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Section 10. Interpretation of a writing according to its legal meaning. - The
language of a writing is to be interpreted according to the legal meaning it bears in the
place of its execution, unless the parties intended otherwise. (8)
By way of review, it bears to recall the basic principles “LEX LOCI CELEBRATIONIS” in
the law on marriage and “LEX LOCI CONTRACTUS”, the Latin term for "law of the place where
the contract is made".
When the contract is entered into in one place, to be executed in another, there are two
loci contractus; the locus celebrate contractus, and the locus solutionis; the former governs in
everything which relates to the mode of construing the contract, the meaning to be attached to
the expressions, and the nature and validity of the engagement; but the latter governs the
performance of the agreement.
An example is a “non-compete clause”. It is a term used in contract law under which one
party (usually an employee) agrees to not pursue a similar profession or trade in competition
against another party (usually the employer). This is used to protect so-called “trade secrets” from
leaking to rival companies.
As far back as 1415, English common law had already been "old and settled" that
restraints on trade were unenforceable. That ban remained unchanged until 1621, when a
restriction that was limited to a specific geographic location was found to be an enforceable
exception to the previously-absolute rule.
In the United States, a “non-compete clause” is varied in its applicability per state. In
Virginia, “non-compete clauses” are deemed valid if proven to be necessary to protect legitimate
business interests. Conversely, in California, “non-compete clauses” are automatically void as a
matter of law, being against public policy, subject tot very limited exceptions.
In the Philippines, the rule is still couched in general terms to wit:
Art. 1306. The contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.
Section 11. Instrument construed so as to give effect to all provisions. - In the
construction of an instrument, where there are several provisions or particulars, such a
construction is, if possible, to be adopted as will give effect to all. (9)
According to Section 11, one has to harmonize provisions in a contract with each other.
G.R. No. 154852, October 21, 2004

Two Provisions:
‘Billing shall be every fifteen (15) days. After three (3) months of satisfactory
performance, the parties may negotiate for the extension of this contract and other
matters that might be advantageous to both parties."


to be adopted as will give effect to all. 2001 Petitioner next argues that the consent or conformity of Anglo-Asean Bank is not necessary to the validity of the Memorandum of Agreement as the evidence on record allegedly shows that it was never the intention of the parties thereto to treat the same as one of conventional subrogation. it is mandated that "(I)n the construction of an instrument where there are several provisions or particulars. if possible. As previously discussed. as provided for in Article 1191 of the Civil Code. under our Rules of Court. ANTONIO P. August 9. which admittedly was Anglo-Asean Bank. The power to rescind obligations is implied in reciprocal ones. arguing that relative to the provision of the Contract on the duration of its effectivity.R. in case one of the obligors should not comply with what is incumbent upon him. No. HELD: Section 11 of Rule 130 of the Rules of Court states that "[i]n the construction of an instrument where there are several provisions or particulars. 1191."Further. Petitioners contend that the court a quo did not comply with Section 11 of Rule 130 of the Rules of Court. He claims that the preambulatory clause requiring the express conformity of third parties. XXX” Therefore. jurisprudence has laid down the rule that contracts should be so construed as to harmonize and give effect to the different provisions thereof. the former does not in any way deal with the termination of the Contract. if possible. if we were to interpret the same as one of assignment of credit. paragraph 5 is a particular provision. such a construction is. At this point. These provisions in the aforementioned Memorandum of Agreement may not simply be disregarded or dismissed as superfluous. it shall be deemed renewed for the same period unless either party notifies the other in writing not later than one (1) month before the expiry of its intent not to renew.12.should prevail. Petitioners contend that according to paragraph 5. Thereafter. paragraph 5 is not inconsistent with paragraph 12. LICAROS vs. absent any provision providing for a right to rescind. after one year. One party. They conclude that since the two provisions are inconsistent. which is one year. because it failed to give effect to paragraph 5. It is a basic rule in the interpretation of contracts that "(t)he various stipulations of a contract shall be interpreted together. GATMAITAN G. TERM OF CONTRACT: "This Contract shall take effect on May 25. the two cited provisions requiring consent of the debtor to the memorandum is inconsistent with a contract of assignment of credit. such a construction is. ABELARDO B. the intention of the parties to treat the Memorandum of Agreement as embodying a conventional subrogation is shown not only by the "whereas clause" but also by the signature space captioned "WITH OUR CONFORME" reserved for the signature of a representative of Anglo-Asean Bank. 1994 and shall be for a period of One (1) Year from said date. there is no right to rescind but an obligation to renegotiate. In the case at bench. we stress that the right to rescind is implied in reciprocal obligations. Petitioners objected to the rescission citing paragraphs 5 and 12 of their agreement. which states: "ART. It has not been shown that any clause or provision in the Memorandum of Agreement is inconsistent or incompatible with a conventional subrogation. to be adopted as will give effect to all." Moreover. paragraph 5 -. Neither does it provide for a right to rescind.being the particular provision -. More important. attributing to the doubtful ones that sense which may result from all of them taken jointly. rescinded the contract. the parties may nevertheless rescind the contract should the other obligor fail to comply with its obligations. Thus." Contrary to petitioners’ contention. They further invoke Section 12 of the same Rule. 142838. the Memorandum of Agreement embodies certain provisions that are consistent with either a conventional subrogation or assignment of credit. On the other hand. then the aforementioned stipulations regarding the consent of Anglo-Asean Bank would be rendered -2- . is a mere surplusage which is not necessary to the validity of the agreement.

G. particularly its provision: That this agreement takes effect on January 1. that the first sentence of the aforequoted covenant speaks of what the lessee can do. It is petitioners' submission that the first clause referred to is independent. No.R. BPI-FSB. prescribes the manner the service contract in question could be terminated. to be adopted as will give effect to all (Rule 130. on the other hand. 118972. This is evident from the phrase "may not however" found in the second sentence. however. not merely the first clause. to be adopted as will give effect to all. HOME DEVELOPMENT MUTUAL FUND. is possessed of the authority to sublease the subject premises. No. the foregoing stipulation seemingly insulates Cruz from any liability in this case. petitioners' interpretation solely based on the first clause. such that upon the expiration of the period stated in the first clause. Under the aforequoted contractual stipulation. which is the bone of petitioners' stance." Article 1374 of the New Civil Code. The lessee may not. The first clause of the aforecited stipulation. No mention is made of obtaining any written consent of the lessor (Cruz) as a condition sine qua non for the validity of a sublease agreement. vs. as lessee. requires that "The various stipulations of a contract shall be interpreted together. April 3. to ascertain the true meaning or import of the controverted provision of subject Consultancy Agreement. We cannot fathom how contracting parties. Consequently. 2006 Provision: Assignment and Sublease – The lessee has the right to sublease the premises or any portion thereof to a third party. the parties intended a distinction between a sublease and an assignment of rights. such a construction is. What necessitates the prior written consent of lessor Cruz is the assignment or transfer by BPI-FSB as lessee of its right or interest under the lease agreement. ZENAIDA DOMINGO G. however. who are sui juris. the Consultancy Agreement ceased to have any binding effect between the contracting parties even though they (petitioners) did not give any written notice of termination at least thirty (30) days in advance. 158676 November 27. as previously discussed. -3- . which means that the act of subleasing in the first sentence may be done by the lessee without the consent of the lessor but the act of assignment or transfer of rights in the second sentence cannot be done by the lessee without the consent of the lessor. Clearly. if possible.inutile and useless considering that. BPI-FAMILY SAVINGS BANK. COURT OF APPEALS. such a construction is. 1998 Our pivot of inquiry is the correct construction or interpretation of subject Consultancy Agreement. while the proviso. On surface. ET AL. and knowledgeable of the purposes for which they solemnly put their Agreement into writing. Time-honored is the rule that "In the construction of an instrument where there are several provisions or particulars. SPS. 1985. Section 11). vs. which is the core of private respondents' action. could be so careless as to include inconsistent conditions in such a short and simple provision in their contract sued upon. distinct and separate from the said proviso. assign or transfer its right or interest under this lease without the written consent of the lessor. basic is the rule that in the construction of an instrument where there are several provisions or particulars. while the second sentence refers to what it cannot do without the consent of the lessor. and rightly so. Provided. However. basically deals with the term of the contract. 1985 to December 31." Conformably. INC. ET AL. cannot be upheld. that either party who desires to terminate the contract may serve the other party a written notice at least thirty (30) days in advance.R. attributing to the doubtful ones that sense which may result from all of them taken jointly. The trial court was quick to point out. its entirety must be considered. the consent of the debtor is not necessary in an assignment of credit. if possible. and which completely ignored the second clause under scrutiny.

nevertheless. One of the rules we learned is: Art. from [the] March 12. So. This is the basic rule in the interpretation of contracts because all other rules are but ancillary to the ascertainment of the meaning intended by the parties. El Hogar Filipino. Ergo. 1468.1. August 29. this special provision controls and prevails over the general terms and conditions extant on the CSS.1989 At the outset. If a matter falls under a specific provision and a general provision. p. Rule 130 of the Rules of Court provides as follows: Interpretation according to intention. p. as a rule. It distinctively provides a clear cut manner by which the right of action against PISA may be exercised by [SBC] pertaining to a specific robbery incident—a matter visibly non-existent in the CSS. No. In Sales. and partly in another thing. February 8. we distinguished a contract of sale from a contract of barter. Rules of Court). 348. ET AL. 67 Phil." SECURITY BANK CORP. . 47) GENERAL versus SPECIAL PROVISIONS In the second part of Section 12.S. the latter is paramount to the former. (Order dated July 12.In the construction of an instrument. 141733. L-38268 May 31. they shall not be understood to comprehend things that are distinct and cases that are different from those upon which the parties intended to agree. LIGON vs. 1992 robbery. a particular intent. " Similarly. it shall be considered a barter if the value of the thing given as a part of the consideration exceeds the amount of the money or its equivalent. If the consideration of the contract consists partly in money. 2007 While it cannot be gainsaid that the terms and conditions in the Contract of Security Services (CSS) were incorporated to the PRA (sic) as integral parts thereof.. If such intention does not clearly appear. And once this intention has been ascertained it becomes an integral part of the contract as though it has been originally expressed therein in unequivocal terms. p. 189. it shall be governed by the specific provision. (Shoreline Oil Corp. the intention of the parties is to be pursued. 84644. VS. Indeed. HON. vs. We conform to the finding of the court of origin that the 2nd contract (PRA) precisely and particularly dealt with the mode of resolving PISA’s liability resulting. it is a sale. Article 1372 of the Civil Code stipulates that however general the terms of a contract may be. general and particular provisions — In the construction of an instrument. which means that where an act deals specifically with a subject a general provision in that act does not override the specific provision. App. we are actually told to apply the principle "GENERALIA SPECIALIBUS NON DEROGANT". No. if any. Likewise. it should be stated that. the latter is paramount to the former. 1993. So a particular intent will control a general one that is inconsistent with it. vs.Section 12. attributing to the doubtful ones that sense which may result from all of them taken jointly. cited in 17A C. as in this case reflected in letter e. CASE: ROLANDO R. COURT OF APPEALS G. Article 1374 of the same Code provides that "the various stipulations of a contract shall be interpreted together. paragraph 5 of the PRA will control a general intent embodied in paragraph 9 of the Contract of Security -4- .R. RUFINO G. Interpretation according to intention. COURT OF APPEALS. general and particular provisions. Section 10. the intention of the parties is to be pursued. (Yatco v. the transaction shall be characterized by the manifest intention of the parties. (10) INTENTION IS PARAMOUNT Intention is always the first rule of interpretation. G. EMPIRE INSURANCE COMP.J. the latter is paramount to the former. 610) When a general and a particular provision are inconsistent. REMEDIOS S.113). and when a general and a particular provision are inconsistent. Records.. No. Guy. So a particular intent will control a general one that is inconsistent with it. otherwise. and when a general and a particular provision are inconsistent. 1979 Section 10. in the construction and interpretation of a document the intention of the parties must be sought (Rule 130.R.R.

Revised Rules of Court) Thus.R. technical or otherwise peculiar signification. 2007 Paragraph 5 of the PRA specifically states that PISA’s payment was subject to express terms and conditions." "pakiao" or task basis are not entitled to certain labor standards benefits. if the maximum recoverable proceeds of the insurance covering the loss suffered by SBC could not be recovered from the insurer.Services. 2007 EQUITABLE PCI BANKING CORPORATION. Rule 130. However. COURT OF APPEALS. the PRA is paramount to and prevails over the terms and stipulations in the first contract (CSS) on matters relevant and material to PISA’s liability relating to the robbery.01. or their PISA co-guards’ negligence and/or willful act. including the situation of the subject thereof and of the parties to it. HON. 2008 Section 13. it is agreed that should Security Guards Wilson Taca and Ernesto Mariano be absolved from the charge of robbery in band and/or are found by the proper court not to have been involved at all in the alleged conspiracy. its general meaning or ordinary signification is to be applied. including those who are paid on piece-work. the circumstances under which it was made. 149040. 182248. CASES SECURITY BANK CORP. Workers who are paid by results. "takay. July 4. G. so that the judge may be placed in the position of those whose language he is to interpret. Further. Section 14.R. or otherwise peculiar signification. and that it is duly established through legal action before the competent court that their failure to prevent the robbery was not due to their. (Section 12. .R. INTERMEDIATE APPELLATE COURT.027. and were so used and understood in the particular instance. December 18. An example of this is the term “PAKIAO”. See also: GUILLERMO CORTES vs. Under the Omnibus Rules to implement the Labor Code. This is an instance when a mere “layman’s understanding” is preferred for verily there are contracts that do not require or was not attended by the intervention of a lawyer. Interpretation according to circumstances. (11) INTERPRETATION ACCORDING TO CIRCUMSTANCES Here. whatever installments may -5- . evidence may be introduced that the term used has a local. 73678 July 21.The terms of a writing are presumed to have been used in their primary and general acceptation. shall not affect or prejudice. (12) ORDINARY MEANING IS PREFERRED Section 14 provides that when interpreting a term used in a contract or instrument. However. vs. ET AL. one who is tasked to consider the evidence presented is implored to place himself in the shoes of the parties to the document and envision the circumstances under which the provisions of an instrument were created. whatever cause of action SBC may have against PISA and whatever claim or defense the latter may have against SBC. February 8. No. CAPITOL DEVELOPMENT CORPORATION G.728. ET AL.R. in which case the agreement must be construed accordingly. may be shown. but evidence is admissible to show that they have a local. No. VS. 141733.For the proper construction of an instrument. one of which was the following: (e) The parties hereto further agree that this agreement and/or payment of the whole amount of P3. technical. directly or indirectly. This rule is useful in interpreting contracts such as equitable mortgages or lease with option to buy. the term PAKIAO may not be understood by laymen in the same manner as it is used under the Omnibus Rules. No. RCBC CAPITAL CORPORATION G. G. 1989 EDGAR LEDONIO vs. Peculiar signification of terms. . ET AL. No.

subsisting agreement.1 of the General Bidding Procedures and Rules of respondent. in which material term is left for future negotiations.] no buts. It appears in the case at bar that petitioner’s construction of the letter of February 22. Under American jurisprudence. For a valid contract to have been created.000.000. vs. As such." and does not state that it should be so declared by a court. Under the same section and rule invoked by petitioner. "an indicative price is a ball-park figure and [respondent] supplies such a figure purely to define the ball-park. Under the objective theory of contract.] "Indicative" is merely the adjective of the verb to indicate. This was the same construction adopted by the trial court. if the parties had intended the non-recovery to be through a judicial and final adjudication. Preliminary negotiations or an agreement still involving future negotiations is not the functional equivalent of a valid. We do not agree. The reliance of the trial court in the Webster definition of the term "indicative. direct attention[. and were so used and understood in the particular instance. viz. Petitioner posits that under Section 14. it is not shared by respondent. technical.have been paid by PISA under this Agreement shall be reimbursed with legal interest to be computed from the time of actual payment. This case sprung from a case of specific performance initiated by petitioner who has the burden to prove that the case should be spared from the application of the technical terms in the sale and disposition of assets under privatization. Indeed. x x x when the price of P21 [M]illion was indicated – then it becomes the "indicative" price – the correct price. November 16. Webster Comprehensive Dictionary.000." The plain contention of petitioner that the transaction involves an "ordinary armslength sale of property" is unsubstantiated and leaves much to be desired. when it says that "to indicate" is [t]o point out. Rule 130 of the Revised Rules of Court. The transaction at bar involves the sale of an asset under a privatization scheme which attaches a peculiar meaning or signification to the term "indicative price." Under No. the term should be taken in its ordinary and usual acceptation and should be taken to mean as a price which is "indicated" or "specified" which. It is a mere evidence of the parties’ preliminary transactions which did not crystallize into a perfected contract. gives rise to a meeting of minds. Paragraph 5(e) only requires that the proceeds "could not be recovered from the insurer." as also adopted by petitioner.R. with the interest thereto being based on the diminishing balance. if accepted. That the letter constituted a definite. JOSE R. or otherwise peculiar signification. or even with finality. understandings and beliefs are effective only if shared. Based on the objective manifestations of the parties in the case at bar. or a mere agreement to agree. paragraph 5(e) would cover LIC’s extrajudicial denial of SBC’s claim. words are presumed to have been used in their primary and general acceptance. but the selling price indicative of the value at which respondent was willing to sell. 2006 Petitioner further argues that the "suggested indicative price" of P21. -6- . 6. No.000. there was no meeting of the minds. gives us a graphic meaning that everybody can understand. is misplaced. the issue on estoppel is now moot and academic. PRIVATE MANAGEMENT OFFICE G. mutual assent is judged by an objective standard. We hold that reading the clause as requiring a final judgment is a strained interpretation and contrary to settled rules of interpretation of contracts.00 is not a proposed price. In its primary and general meaning. In determining the signification of terms. in which case the agreement must be construed accordingly. and there was no evidence presented to show that the words used signified a judicial adjudication. the terms of a writing are presumed to have been used in their primary and general acceptation. MORENO. JR.] to indicate the correct page[. 1993 – that his assent to the "suggested indicative price" of P21. But as the records would show. the parties must have progressed beyond this stage of imperfect negotiation. Having thus established that there is no perfected contract of sale in the case at bar. thus giving rise to a perfected contract of sale – is petitioner’s own subjective understanding. they should have stated so.: Going to defendant’s main defense that P21 Million was a "suggested indicative price" – we have to find out exactly what "indicative" means. but evidence is admissible to show that they have a local. International Edition. complete and certain offer is the subjective belief of petitioner alone. no ifs[. the same to be amortized in eighteen (18) equally monthly installments. Petitioner failed to discharge the burden. the parties are yet undergoing the preliminary steps towards the formation of a valid contract.00 converted it as the price certain. 159373. looking to the express words the parties used in the contract. The letter in question is a mere evidence of a memorialization of inconclusive negotiations.

and when different constructions of a provision are otherwise equally proper. to translate the language with which the tribunal is not familiar. If a party is not satisfied or doubts the veracity of the translation. the former controls the latter. he may raise the same during trial. one in favor of natural right and the other against it. . that sense is to prevail against either party in which he supposed the other understood it. In such cases. 1992 Indubitably. Construction in favor of natural right. (15) This covers a situation where there are different interpretations given by as many parties to one single document. or who understand the language." Section 16. Petitioners' invocation of the interpretative rule in the Rules of Court that written words control printed words in documents. Written words control printed. on cross-examination or even present his own expert or interpreter to rebut the same. vs. As previously stated. and the two are inconsistent. . in order to determine its true character. Section 17. The interpretation which the other party believed and used will prevail. The prevailing interpretation will be determined according to the following rules: 1. to bolster their assertion that the typewritten provisions regarding the routing and flight schedule prevail over the printed conditions. This rule is usually applicable to waivers and renunciations. (13) ANICETO G. the contract has provided for such a situation by explicitly stating that the above condition remains effective "notwithstanding that the same (fixed time for completion of carriage. we find no ambiguity in the contract subject of this case that would call for the application of said rule.When the terms of an agreement have been intended in a different sense by the different parties to it. . that is to be taken which is the most favorable to the party in whose favor the provision was made. Of two constructions. (16) A natural right is one that exists by virtue of natural law. JR. is admissible to declare the characters or the meaning of the language. that interpretation which is most favorable to the party for whose benefit the provision was made in the first place will prevail. 2. that private respondent can use substitute aircraft even without notice and without the assumption of any obligation whatsoever to carry the goods on any specified aircraft is clearly sanctioned by the contract of carriage as specifically provided for under the conditions thereof. 95536. In any event. is tenuous. (14) Although English is the official language of the Philippine Judiciary.R. or any particular route or schedule) may be stated on the face hereof. COURT OF APPEALS. Section 18. (17) -7- . generally testimonial.Section 15.When an instrument is equally susceptible of two interpretations. the former is to be adopted. Experts and interpreters to be used in explaining certain writings. specified aircraft. it cannot be denied that our country is a hodge-podge of cultures and ethnicities with their own dialects or languages and sometimes contracts are written in such native dialects or languages. G. March 23. ET AL.An instrument may be construed according to usage. When the characters in which an instrument is written are difficult to be deciphered. SALUDO. the law allows the introduction of evidence. . Interpretation according to usage. No. or the language is not understood by the court. When both constructions are equally proper. ET AL. Section 19. which preferred.When an instrument consists partly of written words and partly of a printed form. Said rule may be considered only when there is inconsistency between the written and printed words of the contract. the evidence of persons skilled in deciphering the characters.

R. If the words appear to be contrary to the evident intention of the parties. attributing to the doubtful ones that sense which may result from all of them taken jointly. the least transmission of rights and interests shall prevail. In order to judge the intention of the contracting parties. destination. 1375. PROVISIONS OF THE CIVIL CODE ON THE INTERPRETATION OF CONTRACTS Art. (1282) Art. (1281) Art. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated. 1968). (1286) Art. and shall fill the omission of stipulations which are ordinarily established. . A bill of lading operates both as a receipt and as a contract. 1371. (1284) Art. describes the goods as to quantity. it shall be understood as bearing that import which is most adequate to render it effectual. LTD. the latter shall prevail over the former. and value. the contract shall be null and void. 1374. Words which may have different significations shall be understood in that which is most in keeping with the nature and object of the contract. they shall not be understood to comprehend things that are distinct and cases that are different from those upon which the parties intended to agree. and stipulates the rights and obligations assumed by the parties (PHOENIX ASSURANCE CO. The various stipulations of a contract shall be interpreted together. 1377. dimensions. UNITED STATES LINES. (n) -8- . weight. which include the consignee. the literal meaning of its stipulations shall control. a bill of lading should be interpreted according to these usages.Dean Inigo’s example relates to a bill of lading. identification marks and condition. No. If the contract is onerous. 1370. (1285) Art. quality. it names the contracting parties. 1373. (1289) Art. February 22. If some stipulation of any contract should admit of several meanings. G. (1288) Art. the doubt shall be settled in favor of the greatest reciprocity of interests. 1372. 1376. 1378. If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what may have been the intention or will of the parties. However general the terms of a contract may be. Thus. and the doubts refer to incidental circumstances of a gratuitous contract. (1287) Art.. fixes the route. As a contract. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a contract. As a receipt. vs. L-24033. 1379. (1283) Art. The principles of interpretation stated in Rule 123 of the Rules of Court shall likewise be observed in the construction of contracts. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties. and freight rate or charges. their contemporaneous and subsequent acts shall be principally considered. it recites the date and place of shipment. When it is absolutely impossible to settle doubts by the rules established in the preceding articles. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.