INTERPRETATION OF DOCUMENTS

(Rule 130, Sections 10 – 19)

A. Basic Rules

1. Interpretation of 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.
(Sec 10)

2. Construction so as to give effect to all the 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. (Sec 11)

3. Interpretation according to intention

In the construction of an instrument, the intention of the parties is to be

pursued; and when a general and a particular provision are inconsistent, the
latter is paramount to the former. So a particular intent will control a general
one that is inconsistent with it. (Sec 12)

4. Interpretation according to circumstances

For the proper construction of an instrument, the circumstances under which it

was made, including the situation of the subject thereof and of the parties to it,
may be shown, so that the judge may be placed in the position of those who
language he is to interpret.(Sec 13)

5. Terms are presumed to have been sued in their primary and general
acceptation

The terms of a writing are presumed to have been used in their primary and
general acceptation, BUT evidence is admissible to show that they have a
local, technical, or otherwise peculiar signification, and were so used and
understood in the particular instance, in which case the agreement must be
construed accordingly. (Sec 14)

6. Written words control printed words

When an instrument consists partly of written words and partly of a printed

form, and the two are inconsistent, the former controls the latter. (Sec 15)
 7. Experts and interpreters to be used in explaining certain writings

When the characters in which an instrument is written are difficult to be

deciphered, or the language is not understood by the court, the evidence of
persons skilled in deciphering the characters, or who understand the language,
is admissible to declare the characters or the meaning of the language. (Sec 16)

8. Preference over two interpretations in an agreement

When the terms of an agreement have been intended in a different sense by the
different parties to it, that sense is to prevail against either party in which he
supposed the other understood it, and when different constructions of a
provision are otherwise equally proper, that is to be taken which is the most
favorable to the party in whose favor the provision was made. (Sec 17)

9. Construction in favor of natural right

When an instrument is equally susceptible of two interpretations, one in favor

of natural right and the other against it, the former is to be adopted. (Sec 18)

10. Interpretation according to usage

An instrument may be construed according to usage, in order to determine its

true character. (Sec 19).

B. Civil Code Provision on Interpretation of Contracts

1.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. (Art 1370)

2.In order to judge the intention of the contracting parties, their contemporaneous
and subsequent acts shall be principally considered. (Art 1371)

3. 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. (Art 1372)

4. 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.
(Art 1373)
 5. 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.
(Art 1374)
6. Words which may have different significations shall be understood in that
which is most in keeping with the nature and object of the contract. (Art 1375)

7. The usage or custom 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. (Art 1376)

8. The interpretation of obscure words or stipulations in a contract shall not favor

the party who caused the obscurity. (Art 1377)

9. 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. (Art 1378)

10. The principles of interpretation stated in Rule 123 of the Rules of Court shall
likewise be observed in the construction of contracts. (Art 1379)

C. Jurisprudence

1. Plain meaning of words should be enforced.

Contracts should be enforced as they read. If from the words the meaning is
plain, the contract should be enforced according to its words. x x x It is to be
presumed that persons mean what they say; and interpretation and construction
should not be resorted to when the English used is plain. (Leon Lambert v. T.J.
Fox, G.R. No. 7991, January 29, 1914).

2. Ambiguity Doctrine or Contra Proferentem Rule

The doctrine provides that in the interpretation of documents, ambiguities are

to construed against the drafter. By its very nature, the precept assumes the
existence of an ambiguity in the contract. (Cahayag v. Commercial Credit
Corp., G.R. No. 168078)
 Where the terms of a contract prepared by the lawyer of the obligee seems to
be vague or ambiguous, the doubt must be resolved against the latter and in
accordance with the real intention of the parties. (Capital Insurance & Surety
Co., Inc. v. Esteban Sandang and Maria Lachica, G.R. No. L-18857).

Contract to sell does not transfer ownership – A contract to sell, standing

alone, does not transfer ownership. At the point of perfection, the seller under a
contract to sell does not even have the obligation to transfer ownership to the
buyer. The obligation arises only when the buyer fulfills the condition
condition: full payment of the pruchase price. In other words, the seller retains
ownership at the time of the execution of the contract to sell.

Registration of the mortgage bound the buyers under the Contract to Sell –
Registration of the mortgage establishes a real right or lien in favor of the
mortgagee, as provided by Articles 1312  and 2126 of the Civil Code.Corollary
to the rule, the lien has been treated as "inseparable from the property
inasmuch as it is a right in rem." In other words, it binds third persons to the
mortgage. x x x The purpose of registration is to notify persons other than the
parties to the contract that a transaction concerning the property was entered
into.Ultimately, registration, because it provides constructive notice to the
whole world, makes the certificate of title reliable, such that third persons
dealing with registered land need only look at the certificate to determine the
status of the property. (Cahayag v. Commercial Credit Corp., G.R. Nos.
168078 &168357, [January 13, 2016], 778 PHIL 8-41)

3. Effect of defect in or lack of notarization.

The absence of notarization of the deed of sale would not invalidate the
transaction evidenced therein; it merely reduces the evidentiary value of a
document to that of a private document, which requires proof of its due
execution and authenticity to be admissible as evidence. A defective
notarization will strip the document of its public character and reduce it to a
private instrument. Consequently, when there is a defect in the notarization of a
document, the clear and convincing evidentiary standard normally attached to a
duly-notarized document is dispensed with, and the measure to test the validity
of such document is preponderance of evidence. (Diampoc v. Buenaventura,
G.R. No. 200383, [March 19, 2018])

Although Article 1358 of the Civil Code states that the sale of real property
must appear in a public instrument, the formalities required by this article is
not essential for the validity of the contract but is simply for its greater efficacy
or convenience, or to bind third persons, and is merely a coercive means
granted to the contracting parties to enable them to reciprocally compel the
observance of the prescribed form. Consequently, the private conveyance of
the house is valid between the parties.(Diampoc v. Buenaventura, G.R. No.
200383, [March 19, 2018])
4. Even illeterates are presumed to know what they signed

The rule that one who signs a contract is presumed to know its contents has
been applied even to contracts of illiterate persons x x x If a person cannot read
the instrument, it is as much his duty to procure some reliable persons to read
and explain it to him, before he signs it, as it would be to read it before he
signed it if he were able to do so and his failure to obtain a reading and
explanation of it is such gross negligence as will estop him from avoiding it on
the ground that he was ignorant of its contents.(Diampoc v. Buenaventura,
G.R. No. 200383, [March 19, 2018])

The law nor the courts will not extricate the party from an unwise or
undesirable contract - It is also a well-settled principle that "the law will not
relieve parties from the effects of an unwise, foolish or disastrous agreement
they entered into with all the required formalities and with full awareness of
what they were doing. Courts have no power to relieve them from obligations
they voluntarily assumed, simply because their contracts turn out to be
disastrous deals or unwise investments. Neither the law nor the courts will
extricate them from an unwise or undesirable contract which they entered into
with all the required formalities and with full knowledge of its
consequences”. (Diampoc v. Buenaventura, G.R. No. 200383, [March 19,
2018])