Contracts-C5
Interpretation of Contracts
ARTICLE 1370:
If the terms of a contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning
of its stipulations shall control.
If the words appear to be contrary to the evident intention
of the parties, the latter shall prevail over the former.
Kung ang mga napagkasunduan sa kontrata ay malinaw at
hindi nang-iiwan ng pagdududa sa intensyon ng mga partido,
ang literal na ibig sabihin ng mga napagkusunduan ang
mananaig.
Kung ang mga termino ay iba sa intensyon ng mga partido,
ang intensyon ang mananaig.
Discussion:
It is a cardinal rule in the interpretation of contracts that if the terms of a
contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulation shall control. The Court must not
read into any other intention of the contracting parties contradictory to the plain
meaning.
The terms of an agreement or writing are presumed to have been used in their
primary and general acceptation. However, evidence may be admitted to show
that they are used in a local, technical or otherwise peculiar signification.
Legal Meaning
In interpreting a writing according to its legal meaning, it is to be interpreted
according to the legal meaning it bears in the place of its execution, unless the
parties intended otherwise (Rule 130, Section 10 of the Rules of Court).
The MTC has no jurisdiction of the issue is interpretation, enforcement and/or
rescission of the contracts.
Only the laws existing at the time of the execution of the contract applies to the
contract unless the intention is for it to retroact.
ARTICLE 1371:
In order to judge the intention of the contracting parties,
their contemporaneous and subsequent acts shall be
principally considered.
Upang hatulan ang intensyon ng mga nagkasundo, ang
kaalinsabay at kasunod na kilos ang syang pangunahing
ikonsidera.
* When we say contemporaneous this will occur in the same period of time and
the Subsequent Acts is the one which following in time or order of the acts of
the contracting parties.
ARTICLE 1372:
However general the terms of a contract may be, 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. (1283)
Gayunpaman ang pangkalahatang tuntunin ng kontrata ay
maaari, hindi sila dapat intindihin upang unawain ang mga
bagay na naiiba at mga kaso na iba mula sa mga
pinagkasunduan ng mga partido. (1283)
Discussion:
- Can the general terms used in a contract can comprehend things that are
distinct and different from those agreed upon by the parties?
- No, no matter how general the terms used in a contract, they do not
comprehend things that are distinct and different from those agreed upon
by the parties.
Illustrative case:
Carrot man built s house on a lot containing an area of 350 sqm. Cabbage man
protested to the construction alleging that their agreement was that Carrot man
could occupy only that space where the house was constructed. This
interpretation is erroneous because if that was the intention they could have
used the words “portion” or “part” and not the word “lot”.
ARTICLE 1373:
If some stipulation of any contract should admit of several
meanings, it shall be understood as bearing that import which
is most adequate to render it effectual. (1284)
Kung ang ilang mga kasunduan sa kontrata ay dapat umamin ng
ilang kahulugan, ito ay dapat intindihin bilang responsibilidad
na ang import na kung saan ay pinaka-sapat upang
magbigay mabunga. (1284)
ARTICLE 1374:
The various stipulations of a contract shall be interpreted
together, attributing to the doubtful ones that sense which
may result from all of them taken jointly. (1285)
Ang iba't ibang mga stipulasyon ng isang kontrata ay
magkakasamang isinalin, na nauugnay sa mga nagdududa sa
kamalayan na maaaring magresulta mula sa lahat ng mga ito ay
kinuha nang magkasama.
ARTICLE 1375:
Words which may have different significations shall be
understood in that which is most inkeeping with the nature
and object of the contract. (1286)
Ang mga salitang maaring may magkakaibang kahulugan ay
dapat maintindihan ang mas dapat na tandaan ayon sa nature o
object ng kontrata.
Discussion:
If a word is susceptible to two or more meanings shall be understood to follow
the eaning which is most in keeping with the nature and object of the
agreement.
ARTICLE 1376:
The usage or customs of the place shall be borne in mind in
the interpretation of the ambiguities of a contract, and shall
fill the omission of stipulations which are ordinarily
established
Ang paggamit o ang kaugaligan ng isang lugar ay dapat na
nasasaisip sa pamamagitan ng interpretasyon ng hindi
maliwanag na kontrata, ay dapat na punan ang istipulasyon kung
saan ay ordinaryong maitatag.
Effect of Usage or Custom of the Place
Examples: A made a contract with B regarding “pesetas.” In the place
where the contract was made, Mexican pesetas were more
commonly used than Spanish pesetas. The Supreme Court held
that the term “pesetas” should be construed to mean Mexican
pesetas.
If a contract for a lease of services does not state how much
compensation should be given, the custom of the place where the
services were rendered should determine the amount.
ARTICLE 1377:
The interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the obscurity.
(1288)
Ang interpretasyon ng mga malabong salita o nakasaad sa
kontrata ay hindi papaburan ang partido na responsable sa
kalabuan nito.
Dicussion:
It is fair, logical and sensible not to favor that one who caused the ambiguity in
the contract because he should not benefit from it. Therefore, drafters of
contract must be very careful and cautious in the choice of words or term they
are going to use. The terms should be clear and should leave no room for doubt
regarding the true intention of the parties.

The same article applies to contracts of adhesion where the terms are prepared
by only one party while the other merely makes a choice whether he wants to
take it or leave it. Contracts of adhesion become void when the weaker party is
reduced to the alternative of taking ir or leaving it, and is absolutely deprived of
the opportunity to bargain on equal footing.
ARTICLE 1378:
When it is absolutely impossible to settle doubts by the
rules established in the preceding articles, and the doubts
refer to incidental circumstances of a gratuitous contract,
the least transmission of rights and interests shall prevail. If
the contract is onerous, the doubt shall be settled in favor of
the greatest reciprocity of interests.
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, the contract
shall be null and void.
Contracts-C5
Interpretation of Contracts
Illustration:
Mr. A is a businessman and he really want to buy the rice field of Mr. B for
the construction of his commercial building. He issued a written contract to
Mr. B who is a farmer and the owner of 15 hectares of rice field, since Mr.
B doesn’t know how to read and right, Mr. A should interpret first the
written contract that he issued to Mr. B before the latter agreed and signed
upon it because according to art. 1379 The interpretation stated in Rule
123 of the Rules of Court shall likewise be observed in the construction of
contracts which stated in “Sec.10 Interpretation of a writing according to
its legal meaning – that 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.”.

Kung talagang imposibleng pagkasunduan ang pagdududa

gamit ang mga probisyon sa nakaraang artikulo, at ang
pagdududa ay napapatungkol sa mga incidental na pangyayari
sa gratuitous na kontrata, ang may pinakakukonti ang
paglilipat ng karapatan at interes ang masusunod. Kung ang
kontrata ay onerous, ang pagdududa ay isasaayos na ang
pabor ay sa dalawang may interes.
Kung may pagdududa sa mga principal na dahilan ng kontrata
sa pamamaraan na hindi na maaring malaman kung ano ang
intensyon at lakas ng loob ng mga partido, ang kontrata ay
magiging labag sa batas.

Discussion:
If Articles 1370 to 1377 cannot apply, this article will be considered as the last
resort.

In case of doubts on the incidental circumstances of the contract, and the

contract is gratuitous, the least transmissible of rights and interest shall
prevail.

Example:
A pacto de retro sale should be interpreted as providing for the least
transmissible of rights. The construction favoring the right to redeem should
be adopted which right is considered a natural right.
In case of doubts on the incidental circumstances of the contract, and the
contract is onerous, the doubt shall be construed in favor of the greatest
reciprocity of interests.

Example:
When there is doubt as to whether the contract is a loan or a sale, to hold that
the land was conveyed as security for a loan would afford greater reciprocity
of interest.
If there is doubt on the principal object of the contract and it cannot be
determined what might have been the intention or will of the contracting
parties, the contract shall be void. This is in line with Article 1409, par. 6.

ARTICLE 1379: (NI)

The principles of interpretation stated in Rule 123 of the
Rules of Court shall likewise be observed in the
construction of contracts.

Ang mga prinsipyo ng interpretasyon na nakasaad sa Rule 123

ng Rules of Court ay dapat ding ma-obserbahan sa
konstruksiyon ng kontrata.

These are the classifications of defective contracts:

1. Rescissible contracts
2. Voidable or annullable contracts
3. Unenforceable contracts
4. Void or inexistent contracts

Note: There is no case indicated on this article.