Spouses Leoncio G. Cifra v. Court of Appeals

Summary

This case involved the interpretation of a contract to sell real property between spouses Cifra and Dr. Yu Chua. The agreement included an addendum allowing either party to back out by paying P20,000 damages plus attorney's fees. When the sellers attempted to rescind due to a lost business opportunity, the buyer demanded specific performance. The Regional Trial Court and Court of Appeals ruled in favor of specific performance, but the Supreme Court reversed, applying Civil Code provisions on contract interpretation. The Court held that the addendum clause was clear and gave both parties the right to rescind upon payment of stipulated damages, making it the law between the parties. The decision established that penalty clauses in contracts must be respected and can preclude specific performance when clearly agreed upon by the parties.