Oblicon April 17

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Article 1370.

If the terms of a contract are clear and leave no  Intent of the parties is embodied in the instrument
doubt upon the intention of the contracting parties, t` itself
 Four corners rule – allows the courts in some vase to
If the words appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former. (1281) search beneath the semantic surface for clues to
tmeaning
Purpose of interpretation: to know the intent of the parties so
that the contract can be properly implemented.
 Agreement of the parties must be enforced. Ambiguous contracts – contracts that are susceptible of
 Interpretation of a contaract – the determination of two reasonable alternative interpretations
the meaning attached to the words written which
make the contract. CASE: NIELSON AND COMPANY INC. V. LEPANTO
 Difference from reformation: remedy in equity by CONSOLIATED MINING COMPANY
means of which a written contract is made or - The intention of the parties must be sought in the
construed as to express or conform to the real construction and interpretation of an instrument
intention of the parties.
CASE: INTERNATIONAL EXCHANGE BANK V. SPOUSES JEROME
CASE: RAMONA RAMOS ET. AL. v. PHILIPPINE NATIONAL BANK AND QUINNIE BRIONES
ET. AL.  Their creditor, by clear terms of the contract, was the
 Obligations arising from contracts: have the force of agent of the debtors in their insurance claims.
law between the contracting parties
 When the terms of the contract are clear: the literal CASE: CONCHITA TAN v. PLANTERS PRODUCT, INC.
meaning of the stipulations governs. Courts have no  Issue of renewal of lease
authority to alter the contract. A court’s duty is  Respondent argues that there was no perfected new
confined to the interpretation of a contract. lease in the contract because the parties failed to
 Only when the contract is vague can the courts resort agree on all its terms and conditions – the parties
to the interpretation of its terms to identify the parties’ intented a renewal to depend upon the parties
intent. agreement on all the terms and conditions, not merely
those pertaining to its commercial terms.
CASE: THE WELLEX GROUP, INC. v. U-LAND AIR LINES, CO. LTD  SC: it is clear that the renewal of the lease is not
 Plain meaning rule automatic, the parties will still negotiate and bargain
on the terms and conditions of the new contract. If the
parties fail to agree on all terms and conditions of the they could have easily provided for a straight forty
new contract, there is no perfected new contract as years contract instead of 20.
between them. In this case, PPI only accepted the
counter offer with respect to the commercial terms of FERNANDEZ v. CA
the new lease, but it did not accept the other non-  The lease expressed in clear, unmistakeable and
commercial terms and conditions of the new contract. ambiguous erms that the intention of he parties that if
the lease was to be renewed, the option to renew shall
STATUTORY CONSTRUCTION CAN BE APPLIED IN be made by both parties.
INTERPRETING AMBIGIOUS PROVISIONS IN A CONTRACT
 Finman General Assurance Corp. v. CA: The SC used the BUCE v. CA
rule “expresso unius exclusion alterius” – the mention  SC: There was nothing in the contract to show that
of one thing implies the exclusion of another automatic renewal was the intention of the parties
 The contract was unclear as to who may exercise the
CASE: GAW vs. INTERMEDIATE APPELATE COURT option to renew. The SC said that the lease must be
 Parties must be careful in examining the language or construed to be for the benefit of both parties.
the wording of the contract “Renewal of the contract may be had only on their
 The parties must be diligent to read the same before mutual agreement or at the will of both of them.”
entering into a contract to ensure that no
complications can arise in the future UNIVERSAL TEXTILE MILLS INC., V. NLRC
 SC: The N:RC cannot remake a contract by evisceratin
CASE: CONDE v. CA: it, by deleting from it words placed there by the
 SC: If the contract is plain and unequivocal in its terms, parties. No court, no interpreter and applier of a
he is ordinarily bound thereby. It is the duty of every contract has such a prerogative.
contracting party to learn and know its contents before
signing and delivering it. CENTURY PROPERTIES INC. v EDWIN BABIANO
 Confidentiality of documents and non-compete clause
SANTI v. CA  Where the language of a contract is plain and
 The lessor’s intention is not to automatically etend the unambiguous, its meaning should be determined
lease contract but to give her time to ponder and think without reference to extrinsic facts or aids. The
whether or not to extend the lease. If the intention o contracts must be taken to mean that which, in its face
the parties were to provide for an automatic extension, purports to mean, unles some good reason can be
assigned to show that the words should be understood absolute deed of sale was intended and not a contract
in a different sense. to sell.
 Courts cannot make for the parties better or more  The contract being one of absolute sale, the ownership
equitable agreements that than they for themselves of the subject lot was transferred to the buyer upon
have been satisfied to make, or rewrite contracts the actual and constructive delivery thereof.
because they operate harshly as to one of the parties, (Constructive delivery – the execution of the deed;
or alter them for the benefit of one party and to the actual delivery – when the respondents took
detriment of the other, etc. possession of and constructed a house on the lot)
 Absent any ambiguity, the provision on its face shall be
read as it is written and written as the binding law of RADIOWEALTH FINANCE COMPANY v. SPOUSES VICENTE AND
the parties to the contract. MA. SUMILANG DEL ROSARIO
 The foregoing clause is not onlny clear and  The parties di not indicate a date of payment on the
unambiguous in stating that Babiano is barred to work promissory note and therefore it was contended that
for whatsoever capacity with any person whose before the obligation became due, a period should
business is in direct competition with CPI while he is have first been fixed by the court
employed and for a ptiod od one year from the date of  SC: the act of leaving blank the due date did not
his resignation. It is also expressly provided that should necessarily mean that the debtors were allowed to pay
Babiano breach any term of the contract, as and whem they could. On the contrary, the note
compensation will be forfeited.To allow Babiano to clearly provided that each installment will be payable
freely move to direct competitors during and soon each month.
after his emplomyment with CPI would make the  The contemporaneous and subsequent acts of the
latter’s trade secrets vulnerable. As such, it is fair that parties manifest their intention and knowledge that
CPI and Babiano agree on such stipulation in order to the monthly installments would be due and
afford a fair and reasonable protection to CPI. demandable each month.

Article 1371. In order to judge the intention of the contracting CALTEX V. Intermediate Appelate Court
parties, their contemporaneous and subsequent acts shall be  The acts of the parties clearly show that they did not
principally considered. (1282)
intend the deeed of assignment to have the effect of
totally extinguishing the obligation of the private
CASE: PINGOL v. CA
respondent without payment of the interest charges
 the acts of the parties, contemporareneous and
on the overdue account.
subsequent to the contract clearly show that an
Analysis and construction should not be limited to the words  The various stipulations of a contract must be
used in the contract as they may not accurately reflect the interpreted together; the provisions of a contract
terms of the agreement. The law allows the parties must be read as a whole and not in isolation
reasonable rleeway on the terms of the agreement wand the  > the provisions must be related to each other to
contracts should not be interpreted in a harsh and iniquitous clearly know the total import and application of the
way (Caceller v. CA) law

 The import of the word ultimately depends upon the RUIZ v. SHERIFF OF MANILA
consideration of the entire provision, its nature,  SC: the appellants claim that despite the acceleratin
objsect, and the consequences that would follow clase, they had 5 years to pay their debt because of the
from construing it one way or another “notwithstanding the foregoing” phrase in the last
sentence. Since the 5-year period has not expired,
Article 1372. However general the terms of a contract may be, petitioners claim that foreclosure was premature. The
they shall not be understood to comprehend things that are contention is without merit. The entirety of the
distinct and cases that are different from those upon which the
parties intended to agree. (1283) contract must be taken into consideration and not just
the last two sentences. The loan shall be paid within 5
 Noscitur a sociis – general and unlimited terms are years and that failure to pay two successive
restrained.limited by particular terms that would follow amortizations would render the entire laon due and
 Ejusdem generis – a general term joined by a specific one payable. The foreclosure was not premature as the
will be deemed to include only things that are like, of the
same genus, as the specific one. default has been committed for 12 months.
 However broad the terms of a contract, it extends only to
those things concerning which it appears the parties FERNANDEZ v. CA
intended to contract  Interpretation of “renewable for another 10 years at
the option of both parties under such terms and
Article 1373. If some stipulation of any contract should admit of
several meanings, it shall be understood as bearing that import
conditions and rental reasonable at the time”
which is most adequate to render it effectual. (1284) o The lessee CANNOT unilaterally renew the
contract; the assent of both the lessor and the
Article 1374. The various stipulations of a contract shall be lessee is required for anther contract to spring
interpreted together, attributing to the doubtful ones that sense into juridical existence upon the expiration of
which may result from all of them taken jointly. (1285)
the original one”
CHINA BANKING CORP. v. CA  Using the words “in proportion” then significantly
 The collaterals of the real estate properties serve as changed the meaning of the paragraph to ultimately
securities for future obligations mean a performance bond equal to 20% of the next
 Mortgages given to secure future advancements or stage to be done.
loans are valid and legal contracts, and that the
amounts named as consideration in said contracts do SC: use of the terms in a contract shall primarily be governed
not limit the amount for which the mortgage may by the contents and intention of the parties.
stand as security if from the four corners of the
instrument the intent to secure future and other Article 1376. The usage or custom of the place shall be borne
indebtedness can be gathered. in mind in the interpretation of the ambiguities of a contract, and
shall fill the omission of stipulations which are ordinarily
established. (1287)
HOME DEVELOPMENT MUTUAL FUND v. CA
 “several provisions in a contract must be given a
construction that will give effect to all”
 the unilateral termination of the contract violated the
principle of mutuality of contracts under Art. 1308

FELSON REALTY AND DEVELOPMENT CORPORATION v.


COMMONWEALTH OF AUSTRALIA
 SC: the fire was accidental in nature; the respondent
had the right to preterminate the contract of lease

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. (1286)

PASAY CITY GOVERNMENT v. CFI of MANILA


 Re: the performance bond  SC: if read together with
the stage-by-stage approach: a divisible obligation was
contemplated, necessitating a performance bond in
proportion to the uncompleted work

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