MODULE 9: FORMALITIES , If the contract is not in writing, the contract is

INTERPRETATION AND REFORMATION valid (assuming all the essential elements are
present) but it cannot be proved and, therefore,
OF CONTRACTS
it cannot be enforced by either party if the other
refused to perform the contract unless it is
FORM OF CONTRACTS ratified by the letter.
1.​ oral
2.​ in writing Art. 1357. If the law requires a document or
3.​ partly oral and partly in writing other special form, as in the acts and contracts
enumerated in the following article, the
RULES REGARDING FORM OF CONTRACTS contracting parties may compel each other to
observe that form, once the contract has been
1. As a general rule perfected.This right may be exercised
contracts are binding and, therefore, enforceable simultaneously with the action upon the contact.
reciprocally by the contracting parties, whatever (1279a.)
may be the form in which the contract has been
entered into, provided all the three (3) essential Form for the Convenience of the Parties
requisites (consent, object, cause) for their In certain cases, a certain form (e.g, public
validity are present. So, a contract may be oral instrument) is required for the convenience of
or written. the parties in order that the contract may be
registered in the proper registry to make
EXAMPLE: effective, as against third persons, the right
Juan (Buyer) left a note in the store of Maria acquired under such contract. Non- compliance
(Seller) offering P2,000 for a chair Maria is with the required form would not adversely affect
selling. The following day Maria called Juan by the validity nor the enforceability of the contract
phone accepting the offer of Juan who promised between the parties themselves.
to pay the next day.
(1) Donation of real property in private
The note and the oral acceptance constitute a instrument.
legally enforceable contract and both Juan and (2) Suppose the contract is a sale of real
Maria are fully bound. property but it is entered into orally.
(3) If the contract of sale is in private writing,
2. Exceptions. The form, however, is required in then it is valid and binding, although it is still
the following cases: executory, but only as between the parties and
a.​ When the law requires that a contract be not as against third persons without notice until
in some form to be valid; the sale is registered in the Registry of Property.
b.​ When the law requires that a contract be
in some form to be enforceable or CONTRACT WHICH MUST APPEAR IN A
proved in a certain way; or PUBLIC INSTRUMENT
c.​ When the law requires that a contract be Art. 1358. The following must appear in a public
in some form for the convenience of document.
the parties or for the purpose of affecting (1) Acts and contracts which have for their
third persons. object, the creation, transmission, modification
or extinguishment of real rights over immovable
property; sales of real property or of an interest
Form for Validity of Contract therein and governed by articles 1403, No. 2,
(1) Donation of real property. it must be in 1405;
public instrument. (2) The cession, repudiation or renunciation of
(2) Donation of personal property the value hereditary rights or those of the conjugal
of which exceeds P5,000. the donation and partnership of gains;
acceptance must be in writing. (3) The power to administer property, or any
(3) Sale of land through an agent. the power which has for its object an act appearing
authority of the agent must be in writing; or which should appear in a public document, or
otherwise, the sale is void. should prejudice a third person;
(4) Stipulation to pay interest. it must be in (4) The cession of actions or rights proceeding
writing; otherwise, no interest is due. from an act appearing in a public document.
(5) Contract of partnership.if immovables are All other contracts where the amount involved
contributed. it must be in a public exceeds Five Hundred pesos must appear in
instrument to which shall be attached a signed writing, even a private one. But sales of goods,
inventory of the immovable property contributed. chattels or things in action are governed by
articles 1403, NO. 2 and 1405. (1280a)
Form for Enforceability of Contract
In the cases of contracts covered by the Statute
of Frauds, the law requires that they be in writing
subscribed by the party charged or by his agent.
 EXAMPLE:
S and B entered into a contract whereby S sold
REFORMATION OF INSTRUMENTS to B his horse named "Silver." By mistake, the
Reformation is that remedy allowed by law by contract as written and signed by the parties
means of which a written instrument is amended states that the horse sold is "Golden."
or rectified so as to express or conform to the
real agreement or intention of the parties when Here, the instrument may be reformed on the
by reason of mistake, fraud, inequitable, ground of mutual mistake.
conduct, or accident of the instrument fails to Art. 1362. If only party was mistaken and the
express such agreement or intention. other acted fraudulently or inequitably in such a
way that the instrument does not show their true
Article 1359. When there have been a meeting intention, the former may ask for the reformation
of the minds of the parties to a contract, their of the instrument.
true intention is not expressed in the instrument
purporting to embody the agreement, by reason ●​ Concealment of Mistake by the Other
of mistake, fraud, inequitable conduct or Party
accident, one of the parties may ask for the Art. 1363. When one party was mistaken and
reformation of the instrument to the end that the other knew or believed that the instrument
such true intention may be expressed did not state their real agreement, but concealed
that fact from the former, the instrument may be
If the mistake, fraud, inequitable conduct, or reformed.
accident has prevented a meeting of the minds
of the parties, the proper remedy is not ●​ Ignorance, etc. on the Part of Third
reformation of the instrument but annulment of Person
the contract. Art. 1364. When through the ignorance, lack of
skill, negligence or bad faith on the part of the
Requisites of Reformation person drafting the instrument or of the clerk
In order reformation may be availed of as typist, the instrument does not express the true
remedy, the following requites must be present: intention of the parties, the courts may order that
the instrument be reformed.
(1) Meeting of the minds of the parties to the
contract; ●​ Mortgage or Pledge Stated as a Sale
(2) Written instrument does not express the true Art. 1365. If two parties agree upon the
agreement or intention of the parties. mortgage or pledge of real or personal property,
(3) The failure to express the true intention is but instrument states that the property is sold
due to mistake, fraud, inequitable conduct (i.e., absolutely or with a right of repurchase,
any act or omission which is unjust or unfair), or reformation of the instrument is proper.
accident;
(4) The facts upon which relief by way of Cases Where Reformation not Allowed
reformation of the instrument is sought are put in Art. 1366. There shall be no reformation in the
issue by the pleadings; and following cases:
(5) There is clear and convincing evidence (1) Simple donations inter vivos wherein no
(which is more than mere preponderance of condition is imposed;
evidence) of the mistake, fraud, inequitable (2) Wills;
conduct, or accident. (3) When the real agreement is void.

Mutual Mistake as Basis of Reformation ART. 1367. When one of the parties has brought
(Article 1361) an action to enforce the instrument, he cannot
Mutual mistake is mistake of fact that is common subsequently ask for its reformation.
to both parties of the instrument which causes
the failure of the instrument to express their true Party Entitled to Reformation
intention. Art. 1368. Reformation may be ordered at the
instance of either party or his successors in
To justify reformation under this article, the interests, if the mistake was mutual; otherwise,
following requisites must concur: upon petition of the injured party, or his heirs and
(1) The mistake must be of fact assigns.
(2) Such mistake must be proved by clear and
convincing evidence; Procedure for Reformation
(3) The mistake must be mutual, that is, Art. 1369. The procedure for the reformation of
common to both parties to the instrument; and instrument shall be governed by rules of court to
(4) The mistake must cause the failure of the be promulgated by the Supreme Court.
instrument to express their true intention
INTERPRETATION OF CONTRACTS land of which he is co-owner with C. C did not
-​ Interpretation of a contract is the give his consent to the sale.
determination of the meaning of the
terms or words used by the parties in The sale should refer to the land owned by him
their written contract. It is the process of alone as this would make the contract effectual.
ascertaining the intention of the parties
from the written words contained in the Interpretation of Various Stipulations of a
contract. Contract
Art. 1374. The various stipulations of a contract
Art. 1370. If the terms of a contract are clear shall be interpreted together, attributing to the
and leave no doubt upon the intention of the doubtful ones that sense which may result from
contracting parties, the literal meaning of its all of them taken jointly.
stipulations shall control.
EXAMPLE:
If the words appear to be contrary to the evident R lease his house to E. in the contract, it was
intention of the parties, the latter shall prevail stated that E should not sublease the house
over the former. (1281) without the written consent of R. Another
stipulation therein contained stated that E should
Art. 1371. In order to judge the intention of the pay P1,000 as additional rent a month should he
contracting parties, their contemporaneous and violate this condition. E subleased the house
subsequent acts shall be principality considered. without the consent of R.

EXAMPLE: Has R the right to eject E? No, in the light of the

R and E entered into a contract entitled clause stating the penalty for the violation of the
"Contract of Lease." Although the contract refers condition.
to R as lessor and to E as lessee, it states that
the possession and ownership of the land are Interpretation of Words with Different
transferred to E. the title to the land was given Significance
by R to E who registered the land in his name. Art. 1375. Words which may have different
Before the date of the contract, E wrote a letter signification shall be understood in that which is
to R offering to buy the land. most in keeping with the nature and object of the
contract. (1286)
By their acts, the parties clearly indicate that
their evident intention is to make E the owner of EXAMPLE:
the land. Hence, the contract should be R leased to E a roof for the purpose of erecting
interpreted as one sale. an advertising sign. The contract provides for
the termination of the lease by E if a "building"
Special Intent Prevails over a General Intent should be constructed on an adjoining property
Art. 1372. However general the terms of a of such height as to obscure the view of E's sign.
contract may be, they shall not be understood to There was erected on the roof an adjoining
comprehend things that are distinct and cases building a sign which obstructed the view of E's
that are difference from those upon which the sign.
parties intended to agree. (1283)
In this case, the term "building" as the rem is
EXAMPLE: used in the contract may be interrupted to
S sold his house "including all the furniture include the obstructing sign having in mind the
therein." The term "all" should not be understood nature and object of the contract.
to include S's refrigerator which is distinct and
different from "furniture." Resort to Usage or Custom as Aid in
Interpretation
Neither should it be interpreted to include chairs Art. 1376. The usage or custom of the place
borrowed by S from C for the reason that they shall be borne in mind in the interpretation of the
do not belong to S. ambiguities of the contract, and shall fill the
omission of stipulations which are ordinarily
Interpretation of Stipulation with Several established. (1287)
Meanings
Art. 1373. If someone stipulation of any contract EXAMPLE:
should admit of several meanings, it shall be X rendered services to Y but the contract did not
understood as bearing that import which is most provide for the amount of compensation to be
adequate to render it effectual. paid. In this case, the amount must be
determined by the rate customarily paid in the
EXAMPLE: place where the services were rendered.
S sold "his parcel of land" to B. now S has two
lands, one owned by him absolutely and another
Art. 1377. The interpretation of obscure words Principles of Interpretation in the Rules of
or stipulations in a contract shall not favor the Court
party who caused the obscurity. (1288) Art. 1379. The principles of interpretation stated
in Rule 123 of the Rules of Court shall likewise
The reason for the rule in Article 1377 is that the be observed in the construction of contracts. (n)
party who drafts the contract (e.g., insurance
contract the terms of which are prescribed by
the insurance company in printed form), more
easily than the other, could have prevented
mistakes, or ambiguity in meaning by careful
choice of words; and generally, the party who
causes the obscurity acts with ulterior motives.

Rules in Case of Doubts Impossible to Settle

(Article 1378)
When, despite the applications of the application
of the preceding rules (Arts. 1370- 1377.),
certain doubts still exist, such doubts shall be
resolved in accordance with the supplementary
rules stated in the present article
.
(1) Gratuitous contract. if the doubts refer to
incidental circumstances of a gratuitous
contracts, such interpretation should be made
which would result in the least transmission of
rights and interests.

EXAMPLE:
R gave his car to E. it is not clear whether the
contract is a donation or a commodatum.
The contract should be presumed as a mere
commodatum because it would transmit lesser
rights than a donation since R retains his
ownership of the car.

(2) Onerous contract. if the contract in question

is onerous, the doubts should be settled in favor
of the greatest reciprocity of interests.

EXAMPLE:
D borrowed from C P5.000 at 12% interest. It
cannot be determined from the terms of the
contract whether the loan is payable in six
months or in one year.

It must be assumed that the period agreed upon

is one year which results in a greater reciprocity
of interests since D can use the money for one
year instead, and C, on the other hand, can earn
interest due for one year instead of only six (6)
months.

(3) Principal object of the contract. if the

doubt refers to the principal object of the
contract and such doubt cannot be resolved
hereby leaving the intention of the parties
unknown, the contract shall be null and void.

EXAMPLE:
S sold to B his land. S has many lands. It cannot
be determined which land was intended by the
parties to be the subject of the sale.