Interpretation of Contracts Report

7/30/2019 Interpretation of Contracts Report

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Interpretation of acontract refers to

the determination ofthe meaning of the

terms or words used

by the parties in theircontract


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Art. 1370 If the terms of the contract

are clear and leave no doubt as to theintention of the contracting parties, the

literal meaning of its stipulation shall

control.

If the words appear to be contrary

to the evident intention of the parties,

the latter shall prevail over the former.


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Illustrative Example:

Facts: A guarantor guaranteed the payment ofrentals already due at the time the promise wasmade.

Issue: Is he also responsible for subsequent debts?

Held: Under the facts, it is clear that he never hadthe obligation to pay the subsequent rents.


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Facts: In a deed of sale, a certain Lot No. 1357 wasmentioned as the parcel sold, but both partiesmeant Lot No. 1155, and in fact buyer tookpossession of the latter with the knowledge of the

seller.

Held: Since the parties really meant Lot No. 1155, thisshould be considered the object of the contract.


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Art 1371

In order to judge theintention of the contracting

parties, their contemporaneous

and subsequent acts shall be

principally considered.


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Illustrative Example:A and B entered into a contract entitled

Contract of Lease. Although the contractrefers to A as a lessor and to E as lessee, it

states that the possession and ownership of theland are transferred to E. The title to the land

was given by A to B who registered the land in

his name. Before the date of the contract, Bwrote a letter to A offering to buy the land.

The contract should be interpreted asone of sale.


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Art. 1372

However general theterms of a contract may be, they

shall not be understood tocomprehend things that are

distinct and cases that are different

from those upon which the parties

intended to agree.


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Facts: X mortgaged his land to Z tosecure or guarantee Ys debt. Y couldnot pay so the mortgage was foreclosed,but there was a deficiency.

Issue: Is X responsible personally for thedeficiency?

Held: No, because it was only his landthat was offered as security.


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L sold his house including all the furnituretherein. The term all should not be understood toinclude Ls refrigerator which is distinct and differentfrom furniture.


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Art. 1373

If some stipulationof any contract should admit of

several meanings, it shall beunderstood as bearing that

import which is most adequateto render it effectual


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S sold his parcel of land to B. S has two lands,one owned by him absolutely and another land of whichhe is a co-owner with C. C did not give his consent to thesale.

The sale should refer to the land owned by S aloneas this would make the contract effectual.


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If the terms of the contractare clear and leave no

doubt as to the intentionof the contracting parties,the literal meaning of itsstipulations shall control

GENERAL RULE


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If the words appear to becontrary to the evident

intention of the parties,the latter shall prevail overthe former.


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The real nature of acontract may be

determined from thecontemporaneous andsubsequent acts of the

contracting parties


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A special intentprevails over ageneral intent


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If one interpretationmakes a contract valid,

the other illegal, theformer interpretation

must prevail


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Art. 1374

The variousstipulations of a contract shall

be interpreted together,attributing to the doubtful ones

that sense which may resultfrom all of them taken jointly


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Art. 1375

Words which mayhave different significations

shall be understood in thatwhich is most keeping with the

nature and object of thecontract.


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Art. 1376

The usage or customof 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


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Art. 1377 The interpretation

of obscure words or

stipulations in a contract shall

not favor the party who caused

the obscurity


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Art. 1378 When it is absolutely impossible to

settle doubts by the rules established in thepreceding articles, and the doubts refer to

incidental circumstances of a gratuitous contract,

the least transmission of rights and interest 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 principalobject 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.


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Art. 1379 The principles of

interpretation stated in Rule

123 of the Rules of Court shall

likewise be observed in the

construction of contracts.


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THANK YOU!

Documents

Interpretation of Contracts Report