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Contract Mutuality in Coaching

This case involved a contract dispute between GF Equity, Inc. and Arturo Valenzona. Valenzona was hired by GF Equity as the head coach of their basketball team, but was later terminated. The contract contained a clause allowing GF Equity to terminate the contract at any time if, in their sole opinion, Valenzona failed to exhibit sufficient coaching skills. The Court of Appeals and Supreme Court found this clause to violate the principle of mutuality in contracts by allowing one party unilateral control over termination. The Supreme Court upheld the nullification of the clause and ordered GF Equity to pay damages to Valenzona for breaching the contract without valid cause.

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548 views2 pages

Contract Mutuality in Coaching

This case involved a contract dispute between GF Equity, Inc. and Arturo Valenzona. Valenzona was hired by GF Equity as the head coach of their basketball team, but was later terminated. The contract contained a clause allowing GF Equity to terminate the contract at any time if, in their sole opinion, Valenzona failed to exhibit sufficient coaching skills. The Court of Appeals and Supreme Court found this clause to violate the principle of mutuality in contracts by allowing one party unilateral control over termination. The Supreme Court upheld the nullification of the clause and ordered GF Equity to pay damages to Valenzona for breaching the contract without valid cause.

Uploaded by

Jem
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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GF Equity, Inc. vs.

Valenzona
G.R. No. 156841. June 30, 2005
CARPIO-MORALES, J.:
Facts:
Petitioner GF Equity, through Chief Financial Officer Steven Uytengsu, hired respondent
Arturo Valenzona as Head Coach of Alaska basketball team in the PBA from January 1, 1988 to
December 31, 1989 under a Contract of Employment. The last sentence of paragraph 3 of the
contract carried the following condition: “3. x x x If at any time during the contract, the COACH,
in the sole opinion of the CORPORATION, fails to exhibit sufficient skill or competitive ability
to coach the team, the CORPORATION may terminate this contract.” Notwithstanding the
paragraph, because of the trust and confidence respondent reposed in Uytengsu, signed the
contract. The team placed third both in the Open and All-Filipino PBA Conferences in 1988.
However, Valenzona was advised by management of his termination effective January 1, 1988.
Valenzona filed a complaint for breach of contract which the trial court upheld the validity of the
said provision. Upon appeal, CA reversed the decision of the trial court.
Issue:
  Whether the questioned last sentence of paragraph 3 is violative of the principle of
mutuality of contracts?
Rule of law:
Article 1308
Application:
The assailed stipulation being violative of the mutuality principle underlying Article 1308 of
the Civil Code, it is null and void. Mutuality is one of the characteristics of a contract, its validity
or performance or compliance of which cannot be left to the will of only one of the parties. The
ultimate purpose of the mutuality principle is thus to nullify a contract containing a condition
which makes its fulfillment or pretermination dependent exclusively upon the uncontrolled
will of one of the contracting parties.
 The assailed condition clearly transgresses the principle of mutuality of contracts. In other
words, GF Equity was given an unbridled prerogative to pre-terminate the contract irrespective
of the soundness, fairness or reasonableness, or even lack of basis of its opinion.
To sustain the validity of the assailed paragraph would open the gate for arbitrary and illegal
dismissals, for void contractual stipulations would be used as justification therefor. The nullity of
the stipulation notwithstanding, GF Equity was not precluded from the right to pre-terminate the
contract. The pre-termination must have legal basis, however, if it is to be declared justified. GF
Equity failed, however, to advance any ground to justify the pre-termination. It simply invoked
the assailed provision which is null and void.
Conclusion:
WHEREFORE, the decision of the Court of Appeals dated October 14, 2002 is hereby
SET ASIDE and another rendered declaring the assailed provision of the contract NULL AND
VOID and ORDERING petitioner, GF Equity, to pay private respondent, Arturo Valenzona,
actual damages in the amount of P525,000.00 and attorney’s fees in the amount of P60,000.00.

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