INTERPRETATION OF CONTRACTS

Maria Ana M. Pulido

19 February 2014

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.

INTERPRETATION OF CONTRACTS
RULE

In case of conflict between the words of the contract and the evident intention of the parties, the intention must prevail.

INTERPRETATION OF CONTRACTS RULE

The intention must prevail. Let us interpret not by the letter that killeth but by the spirit that giveth life. If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.
(2nd paragraph, Art. 1370, Civil Code).

INTERPRETATION OF CONTRACTS RULE Where the terms and provisions thereof are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulation shall control.

(R & M General Merchandise, Inc. v. CA, GR 144189, Oct. 5, 2001)

Baliwag transit v. CA, et al. (GR 80447, Jan. 31, 1989)

The phraselogy any and all claims or causes of action is broad enough to include all damages that may accrue to the injured party arising from the unfortunate accident.

Petrophil Corp. V. CA (GR 122796, Dec. 10, 2001)

FACTS The contract provided for causes for termination, although it also stated that the contract was for an indefinite term subject to the right of petitioner to terminate it any time after a written notice of 30 days.
HELD The contract clearly provided for two ways of terminating the contract, and, one mode does not exclude the other. When the language of a contract is clear, it requires no interpretation. The finding that the termination of contract was for cause, is immaterial. When petitioner terminated the contract without cause, it was required only to give private respondent a 30-day prior written notice, which it did in this case.

Exercise:
Client A had requested Engineer B to prepare an architectural and engineering design for the construction of his medium-rise residence. A asked B how much PF should he pay. B discussed that it will only cost him 0.0075x pesos instead of the usual 0.03x pesos with a condition that the undertaking for B will reach until project implementation. Otherwise the usual PF applies. Time and again it was emphasized that B is only charging 0.0075x pesos since the remainder from the usual PF was already waived with certain condition as agreed by A and B verbally. Issues: A denies the verbal agreement. A demands for the completed design without the benefit of a written contract.

Theory of B:
A is just interested to get the design which is one of the requirements for his housing loan. After all, he can make a new arrangement with another engineer or architect as to the implementation of his project which is the coonstruction of his residence. A must have thought that by contracting the services of another engineer, he would be able to cut some of his costs for the duration of the construction. At the outset A already intended to trick B without understanding the prior verbal agreement and without analyzing the repercussions of his action to deny the verbal agreement which was solely grounded on trust and confidence.