CHAPTER 5 - INTERPRETATION OF CONTRACTS (ART 1370 - 1379) Flashcards
Act of making intelligible that was not before understood, ambiguous, or not obvious
Interpretation
What are the rules on interpretation of contracts?
- If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of the stipulations shall control.
- If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.
- 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.
- If the 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.
- 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.
- Words which may have different significations shall be understood in that which is most in keeping with the nature and object of the contract.
- 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.
- The interpretation of obscure words or stipulations in a contract shall not favor a party who caused the obscurity.
if S sells “all the grains” in his warehouse to B, can this include also the grains which, though stored in S’s warehouse, do not belong to S?
No
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. (Art. 1372)
S has two cars. He sold one of the cars to B but without indicating which. His ownership of one car is absolute, while his ownership of the other car is disputed. Which car shall deemed to have been sold?
The car that is deemed to have been sold is the first car since such is the import that will render the contract effectual.
If the 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. (Art. 1373)
X leased his house to Y. X forbid Y from subleasing the property without his consent. Further, it was stipulated: “If Y sublease the property to a third person, there will be additional 1,000 per month payment on top of his rent”. Does this mean that Y can still subleased the property base on the last sentence?
No, the last sentence looks like telling us that X can subleased the property, however it was actually telling us that it is a penalty which is the paying of 1,000
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. (Art. 1374)
P gave A, his agent, the authority “to exact payment by legal means” all the receivables of P. With the authority, A, among other things, wrote demand letters and called on P’s debtors including B. When A could not collect from B, he filed a court action against him. B, however, questioned the authority of A to sue claiming that the authority given to him by P “to exact payment by legal means” does not include the power to sue. Can B have the right to question?
No, Here, the power to sue is deemed included because it is in keeping within the nature and object of the contract, which is for A to be able to collect all of P’s receivables.
Words which may have different significations shall be understood in that which is most in keeping with the nature and object of the contract. (Art. 1375)
If A hired the services of B but the contract did not indicate the compensation to be paid, the amount thereof shall be the rate that is customarily paid in the place where the services were rendered.
True or False?
True, based on 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.
In a contract of insurance which is a contract of adhesion, any ambiguity shall be interpreted against the insurer since the terms of the policy do not result from mutual negotiation between the parties as they are prescribed by the insurer in printed form to which the insured may “adhere” if he chooses but which he cannot change.
True or False?
True, based on Art. 1377 The interpretation of obscure words or stipulations in a contract shall not favor a party who caused the obscurity.
What are the rules when it is absolutely impossible to settle doubts under the preceding rules ?
- When the doubts refer to the 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.
If C gave his bicycle to D, but it cannot be determined whether C donated it (donation) or merely lent it (commodatum), how should the contract be interpreted?
(1) The contract should be interpreted as commodatum rather than donation because commodatum transmits lesser rights since the ownership of the bicycle is retained by C.
D obtained from C a loan of 500,000 which bears interest at 1% per month. It cannot be determined, however, whether the loan is payable in 2 years or 3 years. How would the repayment be interpreted?
The repayment period should be interpreted at 3 years because D will have more time to use the money, while C will earn more interest.
S has several cars. He sold one car to B but it cannot be determined which of the cars was being sold. How will the contract be interpreted?
The contract of sale is void.
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.
