Non-impairment of Contract Clause

G.R. No. 177508, August 07, 2009

BANAT v. COMELEC
Carpio, J.

Summarized by Sophia Sy

BANAT assails the constitutionality Sec. 34 of RA 9369 which fixes the per diem
of poll watchers, for being violative of the non-impairment of contracts clause. The court
rules that the non-impairment clause was not violated because there exist no contract
and assuming there is, the law is a valid exercise of police power.

IMPORTANT PEOPLE
Barangay Association for National Advancement and Transparency
(BANAT) Party List duly accredited multisectoral organization, petitioner
Comelec

FACTS
1. This petition for prohibition with a prayer for the issuance of a temporary
restraining order or a writ of preliminary injunction was filed by BANAT
assailing the constitutionality of Sections 34, 37, 38, and 43 of RA 9369.1
2. Petitioners assail Sec. 34 of the said act for being violative of Art. III, Sec. 10
of the Constitution.2 Assailed section provides:
SEC. 34. Sec. 26 of Republic Act No. 7166 is hereby amended to read as follows:
SEC. 26. Official Watchers. - Every registered political party or coalition of political
parties, and every candidate shall each be entitled to one watcher in every polling place
and canvassing center: Provided That, candidates for the Sangguniang Panlalawigan,
Sangguniang Panlunsod, or Sangguniang Bayan belonging to the same slate or ticket
shall collectively be entitled to only one watcher.

The dominant majority party and dominant minority party, which the Commission shall
determine in accordance with law, shall each be entitled to one official watcher who
shall be paid a fixed per diem of four hundred pesos (400.00).
xx

3. Petitioner argues that the provision which fixes the per diem of poll
watchers of the dominant majority and dominant minority parties on election
day violates the freedom of the parties to contract and their right to fix the

1
Only Sec. 34 which allegedly violates the Non-impairment of contract clause shall be discussed here
2
SECTION 10. No law impairing the obligation of contracts shall be passed.

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 terms and conditions of the contract they see as fair, equitable and just.
Petitioner adds that this is a purely private contract using private funds which
cannot be regulated by law.

ISSUE with HOLDING

1. WON Sec. 34 of RA 9369 violates the non-impairment of contracts clause?
NO
OSG: Non-impairment clause only applies to previously perfected contracts.
In this case, there is no perfected contact therefore, no obligation will be
impaired.
COMELEC & OSG: the law is a proper exercise of police power and will
prevail over a contract. Poll watching - not just an ordinary contract but an
agreement with the solemn duty to ensure the sanctity of votes, thus vested
with public interest and can be regulated by Congress. That the poll watchers
will receive fair and equitable compensation promotes the general welfare.
Regulation is reasonable since parties will secure a copy of the election
returns and are given the right to assign poll watchers inside the polling
precincts.
SC:
1) No violation of non-impairment of contracts clause because there is no
contract to begin with.
Non-impairment clause is limited in application to laws that derogate
from prior acts or contracts by enlarging, abridging or in any manner
changing the intention of the parties. There is impairment if a
subsequent law changes the terms of a contract between the parties,
imposes new conditions, dispenses with those agreed upon or
withdraws remedies for the enforcement of the rights of the parties.
Poll watchers hired on election day (May 14, 2007) are deemed to have
incorporated within their contracts the provisions of RA 9369 which took
effect 3 months prior.
2) Even if a contracts exists, the law is a valid exercise of police power.
Police power is superior to the non-impairment clause. Beltran v.
Secretary of Health: the freedom to contract is not absolute; all
contracts and all rights are subject to the police power of the state
The role of poll watchers is invested with public interest. They not only
guard the votes of their respective candidates or political parties but also
ensure that all the votes are properly counted. They aid in fair and honest
elections. and help ensure that the elections are transparent, credible, fair,
and accurate.

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 Thus, assuming there were existing contracts, section 34 would still be
constitutional because the law was enacted in the exercise of the police
power of the state to promote the general welfare of the people.

DISPOSITIVE PORTION
Petition dismissed for lack of merit.

DOCTRINE
The non-impairment clause is limited in application to laws that derogate from
prior acts or contracts by enlarging, abridging or in any manner changing the
intention of the parties.
There is impairment if a subsequent law changes the terms of a contract
between the parties, imposes new conditions, dispenses with those agreed upon
or withdraws remedies for the enforcement of the rights of the parties.