A property owner entered into a rental agreement with tenants and at the same time the parties came to an oral agreement regarding the purchase of the property by the tenants in the future. After the tenants announced that they were unable to meet the purchase price, the parties signed a termination agreement but such termination agreement referred only to the lease agreement and not to the oral agreement for the purchase of the asset.
The Supreme Court held that the termination agreement cancels both the overt agreements and the covert agreements between the parties. When the relationship between the parties consists of two sets of agreements, overt and covert, the covert agreements are the ones that express the true will of the parties. In this case, the overt contractual system is for semblance only and has no binding effect. Moreover, when an agreement is private, signed by unsophisticated people where a gap can arise between their real intention and the language of the contract, it is advisable to put the most weight in their interpretation on locating the subjective intention of the parties at the time of execution of the agreement. Here, the parties conducted themselves on two contractual levels, overt and covert, where the overt contractual system that regulates the rental of the property is for appearance only, while the real agreement between the parties was for the sale of the property. The termination agreement is a private contract and an examination of the language of the contract and the circumstances of its execution indicates that the intent of the parties was the termination of the entire relationship between the parties, both overt and covert.