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Article 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 stipulation shall control.

It is not what existed in the minds of the parties but what intention is expressed in the language used.

EXAMPLE:

Ms. Ang is selling a parcel of her land to Ms. Abad for P100,000. The stipulation is to sell the land to Ms. Abad for P100,000. The intention of the parties is not contrary to the literal meaning of the terms. The contract is a contract of sale.

If words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.

The words written of a written contract is in conflict with what is manifested in the intention of the parties. What they are expressing is not in line with what is written in the contract.

EXAMPLE:

Mr. Acosta entered into a contract of lease with Mr. Aparis. Mr. Acosta is to lease his motorcycle to Mr. Aparis. On the day of signing the contract, Mr. Aparis must pay the amount of P50,000 and P2000 by way of rental on or before the first day of the month. At the end of the year, Mr. Aparis would be the owner of the motorcycle paying the total amount of P74,000. This is not a contract of lease. It is an installment of payment instead of calling it rental payment.

Article 1371

In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered.

The intention of the parties shall be judged according to their contemporaneous and subsequent acts. Contemporaneous means occuring in the same period and subsequent means succeeding. After the contract has been signed, their acts shall be considered on how to judge their intention.

EXAMPLE:

In the second example given, the contract was a contract of lease. At the end of the year, the motorcycle is in the ownership of the lessee. It is not called a contract of lease but called a contract of sale.