Chapter IX

Rules of Construction of Contracts

1. What is a contract?
A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give
something or to render some service. (Article 1305, New Civil Code of the Philippines)
2. Can the contracting parties enter into any kind of agreement and establish such terms and conditions that they may
deem proper?
Yes. The contracting parties may enter into any kind of agreement and establish such terms and conditions that they like
provided that they are not contrary to law, morals, good customs, public order or public policy. (Article 1305, New Civil
Code)
3. Who are bound by the terms of the contract?
General rule: Contracts take effect only between the parties, their assigns and heirs" and therefore generally, its terms
cannot determine the rights of third persons.
However, there are exceptions:
(a) obligations arising from the contract are not transmissible by their nature, by stipulation, or by provision of law
(b) there is stipulation pour autrui (a stipulation in favor of a third party)
(c) third person induces another to violate his contract
(d) in some cases, third persons may be adversely affected by a contract where they did not participate
(e) law authorizes the creditor to sue on a contract entered into by his debtor ("accion directa")
4. When is it necessary to interpret the terms of the contract?
Only when the terms of the contract are not clear and there is doubt regarding the intention of the contracting parties.
This becomes the duty of the court when the parties decide to seek judicial intervention.
5. When is it not necessary to interpret the terms of the contract?
Only when the terms of the contract are clear and leave no doubt upon the intention of the contracting parties.
"If the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning
of its stipulations shall control."
6. In case of conflict between the words of the contract and evident intention of the parties, which prevails?
The intent prevails.
"If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former." (Article
1370)
7. How to judge the intention of the parties?
Their contemporaneous and subsequent acts shall be principally considered.
"In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally
considered." (Article 1371)
8. What are the rules governing the use of several terms?
Limited - However general 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.

Viktoria Mary Antonette P. Villo

Statutory Construction A SY 12-13

9. What are the rules governing stipulations that admit general meanings?
Those that renders that effective - If some stipulations of any contract should admit of several meanings, it shall be
understood as bearing that import which is most adequate to render it effectual.
10. What are the rules governing the usage or custom of the place?
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 that are ordinarily established.
11. What are the rules governing the obscure words or stipulation?
The interpretations of obscure words or stipulation in a contract shall not favor the party who caused the obscurity.
12. What are the rules governing the rule in case of doubt as to the principal object and as to the incidental
circumstances?
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.
13. What are the other rules of interpretation?
Revised Rules of Interpretation
Sec. 7. Evidence of written agreement When the terms of an agreement have been reduced in writing, it is to be
considered as containing all such terms, and therefore, there can be, between the parties and their successors in interest,
no evidence of the terms of the agreement other than the contents of the writing, except in the following cases:
(a) where a mistake or imperfection of the writing, or its failure to express the true intent and agreement of the parties, or
the validity of the agreement is put in issue by the pleadings
(b) when there is an intrinsic ambiguity in the writing. The term agreement includes wills.
Sec. 8. Interpretation of a writing according to its legal meaning. The language of a writing is to be interpreted according
to the legal meaning it bears in the place of its execution, unless the parties intended otherwise.
Sec. 9. Instrument construed so as to give effect to all provisions. In the construction of an instrument where there are
several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all.
Sec. 10. Interpretation according to intention; general and particular provisions In the construction of an instrument,
the intention of the parties is to be pursued and when a general and a particular provision are inconsistent, the latter is
paramount to the former. So if a particular intent will control a general one that is inconsistent with it.
Sec. 11. Interpretation according to circumstances For the proper construction of an instrument, the circumstances
under which it was made, including the situation of the subject thereof and of the parties to it, may be shown, so that the
judge may be placed in the position of whose language he is to interpret.
Sec. 12. Peculiar signification of terms of a writing are presumed to have been used in their primary and general
acceptation, but evidence is admissible to show that they have a local, technical, or otherwise peculiar signification, and
were so used and understood in the particular instance, in which the case the agreement must be construed accordingly.
Sec. 13. Written words control printed When an instrument consists partly of written words and partly of a printed
form, and the two are inconsistent, the former controls the latter.
Sec 14. Experts and interpreters to be used in explaining certain writings When the characters in which an instrument is
written are difficult to be deciphered, or the language is not understood by the court, the evidence of persons skilled in
deciphering the characters, or who understand the language, is admissible to declare the characters of the meaning of the
language.

Viktoria Mary Antonette P. Villo

Statutory Construction A SY 12-13

Sec 15. Of two constructions, which is preferred When the terms of an agreement have been intended in a different
sense by the different parties to it, that sense is to prevail against either party in which he supposed the other understood
it, and when different constructions of a provision are otherwise equally proper, that is to be taken which is the most
favorable to the party in whose favor the provisions was made.
Sec. 16. Construction in favor of natural right When an instrument is equally susceptible of two interpretations, one in
favor of natural right and the other against it, the former is to be adopted.
Sec 18. Interpretation according to usage. An instrument may be construed according to usage, in order to determine its
true character.

Viktoria Mary Antonette P. Villo

Statutory Construction A SY 12-13