Short answer. No. Article 1266 releases a debtor in an obligation to do when the prestation becomes legally impossible without the debtor's fault. Since a later law now makes the service illegal, you can no longer be compelled to perform it, provided the change happened through no fault of your own.
What the law says
The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor.
Civil Code, Article 1266 — Impossibility in Obligations to Do. Read the full provision →
A supervening law can excuse performance
Article 1266 provides that the debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor. Legal impossibility covers exactly your situation: performance was entirely possible when you contracted, but a later law made rendering that service unlawful. Since you cannot be required to break the law to satisfy a private contract, the obligation is extinguished by operation of Article 1266 rather than surviving on paper as a debt you can never lawfully pay.
Why fault on your part changes the outcome
Release under this article depends on the impossibility arising without the fault of the obligor. If the new law targets conduct you engaged in deliberately or recklessly, knowing it invited regulation, or if you somehow induced the legal change yourself, you may not be able to invoke the same release. The article is meant to excuse a debtor caught by a supervening legal change outside their control, not to give a debtor an easy exit from an obligation they made impossible to perform through their own actions.
What release does, and does not, wipe away
Being released under Article 1266 means you can no longer be compelled to render the now-illegal service, and you generally should not be held liable for damages for failing to perform it, since the impossibility was beyond your fault. It does not automatically erase every consequence of the contract, however. Any partial performance already rendered, deposits already received, or other obligations under the same contract that remain lawful and possible are not automatically extinguished merely because this one particular prestation became illegal; each part of the arrangement is assessed on its own footing.
What to do once the law changes
If a new law has made your contracted service illegal, it is worth reviewing the contract to confirm that the specific act you were obligated to perform, and not merely a related but still-lawful part of it, is truly what the new law prohibits. Communicating with the other party about the supervening legal change, rather than simply stopping performance without explanation, helps avoid a dispute over whether you were released under Article 1266 or whether you simply failed to perform an obligation that remained valid.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Asian Construction and Development Corporation vs. Philippine Commercial International Bank, G.R. No. 153827, April 25, 2006 — read the decision on LawPhil →
- Delfin C. Gonzalez, Jr. vs. Magdaleno M. Peña, et al, G.R. No. 214303, January 30, 2017 — read the decision on LawPhil →
- Raymundo S. De Leon vs. Republic of the Philippines, G.R. No. 170405, February 2, 2010 — read the decision on LawPhil →
- El Reyno Homes, Inc. vs. Ernesto Ong and Ma. Sonia Tan Soon Ha, G.R. No. 142440, February 17, 2003 — read the decision on LawPhil →