Question

I. EFFECT AND APPLICATION OF LAWS

C. Retroactivity of Laws (Civil Code, Art. 4), Vested Rights Principle

Scenario 1:

John, a businessman, entered into a contract with Blake on January 1, 2020. The contract stipulates that John will purchase Blake's property for a specified amount. However, on February 1, 2021, a new law was enacted, which increased the tax rate for property transactions. John, who has not yet paid the full amount to Blake, argues that the new tax law should not be applied retroactively. On the other hand, Blake insists that the new law should be applied, and John should pay the higher tax rate.

Question: Should the new tax law be applied retroactively to the contract between John and Blake? Discuss the principle of retroactivity of laws and its application in this scenario.

Scenario 2:

Maria and Sofia entered into a loan agreement on October 1, 2019. According to the agreement, Sofia borrowed a certain amount from Maria and agreed to pay it back with interest within one year. However, on December 1, 2020, a new law was enacted, which reduced the maximum interest rate that can be charged on loans. Maria, who calculated the interest based on the previous higher interest rate, demands that Sofia adhere to the agreed-upon interest rate. On the other hand, Sofia argues that she should only pay the reduced interest rate provided by the new law.

Question: Should the new law on maximum interest rate be applied retroactively to the loan agreement between Maria and Sofia? Discuss the principle of retroactivity of laws and its application in this scenario.