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`
If the words appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former. (1281)
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.
 Interpretation of a contaract – the determination of
the meaning attached to the words written which
make the contract.
 Difference from reformation: remedy in equity by
means of which a written contract is made or
construed as to express or conform to the real
intention of the parties.
CASE: RAMONA RAMOS ET. AL. v. PHILIPPINE NATIONAL BANK
ET. AL.
 Obligations arising from contracts: have the force of
law between the contracting parties
 When the terms of the contract are clear: the literal
meaning of the stipulations governs. Courts have no
authority to alter the contract. A court’s duty is
confined to the interpretation of a contract.
 Only when the contract is vague can the courts resort
to the interpretation of its terms to identify the parties’
intent.
CASE: THE WELLEX GROUP, INC. v. U-LAND AIR LINES, CO. LTD
 Plain meaning rule
itself
 Four corners rule – allows the courts in some vase to
search beneath the semantic surface for clues to
tmeaning
Ambiguous contracts – contracts that are susceptible of
two reasonable alternative interpretations
CASE: NIELSON AND COMPANY INC. V. LEPANTO
CONSOLIATED MINING COMPANY
- The intention of the parties must be sought in the
construction and interpretation of an instrument
CASE: INTERNATIONAL EXCHANGE BANK V. SPOUSES JEROME
AND QUINNIE BRIONES
 Their creditor, by clear terms of the contract, was the
agent of the debtors in their insurance claims.
CASE: CONCHITA TAN v. PLANTERS PRODUCT, INC.
 Issue of renewal of lease
 Respondent argues that there was no perfected new
lease in the contract because the parties failed to
agree on all its terms and conditions – the parties
intented a renewal to depend upon the parties
agreement on all the terms and conditions, not merely
those pertaining to its commercial terms.
 SC: it is clear that the renewal of the lease is not
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
new contract, there is no perfected new contract as
between them. In this case, PPI only accepted the
counter offer with respect to the commercial terms of
the new lease, but it did not accept the other non-
commercial terms and conditions of the new contract.
STATUTORY CONSTRUCTION CAN BE APPLIED IN
INTERPRETING AMBIGIOUS PROVISIONS IN A CONTRACT
 Finman General Assurance Corp. v. CA: The SC used the
rule “expresso unius exclusion alterius” – the mention
of one thing implies the exclusion of another
CASE: GAW vs. INTERMEDIATE APPELATE COURT
 Parties must be careful in examining the language or
the wording of the contract
 The parties must be diligent to read the same before
entering into a contract to ensure that no
complications can arise in the future
CASE: CONDE v. CA:
 SC: If the contract is plain and unequivocal in its terms,
he is ordinarily bound thereby. It is the duty of every
contracting party to learn and know its contents before
signing and delivering it.
SANTI v. CA
 The lessor’s intention is not to automatically etend the
lease contract but to give her time to ponder and think
whether or not to extend the lease. If the intention o
the parties were to provide for an automatic extension,
they could have easily provided for a straight forty
years contract instead of 20.
FERNANDEZ v. CA
 The lease expressed in clear, unmistakeable and
ambiguous erms that the intention of he parties that if
the lease was to be renewed, the option to renew shall
be made by both parties.
BUCE v. CA
 SC: There was nothing in the contract to show that
automatic renewal was the intention of the parties
 The contract was unclear as to who may exercise the
option to renew. The SC said that the lease must be
construed to be for the benefit of both parties.
“Renewal of the contract may be had only on their
mutual agreement or at the will of both of them.”
UNIVERSAL TEXTILE MILLS INC., V. NLRC
 SC: The N:RC cannot remake a contract by evisceratin
it, by deleting from it words placed there by the
parties. No court, no interpreter and applier of a
contract has such a prerogative.
CENTURY PROPERTIES INC. v EDWIN BABIANO
 Confidentiality of documents and non-compete clause
 Where the language of a contract is plain and
unambiguous, its meaning should be determined
without reference to extrinsic facts or aids. The
contracts must be taken to mean that which, in its face
purports to mean, unles some good reason can be
 assigned to show that the words should be understood
in a different sense.
 Courts cannot make for the parties better or more
equitable agreements that than they for themselves
have been satisfied to make, or rewrite contracts
because they operate harshly as to one of the parties,
or alter them for the benefit of one party and to the
detriment of the other, etc.
 Absent any ambiguity, the provision on its face shall be
read as it is written and written as the binding law of
the parties to the contract.
 The foregoing clause is not onlny clear and
unambiguous in stating that Babiano is barred to work
for whatsoever capacity with any person whose
business is in direct competition with CPI while he is
employed and for a ptiod od one year from the date of
his resignation. It is also expressly provided that should
Babiano breach any term of the contract,
compensation will be forfeited.To allow Babiano to
freely move to direct competitors during and soon
after his emplomyment with CPI would make the
latter’s trade secrets vulnerable. As such, it is fair that
CPI and Babiano agree on such stipulation in order to
afford a fair and reasonable protection to CPI.
Article 1371. In order to judge the intention of the contracting
parties, their contemporaneous and subsequent acts shall be
principally considered. (1282)
CASE: PINGOL v. CA
 the acts of the parties, contemporareneous and
subsequent to the contract clearly show that an
absolute deed of sale was intended and not a contract
to sell.
 The contract being one of absolute sale, the ownership
of the subject lot was transferred to the buyer upon
the actual and constructive delivery thereof.
(Constructive delivery – the execution of the deed;
actual delivery – when the respondents took
possession of and constructed a house on the lot)
RADIOWEALTH FINANCE COMPANY v. SPOUSES VICENTE AND
MA. SUMILANG DEL ROSARIO
 The parties di not indicate a date of payment on the
promissory note and therefore it was contended that
before the obligation became due, a period should
have first been fixed by the court
 SC: the act of leaving blank the due date did not
necessarily mean that the debtors were allowed to pay
as and whem they could. On the contrary, the note
clearly provided that each installment will be payable
each month.
 The contemporaneous and subsequent acts of the
parties manifest their intention and knowledge that
the monthly installments would be due and
demandable each month.
CALTEX V. Intermediate Appelate Court
 The acts of the parties clearly show that they did not
intend the deeed of assignment to have the effect of
totally extinguishing the obligation of the private
respondent without payment of the interest charges
on the overdue account.
Analysis and construction should not be limited to the words
used in the contract as they may not accurately reflect the
terms of the agreement. The law allows the parties
reasonable rleeway on the terms of the agreement wand the
contracts should not be interpreted in a harsh and iniquitous
way (Caceller v. CA)
 The import of the word ultimately depends upon the
consideration of the entire provision, its nature,
objsect, and the consequences that would follow
from construing it one way or another
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. (1283)
 Noscitur a sociis – general and unlimited terms are
restrained.limited by particular terms that would follow
 Ejusdem generis – a general term joined by a specific one
will be deemed to include only things that are like, of the
same genus, as the specific one.
 However broad the terms of a contract, it extends only to
those things concerning which it appears the parties
intended to contract
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. (1284)
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. (1285)
 The various stipulations of a contract must be
interpreted together; the provisions of a contract
must be read as a whole and not in isolation
 > the provisions must be related to each other to
clearly know the total import and application of the
law
RUIZ v. SHERIFF OF MANILA
 SC: the appellants claim that despite the acceleratin
clase, they had 5 years to pay their debt because of the
“notwithstanding the foregoing” phrase in the last
sentence. Since the 5-year period has not expired,
petitioners claim that foreclosure was premature. The
contention is without merit. The entirety of the
contract must be taken into consideration and not just
the last two sentences. The loan shall be paid within 5
years and that failure to pay two successive
amortizations would render the entire laon due and
payable. The foreclosure was not premature as the
default has been committed for 12 months.
FERNANDEZ v. CA
 Interpretation of “renewable for another 10 years at
the option of both parties under such terms and
conditions and rental reasonable at the time”
o The lessee CANNOT unilaterally renew the
contract; the assent of both the lessor and the
lessee is required for anther contract to spring
into juridical existence upon the expiration of
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