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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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Illustrative Example:
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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Illustrative Example:
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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Illustrative Example:
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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Illustrative Example:
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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