CHAPTER 5:
INTERPRETATION
OF CONTRACTS
ARTICLE 1370-1379
Interpretation of Contracts
- is the determination of the meaning of the terms or
INTERPRETATION
words used by the parties in their written contract.
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.
Cardinal Rule:
"[i]f 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."
General Rule:
A. Literal meaning controls when language is clear.
B. Evident intention of parts prevails over terms of contracts.
Example:
A contract was executed between Jaira and Jasmine. The contract recites
that it is a sale of a shoes to Jaira for P 3,000. In the contract Jaira
described as the vendor and Jasmine, the vendee. The terms of the
contract are clear and it does not appear from the circumstances that the
intention of the parties is contrary to the literal meaning of said terms.
Article 1371 In order to judge the intention of the contracting parties,
their contemporaneous and subsequent acts shall be
principally considered.
Example:
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.
Example:
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.
Example:
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.
Example:
ARTICLE 1375
Words which may have different significations shall be understood in that
which is most in keeping with the nature and object of the contract.
Example:
Article 1376
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.
Example:
Article 1377
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.
Example:
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.
Example:
Article 1379
The principles of interpretation stated in Rule 123 of the Rules of
Court shall likewise be observed in the construction of contracts.
Example:
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