Question

Alex and Ben are business partners who jointly own a manufacturing company called ABC Manufacturing Corporation. In 2019, they entered into a contract with XYZ Suppliers to purchase raw materials for their production. The contract explicitly stated that the price of the raw materials shall be subject to a 10% increase every year starting from 2021.

However, in 2020, the Philippine government passed a new law imposing a price freeze on essential goods, including the raw materials supplied by XYZ Suppliers. This law prohibits any increase in prices for a period of two years.

In 2021, XYZ Suppliers informed Alex and Ben that they will be implementing a 10% price increase for the raw materials, as stated in the contract. Alex and Ben, on the other hand, argue that the price increase cannot be implemented due to the new law on price freeze.

Assuming that the new law on price freeze is deemed constitutional and effective, discuss the application of the retroactivity of laws (Civil Code, Art. 4) and the principle of vested rights in resolving the conflict between the contract and the new law.