked-in-luggage and placed in
one's pockets or in a handcarried Manila-paper or plastic envelope.
Lack of enough time to make a declaration of a higher value and to pay the corresponding
supplementary charges cannot justify Rapadas failure to comply with the requirement.
Besides, an airplane will not depart meantime that its own employee is asking a passenger
to comply with a safety regulation.
ADDITIONAL DOCTRINES:
As to the question of whether or not private respondent should be paid attorney's fees, it
is just and equitable for Rapadas to recover expenses for litigation in the amount of
P5,000.00. Warsaw Convention does not preclude an award of attorney's fees. However,
the attorneys fees was increased to P10,000.00
As to the value of damages, the lost luggage was declared as weighing around 18 pounds
or approximately 8 kilograms. At $20.00 per kilogram, PanAm offered to pay $160.00.
However, $400.00 per passenger is allowed for unchecked luggage. The checking-in was
against the will Rapadas, so the lost bag as must be considered as an involuntarily and
hurriedly checked-in luggage and continuing its earlier status as unchecked luggage.
Also, since the trial court ruled out discriminatory acts or bad faith on the part of Pan Am
or other reasons warranting damages, there is no factual basis for the grant of P20,000.00
damages.

FEDERICO SERRA vs. THE HON. COURT OF APPEALS AND RIZAL COMMERCIAL
BANKING CORPORATION
G.R. No. 103338 | January 4, 1994

NATURE: specific performance and damages

FACTS: Serra is the owner of a 374 sq.meter land in Masbate. In 1975, RCBC
negotiated with Serra for the purchase of the land. Because the land was still unregistered
then, a contract of Lease with Option to Buy was made. The pertinent portion reads:

1. The LESSOR leases unto the LESSEE, an the LESSEE hereby accepts in
lease, the parcel of land described in the first WHEREAS clause, to have and to
hold the same for a period of twenty-five (25) years commencing from June 1,
1975 to June 1, 2000. The LESSEE, however, shall have the option to purchase
said parcel of land within a period of ten (10) years from the date of the signing
of this Contract at a price not greater than TWO HUNDRED TEN PESOS
(P210.00) per square meter. For this purpose, the LESSOR undertakes, within
such ten-year period, to register said parcel of land under the TORRENS
SYSTEM and all expenses appurtenant thereto shall be for his sole account.
If, for any reason, said parcel of land is not registered under the TORRENS
SYSTEM within the aforementioned ten-year period, the LESSEE shall have the
right, upon termination of the lease to be paid by the LESSOR the market value
of the building and improvements constructed on said parcel of land.
The LESSEE is hereby appointed attorney-in-fact for the LESSOR to register
said parcel of land under the TORRENS SYSTEM in case the LESSOR, for any
reason, fails to comply with his obligation to effect said registration within
reasonable time after the signing of this Agreement, and all expenses appurtenant
to such registration shall be charged by the LESSEE against the rentals due to
the LESSOR.
2. During the period of the lease, the LESSEE covenants to pay the LESSOR, at
the latter's residence, a monthly rental of SEVEN HUNDRED PESOS
(P700.00), Philippine Currency, payable in advance on or before the fifth (5th)
day of every calendar month, provided that the rentals for the first four (4)
months shall be paid by the LESSEE in advance upon the signing of this
Contract.
3. The LESSEE is hereby authorized to construct as its sole expense a building
and such other improvements on said parcel of land, which it may need in
pursuance of its business and/or operations; provided, that if for any reason the
LESSEE shall fail to exercise its option mentioned in paragraph (1) above in
case the parcel of land is registered under the TORRENS SYSTEM within the
ten-year period mentioned therein, said building and/or improvements, shall
become the property of the LESSOR after the expiration of the 25-year lease
period without the right of reimbursement on the part of the LESSEE. The
authority herein granted does not, however, extend to the making or allowing
any unlawful, improper or offensive used of the leased premises, or any use
thereof, other than banking and office purposes. The maintenance and upkeep of
such building, structure and improvements shall likewise be for the sole account
of the LESSEE.
A building and other improvements were constructed on the land - branch office of
RCBC in Masbate. Within three years, Serra complied with his part by having the
property registered for which Original Certificate of Title No. 0-232 was issued.

On September 4, 1984, RCBC decided to exercise its option and informed Serra, through
a letter, of its intention to buy the property at the agreed price of not greater than P210.00
per square meter or a total of P78,430.00. Serra replied, however, that he is no longer
selling the property.
On March 14, 1985, a complaint for specific performance and damages were filed. RCBC
alleged that during the negotiations it made clear to petitioner that it intends to stay
permanently on property once its branch office is opened unless the exigencies of the
business requires otherwise.
The trial court dismissed the complaint ruling that the option to buy is unenforceable
because it lacked a consideration distinct from the price and RCBC did not exercise its
option within reasonable time. But upon motion for reconsideration, the trial court
reversed itself. Upon appeal, CA affirmed trial courts decision.
ISSUE: Whether the contract is inequitable as it is an adhesion contract.
RULING: No. Petition is DISMISSED, CA decision is AFFIRMED.
RATIO:
The contract is an adhesion contract but it is not inequitable. A contract of adhesion is one
wherein a party, usually a corporation, prepares the stipulations in the contract, while the
other party merely affixes his signature or his "adhesion" thereto. These types of contracts
are as binding as ordinary contracts. Because in reality, the party who adheres to the
contract is free to reject it entirely. Although, this Court will not hesitate to rule out blind
adherence to terms where facts and circumstances will show that it is basically one-sided.
Serra is a highly educated man, who was a CPA during the execution of the contract and a
CPA-lawyer during the trial. He was holding a respectable position with the Metropolitan
Manila Commission. It is evident that a man of his stature should have been more
cautious in transactions he enters into, particularly where it concerns valuable properties.
He is amply equipped to drive a hard bargain if he would be so minded to.
ADDITIONAL DOCTRINES:
Consideration distinct from the price
Article 1479 of the Code provides that an accepted unilateral promise to buy and sell a
determinate thing for a price certain is binding upon the promisor if the promise is
supported by a consideration distinct from the price. In a unilateral promise to sell, where
the debtor fails to withdraw the promise before the acceptance by the creditor, the
transaction becomes a bilateral contract to sell and to buy, because upon acceptance by
the creditor of the offer to sell by the debtor, there is already a meeting of the minds of
the parties as to the thing which is determinate and the price which is certain. In which
case, the parties may then reciprocally demand performance.

An optional contract is a privilege existing only in one party the buyer. For a separate
consideration paid, he is given the right to decide to purchase or not, a certain
merchandise or property, at any time within the agreed period, at a fixed price. This being
his prerogative, he may not be compelled to exercise the option to buy before the time
expires.
In this case the consideration separate from the price is the consideration for the lessor's
obligation to sell the leased premises to the lessee, should he choose to exercise his
option to purchase the same, is the obligation of the lessee to sell to the lessor the
building and/or improvements constructed and/or made by the former, if he fails to
exercise his option to buy leased premises.
Price is certain or definite
A price is considered certain if it is so with reference to another thing certain or when the
determination thereof is left to the judgment of a specified person or persons. Contracts
are to be construed according to the sense and meaning of the terms which the parties
themselves have used. In this case, there is evidence to show that the intention of the
parties is to peg the price at P210 per square meter. Serras testimony is enlightening:
Q. Will you please tell this Court what was the offer?
A. It was an offer to buy the property that I have in Quezon City (sic).
Q. And did they give you a specific amount?
xxx xxx xxx
A. Well, there was an offer to buy the property at P210 per square meters (sic).
Q. And that was in what year?
A . 1975, sir.
Q. And did you accept the offer?
A. Yes, sir.
And by his subsequent acts of having the land titled under the Torrens System, and in
pursuing the bank manager to effect the sale immediately, means that he understood
perfectly the terms of the contract. He even had the same property mortgaged to the
respondent bank sometime in 1979, without the slightest hint of wanting to abandon his
offer to sell.
Adjusting the amount of rent
There is no basis, legal or factual, in adjusting the amount of the rent. The contract is the
law between the parties and if there is indeed reason to adjust the rent, the parties could
by themselves negotiate for the amendment of the contract.
Extraordinary Inflation
The decline of the purchasing power of the Philippine peso from 1983 to the time of the
commencement of the present case in 1985 is not so great as to result in an extraordinary
inflation. Extraordinary inflation exists when there in an unimaginable increase or
decrease of the purchasing power of the Philippine currency, or fluctuation in the value of
pesos manifestly beyond the contemplation of the parties at the time of the establishment
of the obligation.