Different Interpretations of Contracts

Section 19. Construction in favor of natural right. – When an instrument is equally susceptible of two(2) interpretations, one in favor of natural right and the other against it, the former is to be adopted. (18)

Basic is the rule that a contract constitutes the law between the parties. Parties may validly stipulate the unilateral rescission of a contract. (Associated Bank vs. Pronstroller, 558 SCRA 113).

It is contrary to human experience that parties would abandon their right to a contract and subject property, absent any form of protection, considering that they have a continuing interest over the said property and when they have the capacity to pay for the same (Id). 

(But) “The right to appeal is neither a natural right nor is it a component of due process. It is a mere statutory privilege, and may be exercised only in the manner and in accordance with the provisions of law.” (Fenequito v. Vergara, Jr., G.R. No. 172829, July 18,2012,677 SCRA 113, 117).

Section 20. Interpretation according to usage.–An instrument may be construed according to usage, in order to determine its true character. (19)

This section provides for the interpretation of a writing according to usage. In other words, interpretation according to common practice. (Usage is synonymous to Practice).

Instrument – means a formal legal document in writing, such as the: Deed of Sale, Deed of Donation, Deed of Mortgage, Contract to Sell, and several instruments.

ILLUSTRATIONS

In the Agreement, Berni promised to pay his debt to Girlie as soon as the former won in Thailand One Loft Race Pigeon Racing. Berni emerged as the champion in that Thailand One Loft Race. Accordingly, Berni should immediately pay his obligation to Girlie.

The seller and the buyer agreed in writing that the seller has the right to get back his property within five (5) years from the date of the Deed of Sale. In this case, the instrument should be interpreted as the Deed of Sale with the right to repurchase, although the exact term of right to repurchase is not written.

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. (Art. 1370, Civil Code).

To have a complete knowledge on the interpretation of contracts hereto quoted the provisions of the Civil Code:

INTERPRETATION OF CONTRACTS

Art. 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. (1281)

Art. 1371. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. (1282)

Art. 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)

Art. 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)

Art. 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)

Art. 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)

Art. 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. (1287)

Art. 1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. (1288)

Art. 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.

If the doubts are cast upon the principal object 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. (1289)

Art. 1379. The principles of interpretation stated in Rule 123 of the Rules of Court shall likewise be observed in the construction of contracts. (n)