Rule 130
Interpretation of Documents
As far back as 1415, English common law had already been "old and
settled" that restraints on trade were unenforceable. That ban remained
unchanged until 1621, when a restriction that was limited to a specific
geographic location was found to be an enforceable exception to the previously-
absolute rule.
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ILLUSTRATIVE CASES
Two Provisions:
5. MODE OF PAYMENT:
‘Billing shall be every fifteen (15) days. After three (3) months of satisfactory
performance, the parties may negotiate for the extension of this contract and other
matters that might be advantageous to both parties."
"This Contract shall take effect on May 25, 1994 and shall be for a period of One
(1) Year from said date. Thereafter, it shall be deemed renewed for the same period
unless either party notifies the other in writing not later than one (1) month
before the expiry of its intent not to renew.
HELD:
Section 11 of Rule 130 of the Rules of Court states that "[i]n 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." Contrary to petitioners’ contention,
paragraph 5 is not inconsistent with paragraph 12. More important, the former does not
in any way deal with the termination of the Contract. Neither does it provide for a right
to rescind.
Therefore, absent any provision providing for a right to rescind, the parties may
nevertheless rescind the contract should the other obligor fail to comply with its
obligations.
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ABELARDO B. LICAROS vs. ANTONIO P. GATMAITAN
G.R. No. 142838, August 9, 2001
Petitioner next argues that the consent or conformity of Anglo-Asean Bank is not
necessary to the validity of the Memorandum of Agreement as the evidence on record
allegedly shows that it was never the intention of the parties thereto to treat the same as
one of conventional subrogation. He claims that the preambulatory clause requiring the
express conformity of third parties, which admittedly was Anglo-Asean Bank, is a mere
surplusage which is not necessary to the validity of the agreement.
That this agreement takes effect on January 1, 1985 to December 31, 1985;
Provided, however, that either party who desires to terminate the contract may
serve the other party a written notice at least thirty (30) days in advance.
The first clause of the aforecited stipulation, which is the bone of petitioners'
stance, basically deals with the term of the contract; while the proviso, which is the core
of private respondents' action, prescribes the manner the service contract in question
could be terminated.
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It is petitioners' submission that the first clause referred to is independent,
distinct and separate from the said proviso, such that upon the expiration of the period
stated in the first clause, the Consultancy Agreement ceased to have any binding effect
between the contracting parties even though they (petitioners) did not give any written
notice of termination at least thirty (30) days in advance.
We cannot fathom how contracting parties, who are sui juris, and knowledgeable
of the purposes for which they solemnly put their Agreement into writing, could be so
careless as to include inconsistent conditions in such a short and simple provision in
their contract sued upon.
Time-honored is the rule that "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." Article 1374 of the New Civil Code, on the other hand, requires
that "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."
Conformably, to ascertain the true meaning or import of the controverted provision of
subject Consultancy Agreement, its entirety must be considered; not merely the first
clause. Consequently, petitioners' interpretation solely based on the first clause, and
which completely ignored the second clause under scrutiny, cannot be upheld.
Provision:
Assignment and Sublease – The lessee has the right to sublease the
premises or any portion thereof to a third party. The lessee may not, however,
assign or transfer its right or interest under this lease without the written
consent of the lessor.
On surface, the foregoing stipulation seemingly insulates Cruz from any liability
in this case. However, basic is the rule that 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 (Rule 130, Section 11). The trial court was quick to
point out, and rightly so, that the first sentence of the aforequoted covenant speaks of
what the lessee can do, while the second sentence refers to what it cannot do without the
consent of the lessor. This is evident from the phrase "may not however" found in the
second sentence, which means that the act of sub-leasing in the first sentence may be
done by the lessee without the consent of the lessor but the act of assignment or transfer
of rights in the second sentence cannot be done by the lessee without the consent of the
lessor. Clearly, the parties intended a distinction between a sublease and an assignment
of rights.
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Section 12. 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 a particular intent will control a
general one that is inconsistent with it. (10)
INTENTION IS PARAMOUNT
CASE:
In the second part of Section 12, we are actually told to apply the principle
"GENERALIA SPECIALIBUS NON DEROGANT", which means that where an
act deals specifically with a subject a general provision in that act does not
override the specific provision. If a matter falls under a specific provision and a
general provision, it shall be governed by the specific provision.
Likewise, Article 1372 of the Civil Code stipulates that 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. "
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Similarly, Article 1374 of the same Code provides that "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."
While it cannot be gainsaid that the terms and conditions in the Contract of
Security Services (CSS) were incorporated to the PRA (sic) as integral parts thereof,
nevertheless, We conform to the finding of the court of origin that the 2nd contract
(PRA) precisely and particularly dealt with the mode of resolving PISA’s liability
resulting, if any, from [the] March 12, 1992 robbery. (Order dated July 12, 1993, p.1;
Records, p.113). It distinctively provides a clear cut manner by which the right of action
against PISA may be exercised by [SBC] pertaining to a specific robbery incident—a
matter visibly non-existent in the CSS. Indeed, this special provision controls and
prevails over the general terms and conditions extant on the CSS. (Yatco v. El Hogar
Filipino, 67 Phil. 610) When a general and a particular provision are inconsistent, the
latter is paramount to the former. Ergo, a particular intent, as in this case reflected in
letter e, paragraph 5 of the PRA will control a general intent embodied in paragraph 9 of
the Contract of Security Services. (Section 12, Rule 130, Revised Rules of Court) Thus,
the PRA is paramount to and prevails over the terms and stipulations in the first
contract (CSS) on matters relevant and material to PISA’s liability relating to the
robbery.
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Section 14. Peculiar signification of terms. - The 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 case the agreement must be construed accordingly. (12)
CASES
Paragraph 5 of the PRA specifically states that PISA’s payment was subject to
express terms and conditions, one of which was the following:
(e) The parties hereto further agree that this agreement and/or
payment of the whole amount of P3,027,728.01, shall not affect or
prejudice, directly or indirectly, whatever cause of action SBC may have
against PISA and whatever claim or defense the latter may have against
SBC, if the maximum recoverable proceeds of the insurance covering the
loss suffered by SBC could not be recovered from the insurer. Further, it is
agreed that should Security Guards Wilson Taca and Ernesto Mariano be
absolved from the charge of robbery in band and/or are found by the
proper court not to have been involved at all in the alleged conspiracy, and
that it is duly established through legal action before the competent court
that their failure to prevent the robbery was not due to their, or their PISA
co-guards’ negligence and/or willful act, whatever installments may have
been paid by PISA under this Agreement shall be reimbursed with legal
interest to be computed from the time of actual payment, the same to be
amortized in eighteen (18) equally monthly installments, with the interest
thereto being based on the diminishing balance.
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be through a judicial and final adjudication, they should have stated so. In its primary
and general meaning, paragraph 5(e) would cover LIC’s extrajudicial denial of SBC’s
claim.
Going to defendant’s main defense that P21 Million was a "suggested indicative price" –
we have to find out exactly what "indicative" means. Webster Comprehensive
Dictionary, International Edition, gives us a graphic meaning that everybody can
understand, when it says that "to indicate" is [t]o point out; direct attention[;] to
indicate the correct page[.] "Indicative" is merely the adjective of the verb to indicate. x x
x when the price of P21 [M]illion was indicated – then it becomes the "indicative" price
– the correct price, no ifs[,] no buts. We do not agree.
Under the same section and rule invoked by petitioner, the 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 case the agreement
must be construed accordingly.
The reliance of the trial court in the Webster definition of the term "indicative,"
as also adopted by petitioner, is misplaced. The transaction at bar involves the sale of an
asset under a privatization scheme which attaches a peculiar meaning or signification to
the term "indicative price." Under No. 6.1 of the General Bidding Procedures and Rules
of respondent, "an indicative price is a ball-park figure and [respondent] supplies such a
figure purely to define the ball-park." The plain contention of petitioner that the
transaction involves an "ordinary armslength sale of property" is unsubstantiated and
leaves much to be desired. This case sprung from a case of specific performance initiated
by petitioner who has the burden to prove that the case should be spared from the
application of the technical terms in the sale and disposition of assets under privatization.
Petitioner failed to discharge the burden.
It appears in the case at bar that petitioner’s construction of the letter of February
22, 1993 – that his assent to the "suggested indicative price" of P21,000,000.00
converted it as the price certain, thus giving rise to a perfected contract of sale – is
petitioner’s own subjective understanding. As such, it is not shared by respondent.
Under American jurisprudence, mutual assent is judged by an objective standard,
looking to the express words the parties used in the contract. Under the objective theory
of contract, understandings and beliefs are effective only if shared. Based on the objective
manifestations of the parties in the case at bar, there was no meeting of the minds. That
the letter constituted a definite, complete and certain offer is the subjective belief of
petitioner alone. The letter in question is a mere evidence of a memorialization of
inconclusive negotiations, or a mere agreement to agree, in which material term is left for
future negotiations. It is a mere evidence of the parties’ preliminary transactions which
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did not crystallize into a perfected contract. Preliminary negotiations or an agreement
still involving future negotiations is not the functional equivalent of a valid, subsisting
agreement. For a valid contract to have been created, the parties must have progressed
beyond this stage of imperfect negotiation. But as the records would show, the parties are
yet undergoing the preliminary steps towards the formation of a valid contract. Having
thus established that there is no perfected contract of sale in the case at bar, the issue on
estoppel is now moot and academic.
Indubitably, that private respondent can use substitute aircraft even without
notice and without the assumption of any obligation whatsoever to carry the goods on
any specified aircraft is clearly sanctioned by the contract of carriage as specifically
provided for under the conditions thereof.
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equally proper, that is to be taken which is the most favorable to the party in
whose favor the provision was made. (15)
1. The interpretation which the other party believed and used will prevail;
2. When both constructions are equally proper, that interpretation which is
most favorable to the party for whose benefit the provision was made in
the first place will prevail.
A natural right is one that exists by virtue of natural law. This rule is
usually applicable to waivers and renunciations.
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.
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)
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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. 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)
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)
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