SAMPLE LEGAL OPINION

By: JEAN MONIQUE C. OABEL

Brgy. Ilayang Palale, Tayabas City, Quezon
oabeljeanmonique@gmail.com

November 29,2018

Dr. Fe Sy
San Pedro
Laguna 4023

Dear Ms. Sy:

This legal opinion seeks to advise you on whether you can open your own practice clinic in
San Pedro, Laguna, considering the restrictive covenant that you signed with the Lazaro Dental
Clinic.

The Facts

At the time you were hired by the Lazaro Dental Clinic, you signed an employment contract
that includes a restrictive covenant which provides that when you leave the clinic, you agree not to
practice dentistry within a 160-kilometer radius of Pasay City for five years.

Because of being tired of city living, you now want to leave the Lazaro Dental Clinic and
open your own practice in San Pedro, Laguna, just 26 kilometers south of Pasay City.

The Applicable Law

The applicable laws are the following:

Article 1306 of the Civil Code provides that parties to a contract 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.

Article 1159 of the same Code also provides that obligations arising from contracts have the
force of law between the contracting parties and should be complied with in good faith. Courts
cannot stipulate for the parties nor amend their agreement where the same does not contravene law,
morals, good customs, public order or public policy, for to do so would be to alter the real intent of
the parties, and would run contrary to the function of the courts to give force and effect thereto. Not
being contrary to public policy, the non-involvement clause, which petitioner and respondent freely
agreed upon, has the force of law between them, and thus, should be complied with in good faith.
The Applicable Jurisprudence

In Del Castillo v. Richmond , G.R. No. L-21127, February 9, 1924, the court upheld a similar
stipulation as legal, reasonable, and not contrary to public policy. In the said case, the employee was
restricted from opening, owning or having any connection with any other drugstore within a radius
of four miles from the employer’s place of business during the time the employer was operating his
drugstore. A contract in restraint of trade is valid provided there is a limitation upon either time or
place and the restraint upon one party is not greater than the protection the other party requires.

It will be noted that the restrictions placed upon the plaintiff are strictly limited (a) to a
limited district or districts, and (b) during the time while the defendant or his heirs may own or have
open a drugstore, or have an interest in any other one within said limited district.

In Rivera vs. Solidbank Corporation 487 SCRA 512 , April 19, 2006,it was provided that the
freedom of contract is both a constitutional and statutory right. A contract is the law between the
parties and courts have no choice but to enforce such contract as long as it is not contrary to law,
morals, good customs and against public policy. The well-entrenched doctrine is that the law does
not relieve a party from the effects of an unwise, foolish or disastrous contract, entered into with full
awareness of what he was doing and entered into and carried out in good faith. Such a contract will
not be discarded even if there was a mistake of law or fact. Courts have no jurisdiction to look into
the wisdom of the contract entered into by and between the parties or to render a decision different
therefrom. They have no power to relieve parties from obligation voluntarily assailed, simply
because their contracts turned out to be disastrous deals.

The Court reiterates that the determination of reasonableness is made on the particular facts
and circumstances of each case. In Esmerson Electric Co. v. Rogers, 418 F. 3d 841, 486 (2005), it
was held that the question of reasonableness of a restraint requires a thorough consideration of
surrounding circumstances, including the subject matter of the contract, the purpose to be served, the
determination of the parties, the extent of the restraint and the specialization of the business of the
employer.

The court has to consider whether its enforcement will be injurious to the public or cause
undue hardships to the employee, and whether the restraint imposed is greater than necessary to
protect the employer. Thus, the court must have before it evidence relating to the legitimate interests
of the employer which might be protected in terms of time, space and the types of activity
proscribed. Consideration must be given to the employee’s right to earn a living and to his ability to
determine with certainty the area within which his employment ban is restituted. A provision on
territorial limitation is necessary to guide an employee of what constitutes as violation of a restrictive
covenant and whether the geographic scope is coextensive with that in which the employer is doing
business. In considering a territorial restriction, the facts and circumstances surrounding the case
must be considered. Thus, in determining whether the contract is reasonable or not, the trial court
should consider the following factors: (a) whether the covenant protects a legitimate business interest
of the employer; (b) whether the covenant creates an undue burden on the employee; (c) whether the
covenant is injurious to the public welfare; (d) whether the time and territorial limitations contained
in the covenant are reasonable; and (e) whether the restraint is reasonable from the standpoint of
public policy.

In Tiu v. Platinum Plans, G.R. No. 163512, February 28, 2007, it was pronounced that a
non-involvement clause is not necessarily void for being in restraint of trade as long as there are
reasonable limitations as to time, trade, and place.

In Consulta v. Court of Appeals, it was considered a non-involvement clause in accordance

with Article 1306 of the Civil Code. While the complainant in that case was an independent agent
and not an employee, she was prohibited for one year from engaging directly or indirectly in
activities of other companies that compete with the business of her principal. We noted therein that
the restriction did not prohibit the agent from engaging in any other business, or from being
connected with any other company, for as long as the business or company did not compete with the
principal’s business. Further, the prohibition applied only for one year after the termination of the
agent’s contract and was therefore a reasonable restriction designed to prevent acts prejudicial to the
employer.

Analysis and Condition

The validity of the restrictive covenant applicable to you being a non-competition/non-

compete clause – when the employee is prevented from directly competing or working for a
competitor of his former employer, or when the employee is prevented from setting up a competing
business, was attached on the mentioned jurisprudence and articles.

The employer and the employee may establish such stipulations, clauses, terms, and
conditions as they may deem convenient and that the obligations arising from the agreement between
the employer and the employee have the force of law between them and should be complied with in
good faith.

It was held from the cases that if the restraint was limited to "a certain time" and within "a
certain place," such contracts were valid and not "against the benefit of the state." It was now well
established, that a contract in restraint of trade is valid providing there is a limitation upon either
time or place. A contract, however, which restrains a man from entering into a business or trade
without either a limitation as to time or place, will be held invalid.

In your case, it has to be considered whether the enforcement of the restrictive covenant will
be injurious to the public or cause undue hardships to you, and whether the restraint imposed is
greater than necessary to protect the employer. Both the legitimate interests of the employer which
might be protected and your right to earn a living have to be considered. In your case, a provision on
territorial limitation was provided in order for you to determine what constitutes a violation of the
restrictive covenant and whether the geographic scope is coextensive with that in which the
employer is doing business.

In considering a territorial restriction, the facts and circumstances surrounding the case must
be considered. Thus, in determining whether the contract is reasonable or not, the trial court should
consider the following factors: (a) whether the covenant protects a legitimate business interest of the
employer; (b) whether the covenant creates an undue burden on the employee; (c) whether the
covenant is injurious to the public welfare; (d) whether the time and territorial limitations contained
in the covenant are reasonable; and (e) whether the restraint is reasonable from the standpoint of
public policy.

Recommendation

Considering the nature of the business in which you are engaged, in relation with the
limitation placed upon by the Lazaro Dental Clinic both as to time and place, I am of opinion that
such limitation provided in the restrictive covenant is legal and reasonable and not contrary to public
policy upon considering the factors determining the reasonableness and validity of the restrictions
enumerated above.

To invoke Article 1306 and 1159 of the Civil Code and applying above-mentioned
jurisprudence, it is humbly opined that you can open your own dental clinic to practice in other city
or municipality within Laguna provided that the limitations provided in the restricted covenant were
adhered and satisfactorily complied with.

To concretize, the restrictive covenant in your employment contract does not prohibit you
from opening in other parts of Laguna as you have said that that most of the clinic’s patients will
stay with the clinic and the affiliation and contracts will not be affected. Practicing outside the 160-
km radius of Pasay can provide a win-win situation for you and your previous employer as you
would have a better opportunity to attract new and more clients in Laguna while at the same time,
the Lazaro Clinic would not be able to sue you for breaching the restrictive covenant.

I appreciate the opportunity to advise you regarding this matter. Please let me know if you
wish to discuss any of these issues further. Thank you.

Very truly yours,

JEAN MONIQUE C. OABEL