The Statute of Frauds does not apply to an original debt of the promisor
"I am a contractor of a house where, for a sum of money, I build a house for others. In one of my contracts, there came a time when I had difficulty in financing the materials for my construction projects. To cover this deficit, the principal in one of my construction projects, agreed to pay for the construction materials that I ordered from the supplier of the same.The supplier, who was well aware of my financial restraints, gave credence to the credit of my principal, after all, the materials will be used for the construction of the latter’s house.
Unfortunately, when the payment for the construction materials became demandable, my principal feigned ignorance of the same. According to my principal, since his special promise to pay for this construction materials were not made in writing, then the same is not enforceable under the law. When I researched this matter, I have learned of this so-called statute of frauds which, accordingly, renders unenforceable an unwritten contract to answer for the debt of another. In this relation, may I know if the said law is applicable to my situation?Erik
Dear Erik,The answer to your question actually depends on the nature of the said special promise to pay for the construction materials. To begin with, let us discuss the pertinent law and jurisprudence on the matter. Succinctly, Article 1403 (2) (b) of Republic Act 386, otherwise known as the Civil Code of the Philippines, dictates:
“Unenforceable Contracts (n)“Article 1403. The following contracts are unenforceable, unless they are ratified:
“(1) xxx“(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents:“(a) xxx“(b) A special promise to answer for the debt, default, or miscarriage of another xxx.” (Emphasis supplied)
The above-cited law provides the so-called “Statute of Frauds.” In essence, this law states the rule that the specified contracts enumerated therein must be reduced in writing for its enforceability. In this regard, as can be gleaned from the lifted provision, it says that one of the contracts in which the Statute of Frauds applies is in a contract for a special promise to answer for the debt, default or miscarriage of another.For this matter, the issue which remained subject to further factual determination is the nature of your principal’s so-called promise to pay. Briefly, the question must follow: Is the promise to pay refers to an original debt in which the promisor or the principal in your situation becomes primarily liable for the payment of the debt or does it refer to a collateral agreement of another? As jurisprudence elucidates, the Statute of Frauds only applies in the latter case because the same does not apply to a promise to pay for an original debt of the promisor. Stated otherwise, if your principal agreed and promised to pay for this construction materials as part of his original debt to the supplier, and not just as your surety for the same, then, the same need not be in writing for its enforceability.In fact, this has been the pronouncement of the Supreme Court in the case of Reiss vs Memije (GR L-5447, March 1, 1910), ponencia of Associate Justice Adam Clarke Carson, to wit:“The true test as to whether a promise is within the statute had been said to lie in the answer to the question whether the promise is an original or a collateral one. If the promise is an original or an independent one that is, if the promisor becomes thereby primarily liable for the payment of the debt, the promise is not within the statute. But, on the other hand, if the promise is collateral to the agreement of another and the promisor becomes thereby merely a surety, the promise must be in writing. xxx“If goods are sold upon the sole credit and responsibility of the party who make the promise, then, even though they be delivered to a third person, there is no liability of the third person to which that of the party promising can be collateral, and consequently such a promise to pay does not require a memorandum in writing and on the same principle it has been held that when one advances money at the request of another (on his promise to repay it) to pay the debt of a third party, as the payment creates no debt against such third party, not being made at all upon his credit, the liability of the party on whose request and promise it was made is original and not collateral, and not with the Statute of Frauds.” (Emphasis and underscoring supplied)We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to email@example.com"