Press Release
April 3, 2019

Drilon urges caution in review of contracts with private, foreign entities

Senate Minority Leader Franklin M. Drilon said that extreme caution must be exercised in implementing the President's directive to review all governmentcontracts and loan agreements, saying that existing and binding contracts cannot simply be classified as onerous and cancelled, for doing so would represent a clear breach of contract.

"In general, I am in favor of reviewing these proposed contracts with China and other bilateral or multilateral international agencies, like World Bank and Asian Development Bank, etc.," said Drilon said, a former justice secretary.

"But I must caution that existing and binding contracts cannot simply be classified as onerous and cancelled," he warned.

"The government must avail of the procedure outlined in the contract," he emphasized.

To do otherwise, Drilon stressed, would constitute a breach of the country's obligations under the contract. He added that it would have legal and financial implications.

"The government must respect the sanctity of the contracts. Otherwise, no country or entity would enter into contracts with us because we cannot be trusted to honor our obligations," Drilon said.

The principle on sanctity of contracts dictates that once parties duly enter into a contract, they must honor their obligations under it, Drilon explained.

Considering the existence of such legal doctrine, Drilon said it is incumbent upon the government to be very careful in entering into a contract.

If the government thinks a contract duly executed is disadvantageous or onerous, Drilon said it can renegotiate its terms, go to court for its reformation, or terminate the same in accordance with the procedure laid down in the contract, subject to the consequences provided in the agreement.

He added that the government could bring it to the Ombudsman if it violates the anti-graft law.

Drilon also said that the power to review contracts must not be used to harass.

Earlier, Drilon backed calls to review the loan agreements that the Philippines signed with China, including the Chico River Dam and Kaliwa Dam.

He said that it is important that the government ensures that these are not disadvantageous to the country or that they will not place the country in a debt trap.

"Let us review and expose the terms. We owe it to the public, because it is the public, through their taxes, who will pay the loan," he said.

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