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Art. 1359. When, there having been a meeting of the minds of the parties to a contract, their
true intention is not expressed in the instrument purporting to embody the agreement, by reason of
mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the
instrument to the end that such true intention may be expressed.
If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of
the parties, the proper remedy is not reformation of the instrument but annulment of the contract.
Definition
Reformation – is a special civil action for declaratory relief that serves as a remedy by means of
which a written instrument is amended or rectified in order to express or conform to the real agreement
or intention of the parties.
The action for reformation is called a special civil action for declaratory relief under Rule 63 of
the Rules of Court, and its purpose is to secure an authoritative statement of the rights and obligations
of the parties for their guidance in the enforcement thereof.
Rationale
Basis of reformation is equity. The courts by reformation do not attempt to make a new contract
for the parties, but tries to make the instrument express their real agreement. The rationale for such
doctrine is that it would be unjust and inequitable to allow the enforcement of a written instrument
which does not reflect the parties’ meeting of the minds.
Burden of Proof
Burden of proof is upon the party who insists the party should be reformed based on some legal
ground. It is also a right in personam.
Quantum of Evidence
Prescription
Prescriptive period is within ten years from the time the cause of action accrues.
Implications
3. Reforms the instrument embodying the contract and not the contract.
Requisites
2. The true intention is not expressed in the instrument embodying the contract.
3. Failure to express the true intention is due to mistake, fraud, inequitable conduct, or
accident.
– if these factors prevented the meeting of the minds, then annulment is the remedy.
Reformation of instrument presupposes a valid, existing contract, in which there had been a meeting of
the minds of the parties but the instrument drawn up and signed by them does not correctly express the
terms of their agreement.
Annulment of a contract, on the other hand, presupposes a defective contract in which the minds of the
parties did not meet, or the consent of one was vitiated. (Veluz vs. Veluz, July 31, 1968)
Breach of Contract
An action for reformation instituted after a breached of contract will not prosper (Rosello-Bentir vs.
Leanda, April 12, 2000).
Art. 1360. The principles of the general law on the reformation of instruments are hereby
adopted insofar as they are not in conflict with the provisions of this Code.
- In case of conflict between the Civil Code and the principles of the general law on
reformation, the former prevails. The latter will have only suppletory effect.
Art. 1361. When a mutual mistake of the parties causes the failure of the instrument to
disclose their real agreement, said instrument may be reformed.
Mutual Mistake – mistake of fact that is common to both parties which causes the failure of the
instrument to express true intention.
Requisites
One of the parties contended that there was a mutual mistake relative to the documentation of the
contract of sale but there was no convincing evidence that the mistake is mutual. The reformation of sale
was denied (Gonzalez Mondragon vs. Santos, October 12, 1950).
Art. 1362. If one party was mistaken and the other acted fraudulently or inequitably in such a
way that the instrument does not show their true intention, the former may ask for the reformation
of the instrument.
Fraudulent Acts
- It must be shown that the other party has acted fraudulently or inequitably resulting in
the drafting of a document which does not correspond to the actual contract agreed upon by the
parties.
General Rule
Exception
- if the other party acted fraudulently or with deception towards the other in executing the
contract.
- Knowledge by one party of the other’s mistake regarding the expression of the
agreement is equivalent to mutual mistake. The concealment of mistake constitutes fraud.
- Remedy of reformation may be availed by the party who acted in good faith – injured
party.
Art. 1364. When through the ignorance, lack of skill, negligence or bad faith on the
part of the person drafting the instrument or of the clerk or typist, the instrument does not
express the true intention of the parties, the courts may order that the instrument be reformed.
- The mistake is deemed mutual and either party may ask for reformation. Neither party is
responsible.
- The court may order the reformation of the instrument if the instrument does not convey
the true intention of the parties because of the:
(a) Ignorance;
Art. 1365. If two parties agree upon the mortgage or pledge of real or personal property,
but the instrument states that the property is sold absolutely or with a right of repurchase,
reformation of the instrument is proper.
- The intention of the parties can be judged from their contemporaneous and subsequent
acts. (Velasquez v. Teodoro, 46 Phil. 757).
The parties intended that the house subject of the agreement was to be collateral for a
particular loan but the agreement apparently states that the house was the subject of a
conditional sale of a residential building. Reformation of the agreement was allowed (Palileo v.
Cosio, May 31, 1965).
Simple Donations
- Donations are essentially acts of pure liberality. Since act is essentially
gratuitous, donee has no just cause for complaint. Do not involve meeting of minds.
Wills
- The making of a will is strictly a personal act which is free. Moreover, a will may
be revoked at any time.
Void Agreement
- Reformation is not allowed in case the real agreement is void because such a
procedure would be useless. Once reformation is made, the new instrument would be void
precisely because the true agreement and intention are void. There is no meeting of the minds.
Art. 1367. When one of the parties has brought an action to enforce the instrument, he
cannot subsequently ask for its reformation.
Art. 1368. Reformation may be ordered at the instance of either party or his successors in interest,
if the mistake was mutual; otherwise, upon petition of the injured party, or his heirs and assigns.
2. In all other cases, the injured party or his heirs and assigns.
Art. 1369. The procedure for the reformation of instrument shall be governed by rules of court to
be promulgated by the Supreme Court.
INTERPRETATION OF CONTRACTS
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.
If the words appear to be contrary to the evident intention of the parties, the latter
shall prevail over the former.
INTERPRETATION REFORMATION
General Rule:
The intention of the parties is reflected from the wordings of the contract, and therefore
the literal stipulations shall control.
Exception:
When the wording is ambiguous, apply the rules in statutory construction.
e. Contra proferentem
- rule in contract
law which states that any clause considered
to be ambiguous should be interpreted against the interests of the party
that requested that the clause is included.
f. Applying the gratuitous and onerous rule
Art. 1371. In order to judge the intention of the contracting parties, their contemporaneous
and subsequent acts shall be principally considered.
The import of a word ultimatedly depends upon the consideration of the entire provision,
its nature, the object and the consequences that would follow it from construing it one way or the other.
Thus if a provision demands a mandatory application, the word “may” be construed as “shall.” (Gonzales
v. Previsora Filipina)
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.
NOSCITUR A SOCIIS
- General and unlimited terms are restrained and limited by particular terms that
follow.
EJUSDEM GENERIS
- A general term joined with a specific one will be deemed to include only things that
are like, of the same genus, as the specific one.
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.
Provisions in a contract must be given a construction as will give effect to them. If it were
the intention of the parties to limit the respondent’s obligation to P4M they should have stated so,
and there would have been no need to qualify the statement of said amount with the clause “as of
June 1980 plus any applicable charges on the overdue account,” among others. (Caltex v.
Intermediate Appellate Court)
Art. 1374. 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.
- The various provisions of a contract must be read as a whole and not in isolation.
Each provision must be related to each other in order to clearly now the total import and
application of the law, and so that a harmonious whole can be attained.
Mortgages given to secure future advancements or loans are valid and legal contracts, and
amounts named as consideration in said contracts do not limit the amount for which the
mortgage may stand as security, if from the four corners of the instrument the intent to secure
future and other indebtedness can be gathered. (China Banking Corp v. CA)
The important task in contract interpretation is always the ascertainment of the intention
of the parties through looking to the words they used to project the intention of their contract—all
the words, and not just a particular word or two, and words in context and not words standing
alone. (Fernandez v. CA)
Art. 1375. 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 Court interpreted the words “in proportion” to mean that the parties to a
compromise contemplated a divisible obligation. (Pasay City Government v. Court of First
Instance of Manila)
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.
Rationale
- Since he caused the obscurity, the party who drew up the contract with
ambiguous terms should be responsible therefor; so the obscurity must be construed against him.
The drafter of the terms of the contract should, therefore, be careful.
CONTRA PROFERENTEM
- Means “against the proferrer.” If there is an ambiguity in a document and all the
other methods of construction have failed to resolve so that there are two alternative meanings to
certain words, the Court may construe the words against the party who put forward the
document, and give effect to the meaning more favourable to the other party
- Based on the maxim verba accipiuntur fortius contra proferentem: a contract is
interpreted against the person who wrote it.
The interpretation should be in favor of the contractor because they were not
the cause of misunderstanding. The government must state their instruction in a clear
manner. Whatever maybe favorable to the party whose favors the provision was made and to the
one who do not cause misinterpretations. (GOV’T. OF THE PHILIPPINES v. DERHAM
BROTHERS)
Art. 1378. 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.
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.
- Where a donee seeks the execution of a donation even though such done did not
fulfil a condition sought by the donor, because such donor did not seek the enforcement of the
condition for a long time anyway, the Court ruled for the revocation of the donation. (Central
Philippine University v. CA)
- When the contract’s principal object is expressed in such a way that the intention
of the parties cannot be known, the contract is null and void.
Art. 1379. The principles of interpretation stated in Rule 123 of the Rules of Court
shall likewise be observed in the construction of contracts.
It is a well-settled rule that in case repugnance exists between written and printed
portions of a policy, the written portion prevails, and there can be no question that as far as any
inconsistency exists, the above-mentioned typed ‘rider’ prevails over the printed clause. (JARQUE v.
SMITH, BELL AND CO.)