When we enter into agreements, we invariably use periods to reckon when certain obligations are to be performed. In contracts, it pays to be precise in determining when things are supposed to happen and, when a right is violated, when an action can be filed to enforce such right against another.
When you expect that something is to be done in a week’s time, what do you really mean? For example, just saying that another party has “seven days” while seemingly clear can be subject to interpretation. You can leave it to lawyers to either require precision or find a way to obfuscate matters (or in layman’s terms, confuse). Days can mean business days which results in a longer period, or calendar days which can be much shorter. So you just have to say what you mean. It may be reasonable to state business days if a thing can be acted upon only during office hours.
And when you say “business day” and you deal with parties in different jurisdictions (or time zones), you may have to specify a business day to refer to a day when banks are generally open in a certain jurisdiction. Pay attention to this provision especially in the case of loans. If a lender is based abroad, and you have to pay on a business day, does it have to a business day in your place of business, that of the lender’s or both?
You might say, what’s a day or two anyway? Well a year has 365 days or at least that is how we normally count it. But in a loan, interest is usually quoted as “per annum” and the bank usually defines a year to be 360 days. For example, if the interest is 10% p.a. and the principal is P1 million the interest per month will be different:
If we use 365 days, i.e. 10%/365 days * 30 days, interest is only about P8,219 per month
At 360 days, interest is about P8,333 per month
That may seem small but it all adds up specially if the amount is bigger and if the tenor of the loan is longer. In a loan of P1B, the interest per month would be between 8.2 million per month or P8.33 million per month.
Actually, it would just be much better if we specify dates, like this should be done by the June 15, but there are just occasions when we cannot.
By default, the Philippine’s Revised Administrative Code does provides legal definitions for time periods. And please note that the law is considered read into every contract. You might not be aware you’re already in default if you have failed to correctly count the days.
The Code states:
“SECTION 31. Legal Periods. — “Year” shall be understood to be twelve calendar months; “month” of thirty days, unless it refers to a specific calendar month in which case it shall be computed according to the number of days the specific month contains; “day,” to a day of twenty-four hours; and “night,” from sunset to sunrise.
So a “year” does not include the 31st of each month. And, unless you specify February, a “month” is always presumed to have 30 days. If you need something done before nightfall, you have to state the particular time, say “on or before 5:00 p.m.”, when a delivery is to be made. Otherwise, a delivery by 11:59 p.m. and 58 seconds on a certain day will still be valid.
Before, the New Civil Code defined a year to have 365 days but the Code is a more recent piece of legislation which should govern. But the NCC contains an important explanation on how a period is computed. It states in part:
“ARTICLE 13. xxx In computing a period, the first day shall be excluded, and the last day included. (7a)”
Whatever period is given to you, you just don’t count the first day. In other words, you start counting from the day after the first day. This is illustrated in the following case:
“Under this cited provision, the Appeal may be taken within 30 days from notice of the judgment or order of the trial court. xxx In relation thereto, the New Civil Code states that in computing a period, the first day shall be excluded and the last day included.
The petitioners admit that they received their copy of the Order of dismissal of their Complaint on July 17, 1979. xxx. In computing the 30-day period, July 17, 1979 (the first day) is excluded, pursuant to Article 13 of the New Civil Code. Counting 30 days thereafter, beginning on July 18, 1979, the petitioners had up to August 16, 1979 to file their Motion for Reconsideration. Their Motion for Reconsideration, although dated August 16, 1979, was filed with the trial court on August 17, 1979 or one day beyond the 30-day reglementary period xxx. REMIGIO QUIQUI,et al. vs. BONCAROS, et al. [G.R. No. L-51841. June 30, 1987.]”
Dates are also important when you get to figure out if you can still file cases or actions against another party. Please note that the prescription period (or the time when you can still do a particular act) can be based on law or contract. We will focus on written contracts here. Under the New Civil Code, an action upon a written contract must be brought within ten years from the time the right of action accrues (Article 1144). The right accrues from the time there is a breach or violation of a contract. From the time of breach, you thus have 10 years within which to sue the other party.
But in one case, the Supreme Court upheld a contractual provision which provided for a shorter period than that provided by law within which an action can be filed (PHIL-AM vs. Sweet Lines, Inc. et al. (G.R. No. 87343, August 5, 1992). So a contract can trump the law, at least in this particular case, if so agreed by the parties.
So the next time you get into a contract, take a look at the dates when you have to do something or when you want something done. And see what the consequences are if you don’t, or if someone else doesn’t do it. Then we can go into penalties for default, or even liquidated damages, which are different topics altogether. For now, just be careful what you sign up for and when.
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