On January 11, 1902,  the plaintiff and  the  defendant entered into a contract with  the following stipulations:

"First. Pedro Koch binds himself to render his services as an employee of  the commercial firm of Carlos  Gsell, established in  this city, and to devote all his practical and technical knowledge exclusively to the business of the said Gsell.  He  binds himself,  furthermore, not to do business, for account of  himself,  for  another person, or for  his own account, and to keep the most absolute reserve with regard to the business commended to him;

"Second.  The term  or duration of this contract shall be two  and one-half years, counting from the first of the present month of January, 1902, to which the effect of this document shall be retroactive; and the said Pedro  Koch shall receive as salary and for board and lodging the sum of two hundred pesos,  Mexican currency, per month;

"Third. The said Pedro Koch binds himself to pay in cash to Mr. Gsell the sum of ten thousand pesos if, after leaving the  firm of C.  Gsell, and against the latter's will, he shall engage directly or indirectly  in carrying on any business in which the said Carlos Gsell is at  present engaged, or within the  two and one-half  years fixed for the duration of the present contract in these Islands, either as an employee or member of  a firm  or company, or on his own account; and he furthermore  binds himself to pay in cash to Mr. Gsell an equal  sum of ten thousand pesos for each violation  of any secret of the  business entrusted to him;

"Fourth.  This contract shall  subsist in  each  and all of its parts  during the period of time above mentioned, even though Mr. Gsell  should  organize a company or transfer his business to another person, for in these cases the present contract shall be understood also to be transferred either to the company or to  the person or persons who acquire the business referred to; and

"Fifth. Under the preceding conditions,  the contracting parties have executed the present contract which they bind themselves to observe  and comply with well and faithfully in each and  all of its parts, in the most solemn manner conformable  to law, and  by common consent they designate this  city of Manila as the place where all the  acts and proceedings,  judicial and  extrajudicial, that originate there from shall be performed."

On June 30, 1904, the same  plaintiff and defendant executed the following instrument:

"The contract between Mr.  Carlos Gsell and Mr. Pedro Koch,  made  in  Manila on  January  11, 1902, before the notary Mr. Enrique Barrera, having expired, the first named this day delivers to Mr. Pedro  Koch a ticket for passage on  the steamer  Rubi to Hongkong and another ticket for passage from that port on the German  mail steamer to Genoa.  Moreover, he delivers  to him  the sum of $200 Mexican currency as traveling expenses and for the purchase of railroad tickets from Genoa to Switzerland.

"By the foregoing the contract before mentioned, of hire of personal services, is fulfilled, with the exception of its third paragraph, which shall subsist in all its parts and with all the penalties stipulated for its violation.

"Finally, Mr. Pedro Koch declares that he will not make any subsequent claim against the firm of Mr. Carlos Gsell."

It is alleged in the complaint that, during the last ten years,  the  plaintiff has engaged solely and exclusively in the manufacture of umbrellas,  matches, and hats in the city of Manila, and at the present time continues to engage in the manufacture of the aforementioned articles,  and among them  the manufacture  of straw hats; that the contracts  above  mentioned were  executed in  consequence of and under the  following circumstances: The defendant, while a  young  laborer  without  experience or  technical knowledge, a native and resident  of  Switzerland, was, by recommendation and at the expense  of the plaintiff,  employed as an apprentice in an important hat manufactory in Switzerland, under the agreement  that,  after he should have acquired some experience,  he should come to Manila at the expense of the plaintiff, to  work in the latter's hat manufactory, as in fact he did, after an apprenticeship of one year and a half in the aforesaid manufactory in Switzerland.  That on February  11, 1900, the defendant arrived at this port, at the expense  of the plaintiff, on which date a contract  of lease of services was executed between both parties  which contained nearly the same  clauses as that mentioned in the complaint,  which latter contract was executed after the expiration of the term of that first contract; that in the manufacture of hats in his manufactory in Manila, the plaintiff uses various recipes, formulas, and procedure,  the acquisition and knowledge of which have cost him more than  P20,000; that the defendant, during his stay in  plaintiff's manufactories  in Manila finally became familiar with the said procedure, formulas, and  recipes employed by the plaintiff; that since the month of November, 1907, and after having left the service of the plaintiff, the  said defendant engaged and  continues  to engage in the  manufacture of straw hats in the city of Manila, against the  will of the plaintiff, thereby violating, to the  serious detriment of  the latter, the stipulations of the aforementioned contracts of January  11, 1902, and June 30,  1904, and that he is therefore obliged to pay the plaintiff the sum of P10,000.

On the basis of the foregoing facts, the plaintiff requests: (1)  that judgment be entered against the defendant and in favor of the said plaintiff for the sum of P10,000 and the costs of  the trial; and (2) that, in default of such payment, the  defendant be prohibited from engaging  in the manufacture  of hats in the Philippine Islands.

The defendant filed a demurrer to the complaint  on the ground that it did not set forth facts sufficient to constitute a cause  for action, which, demurrer was admitted by the court and the plaintiff was allowed a term of five days to amend the complaint, should he deem proper to do so.  The plaintiff stated that  he did  not  desire  to amend it and requested that the case be decided  on its merits, whereupon the court issued  an order of dismissal, to which exception was  taken in due form by the plaintiff.

The question of law here raised is  whether the stipulation  contained in the  third clause of  the contract alleged in the complaint  is or is not valid in law.  The trial court has decided it in the negative, basing its decision on article 1583 of the Civil Code, which declares the hire of services for life to be  null and void, concluding that, by virtue of the said stipulation, the services of the defendant, in so far as they concern the conduct of any business or undertaking in which the defendant might engage, were pledged for life to the plaintiff, for in the said clause, it  appears that the services are not confined to any specific business or undertaking  the manufacture of straw hats to which the complaint refers being included therein, nor is there a  limit to the time  during which the  defendant shall  be obliged to render his services exclusively to the plaintiff in the business or undertaking in which the latter might engage.

It is  unquestionable that  were it  a matter  of the hire of services  for life the contract would be null and void in accordance with the said provision of theCivil Code, which, moreover, is clear  and specific.  But, in  our opinion, that is not the case.  The third clause referred to contains no contract whatever for the hire of services of any kind for any period of time,  either long or short, and still less during the whole of defendant's life; far from this, it  refers distinctly to the cessation of the services stipulated, not indeed for life, but for only two years and a half, in the first and second clauses of the contract; so that the agreement therein contained rests on the necessary supposition of  the  defendant's  having left the service of the plaintiff.  The hire of services covenanted between  both  parties was  terminated at the expiration of that period of two  years  and a half agreed upon, so recognized and  expressly declared in the instrument  of  June  30,  1904, and therefore there is no occasion to speak here of such a hiring.

Considering the question from another point of view, the court says in the order appealed from that by  virtue of what  was covenanted in  the  third clause of the contract, the defendant was bound not to engage, either as a member of a  firm, as an employee, or on his  own account, directly or indirectly,  in carrying on  any business in which the plaintiff Gsell might be engaged, and in case of failure to comply therewith he was bound to pay in cash  to the said plaintiff the sum of P10,000,  which stipulation, it may be said  in  addition, deprives the defendant  of the liberty to use his abilities for his own benefit or that of any other person except the plaintiff; that it constitutes a restrictive obligation or a prohibition in absolute terms with respect to  defendant's conducting one or various industries; it is also an infringement of the latter's liberty to remain in these Islands, because if he conducts the same  industry or engages  in the  same  business  in  which the  plaintiff  is engaged,  he would  find himself obliged to absent himself from the  Islands in order not to pay the P10,000  specified in the aforesaid third clause of the contract.

We believe that this opinion is not well founded, considering the terms of the clause referred to.  It does not prohibit the defendant from conducting  any industry or business, even the kind of businesses in which the plaintiff is engaged. The defendant has not  bound himself to abstain from such kinds  of businesses or  industries as are  mentioned in the order appealed from.   At least,  no obligation whatever of that kind appears  to have  been assumed in the contract. On the contrary, the latter allows the presumption that the said defendant may engage in the same industries or businesses in which the plaintiff is engaged, and the sole obligation that  he has contracted with regard to this feature is that he shall pay to the latter  P10,000 in case he should engage in them.  Consequently the question which arises is that as to whether a  person can lawfully bind himself to pay a  certain sum of money to another in case the former shall  conduct a  specified business or  industry.  And we certainly do not see why such an obligation should be considered null and void, supposing that it is a question of a lawful industry or business.  Within the liberty to make contracts, sanctioned by our laws, everyone is free to execute the contracts he may consider suitable, provided they are not contrary to law, morality, and good customs, and, in our opinion, there is nothing  in the obligation referred to that is  opposed to any of these three conceptions.  Apparently,  the  obligation essentially rests  on a  just desire on the part of the plaintiff to protect himself by means of an  indemnity paid in advance  against the  effects of  the competition which the defendant might make, after he had duly qualified the defendant to enable him to do so, by defraying the expenses of his industrial apprenticeship and initiating him into a knowledge of his own  procedure and formulas, the acquisition of which, as he states, has cost him more than P20,000, and this is to be accepted as true under the demurrer to the written complaint.

But  it is alleged that if  the P10,000 stipulated are not paid to the plaintiff the defendant may not engage in the businesses in which the former is engaged, and in fact the plaintiff asks, in the second part  of the complaint, that in default of payment of the  said  sum, claimed in the first part thereof,  the defendant be prohibited  from  engaging in the manufacture of hats in the Philippine Islands.  It is to be observed, however, that the contract does not so state. It is not an expression of its terms, but an  interpretation, more or less direct, more or less debatable,  of its purview and consequences, and  it is very obvious that the validity of  a contract is not to be judged  by the consequences, perhaps  unfounded, which the  contracting parties  with more or less correctness claim to deduce from it, but by its context.  Speaking  in  general terms and without  predetermining the question with regard to the true value of the said interpretation, from the fact of the defendant's binding himself to pay P10,000  to the plaintiff in the case provided for in the contract, it might perhaps not necessarily follow that, by not being able to pay the said sum, he could not engage in the same kind of businesses in which the plaintiff is engaged, as would occur, for  example, were it decided finally  upon the merits that such  a payment was not  stipulated as a necessary condition in order that the defendant might undertake the class of businesses or industry referred to.  In such a case it is evident  that  the defendant would not be in a worse situation than other  debtors  who can not pay their debts or comply with their obligations.

Be this as it may, this is not the proper time to discuss such an aspect of the question.  It is certain that there is no obligation whatever resting upon the defendant, recorded in the  contract, requiring him not to engage in the same enterprises in which the plaintiff is engaged, even though he might not be able to pay to the latter the P10,000 stipulated therein; and that the sole obligation that is found to be clearly and expressly  contracted by the said defendant, with respect to that point, is that he shall pay to the plaintiff the aforementioned sum in the case provided for in the contract, an obligation which we declare to be  valid and sufficient, together with the other facts alleged in the complaint, to constitute a cause of action.

The  order appealed from  is revoked, and the records shall be returned to the trial court so that it may proceed in accordance with law by ordering the defendant to answer the complaint within the regular period.  No express finding is made as to the costs of this instance.  So ordered.

Arellano, C. J., Torres and Carson, JJ., concur.