Issue was the waiver of right to transfer to another

ISSUE:
Was the “waiver of right to transfer to another school without refunding the equivalent of his
scholarships in cash” as stipulated in the contract valid?
HELD:
No, the waiver of right stipulated in the contract is not valid as it is against public policy.
In order to declare a contract void as against public policy, a court must find that the contract as to
consideration or the thing to be done, contravenes some established interest of society, or is
inconsistent with sound policy and good morals, or tends clearly to undermine the security of individual
rights. The policy enunciated in the Director of Private Schools’ Memorandum No. 33, s. 1949 is sound
policy stating that scholarships are awarded in recognition of merit not to keep outstanding students in
school to bolster its prestige. In the understanding of that university scholarships award is a business
scheme designed to increase the business potential of an educational institution. Thus, conceived it is
not only inconsistent with sound policy but also good morals. The practice of awarding scholarships to
attract students and keep them in school is not good customs nor has it received some kind of social
and practical confirmation. Scholarships are granted not to attract and to keep brilliant students in
school for their propaganda value but to reward merit or help gifted students in whom society has an
established interest or a first lien.
Thus, the waiver for being against public policy, Arellano must return the amount paid by Cui with
interest.