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Chapter 4 Price and Other Consideration

By definition under Art. 1458, the ideal consideration for a contract of sale would be
price as a sum certain in money or its equivalent.

It is still possible that a sale may still be when it has for its cause or consideration an
item other than price.

Torres v. CA Consideration, more properly denominated as cause, can take in
different forms, such as the prestation, or promise of a thing or service by another.

Meaning of Price

Price signifies the sum stipulated as the equivalent of the thing sold and also every
incident taken into consideration for the fixing of the price put to the debt of the buyer
and agreed by him.

A seller cannot unilaterally increase the price previously agreed upon with the buyer,
even when the need to adjust the price of sale is due to increased construction cost;
otherwise, it would be a violation of the essential characteristic of obligatory force of
contracts of sale.

Requisites for Valid Price

(a) It must be Real;
(b) It must be in Money or its equivalent (i.e. it must be Valuable
Consideration); and
(c) It must be Certain or Ascertainable

The requisites provided by law for a valid price to support a valid sale are intended to
preserve the integrity and enforceability of the underlying obligation of the buyer to pay.
It is also essential that the requisites for the price promote the onerous, commutative,
and bilateral-reciprocal characteristics of the contract of sale.

(1) PRICE MUST BE REAL

i. When Price is Real
Price is real when at the perfection of the sale, there is the legal intention on
the part of the buyer to pay the price, and legal expectation on the part of the
seller to receive such price as the value of the subject matter he obligates
himself to deliver.

Pealosa v. Santos held that when the parties execute a Deed of Absolute Sale
over a parcel of land with the understanding that the price indicated therein
would be paid from the proceeds of the loan to be obtained by the buyer
froma bank using the subject property as mortgage collateral, then neither the
contract of sale nor the price can be considered as wholly simulated, for there
was valuable consideration, and the non-payment of the price because of the
refusal of the seller to turn-over the title to the bank, would not grant the seller
the right to rescind the sale after the buyer has duly consigned the price with
the courts.

ii. When Price is Simulated
When the price is simulated because neither party to the Deed of Sale had any
intention whatsoever that the amount will be paid, the sale is void, although
the act may be shown to have been in reality a donation, or some other
contract.

The whole issue therefore boils down to contractual intent; if there was no
intent by the parties at the time of perfection to pay and to receive the price
stipulated, then it is a wholly simulated price, and the underlying contract of
sale is void for lack of consideration.

Suntay v. CA The court considered it to be the most protuberant index of
simulation of the price when there is a complete absence of an attempt in
any manner on the part of the buyer to assert his rights of ownership over the
land and rice mill in question. The failure of the buyer to take possession of
the property allegedly sold to him is a clear badge of fraud and therefore
considered the sale utterly void

Labagala v. Santiago the admission of the buyer that he did not pay any
centavo for the property, made the sale void, especially when evidence showed
that the deed of sale was forged.

The indication in the covering instrument that the price has been agreed upon
and paid, when in fact there has been no such payment, has been considered
to be an indication of simulation of price.

When the price is completely simulated, then the principle of in pari delicto
nonovitar actio should apply, which denies all recovery to the guilty parties
inter se. However, such principle applies to cases where the nullity arises from
illegality of the consideration of the purpose of the contract but does not apply
to inexistent and void contracts where the price is merely simulated.

iii. When Price is False
Price is false when there is a real price upon which the minds of the parties
had meet, but not declared, and what is stated in the covering deed is not the
one intended to be paid.

If the price indicated in the covering instrument is false, the contract of sale is
valid, but the underlying deed is subject to reformation to indicate the real price
upon which the minds of the parties have met.

Nevertheless, the parties may be held bound by the false price indicated in the
instrument under estoppels principle, especially when the interest of the
Government or third parties would be adversely affected by the reformation of
the instrument.

iv. Meeting of Minds as to Price
In Mapalo v. Mapalo, the spouses Mapalo, who were simple illiterate farmers,
were made to sign a deed of sale over their registered land although they were
told that they were signing a donation for the eastern half of said property in
favor of the brother. (Non-payment of Php 500.00)

The court differentiated between a contract that had no consideration from
one which merely contained a false consideration. It ruled that according to
Manresa, what is meant by a contract states a false consideration is one that
has in effect a real consideration but the same is not the one stated in the
contract. In Mapalo, aside from the false consideration of Php 500.00, there
was no real consideration as to the western half of the property; therefore, the
contract was one with no consideration. It was void, and it inexistence was
permanent and incurable and could not be subject of prescription.

v. Effect of Non-Payment of Price
If the price is fixed but later on remitted or condoned, this is perfectly all right,
for then the price would not be fictitious. The failure to pay the price does not
cancel a sale for lack of consideration, for there is still consideration. The
failure to pay a real price goes not into perfection of the sale but into its
consummation. The failure to pay the price or balance thereof does not render
the sale inexistent or invalid, but merely give rise to a right in favor of the
seller to either demand specific performance or rescission of the contract of
sale.

It is not the fact of payment that determines the validity of the contract of sale,
since sale is not a real contract. Sale is a consensual contract, and it becomes
binding and valid contract upon the meeting of the minds on the price. If the
minds of the parties never meet as to the price, because the price stipulated is
known by both parties as simulated, the contract is undoubtedly void. On the
other hand, if the minds of the parties have met as to the price, the contract of
sale if valid irrespective of the manner of payment they agreed upon, or even
by the breach of the manner of payment agreed upon.

Balatbat v. CA A contract of sale being consensual, it is perfected by the
mere consent of the parties. Delivery of the thing bought or payment of the
price is not necessary for the perfection of the contract; and failure of the
vendee to pay the price after the execution of the contract does not make the
sale null and void for lack of consideration but results at most in default on the
part of the vendee, for which the vendor may exercise his legal remedies.

Heirs of Pedro Escanlar v. CA In a contract of sale, the non-payment of the
price is a resolutory condition which extinguishes the transaction that, for a
time, existed and discharges the obligations created thereunder. The remedy of
an unpaid seller in a contract of sale is to seek either specific performance or
rescission.

Failure of Consideration vs. Lack of Consideration
Montecillo v. Reynes Failure to pay the consideration is different from lack
of consideration. The former results in a right to demand the fulfilment or
cancellation of the obligation under an existing valid contract while the latter
prevents the existence of a valid contract. Where the deed of sale states that
the purchase price has been paid but in fact has never been paid, the deed of
sale is null and void ab initio for lack of consideration.

vi. Accommodation Does Not Make Sale Void for Lack of Price
Yu Bun Ong (2001) held that when the Deed of Sale was executed merely to
facilitate the transfer of the property to the buyer pursuant to an agreement to
enable the buyer to construct a commercial building and to sell the property to
the children, but that in truth the agreement was a mere subterfuge on the part
of the buyer, the agreement cannot be taken as a consideration for the sale
which the Court held to be void.

The ruling in Yu Bun Ong is in stark contrast to the Courts earlier decision in
Mate v. CA (1998), which sustained the validity of agreement even when fraud
may have been the intention of the party accommodated, more so when fraud
has not been considered an efficient cause to render a contract void, but rather
voidable by reason of vice in the consent of the party-victim.

Mate is a prime example to show that even when undoubtedly the price
stipulated in the covering instrument is simulated (i.e. false) the underlying sale
would still be valid and enforceable provided there is another consideration
(apart from the false price) to support the sale.

vii. Simulation of Price Affects Delivery of Subject Matter
When a contract of sale is fictitious, and therefore void, and inexistent, as there
was no consideration therefore does not transfer ownership to the buyer. But
care should be made to distinguish between a simulated price that affects
delivery, on one hand, and the failure to pay the price, on the other hand,
which does not affect the efficacy of delivery of the subject matter.

(2) PRICE MUST BE IN MONEY OR ITS EQUIVALENT: Valuable
Consideration
Article 1458 of the CC, in defining the obligation of the buyer, provides that he
must pay the price certain in money or its equivalent. It had been proposed,
though not resolved, in Bagnas v. CA, that Art. 1458 requires that equivalent be
something representative of money, e.g. a check or draft, citing Manresa, to
effect that services are not the equivalent of money insofar as said requirement is
concerned and that a contract is not a true sale where the price consists of
services or prestations.

Nevertheless, Art. 1458 recognizes that if the consideration of a contract consists
partly in money and partly in another thing, the transaction can still be
considered a contract of sale when this is the manifest intention of the parties.
This shows that the consideration for a valid contract if sale can be the price and
other additional consideration.

Republic v. Phil. Resources Development delivery of Apostol galvanized iron (owned
by PRDC) as payment of the lacking amount from the previous obligation to
Bureau of Prisons; The Court held that the Governments contention were
untenable, ruling that Article 1458 provides that the purchaser may pay a price
certain in money or its equivalent, which means payment of the price need not be
in money.

Republic is not at all authority to say that under Art. 1458, as it defines a contract
of sale, the term equivalent of price can cover other than money or other
media of exchange, since Republic covers not the perfection stage of a contract of
sale but rather the consummation where the price agreed upon (which ideally
should be in money or its equivalent) can be paid under the mutual agreements
agreed upon by the parties to the contract of sale, even by dation in payment as
was the case in Republic.

Torres v. CA when the covering contract of sale of a parcel of land clearly
provides that the consideration for the sale was the expectation of profits from
the subdivision project, it constituted valid cause or consideration to validate the
sale and delivery of the land.

i. Adequacy of Price to make it Real; Concept of Valuable
Consideration
Ong v. Ong considered the validity of a sale of real property where the
consideration stated in the deed was One Peso (Php 1.00) and the other
valuable consideration.

The Court held that since no evidence was adduced to show that the
consideration stated in the deed of sale was not paid or was simulated, it
presumed to exist under Art. 1354 of the CC. In any event, the Court held
that the apparent inadequacy is of no moment since it is the usual practice
in deeds of conveyance to place a nominal amount although there is a more
valuable consideration given.

The essence of the Ong ruling is that in our jurisdiction, it is possible for
parties to a sale to agree on an adequate consideration, and though they will
state a false nominal consideration in their covering deed, it would not affect
the validity of the contract of sale, provided that valuable consideration was
in fact agreed upon.

For consideration to support an onerous contract, such as a contract of sale,
it would have to be valuable consideration.

Bagnas v. CA Sale of real property for One Peso; the court noted that the
gross disproportion between the consideration stipulated and the value of
the property, would show that the price stated was a false and fictitious
consideration and no other true and lawful cause having been shown, the
Court finds both said deeds, insofar as they purport to be sales, not merely
voidable, but void ab initio. Therefore, even though a consideration is real
in the sense that it was agreed upon and there is every intention of the
parties to pay and receive such price, it would still be considered fictitious
and render the sale void if it is a mere nominal price.

Bagnas should not be interpreted to mean that although the parties agreed
that services was agreed upon to be part of the consideration, the fact that
no services were rendered would make the contract void, since the non-
performance of the services agreed upon does not go into the validity of the
contract but actually grants to the seller or his successor-in-interests the
right to rescind the contract for breach thereof. The essence of the ruling
in Bagnas was that evidence was adduced to indicate that there was
no real intention to pay any indicated valuable consideration.

(3) PRICE MUST BE CERTAIN OR ASCRETAINABLE AT
PERFECTION
Price is certain when it has been expressed and agreed in the terms of specific
pesos and/or centavos. This affirms the proposition that money represents the
best model of valuable consideration.

Art. 1469 of the CC in order that the price may be considered ascertainable, it
shall be sufficient that it be so with reference to another thing certain, or that the
determination thereof be left to the judgement of a specified person or persons.

i. Price Fixed by Third Party
The designation of a third party to fix the price is valid and such designation
by itself makes the price ascertainable as to give rise to a valid contract of
sale. The fixing of the price cannot be validly left to the discretion of one of
the contracting parties, for to consider a contract of sale already existing
when the price has yet to be fixed by one of the parties would render the
contract to be without the characteristics of mutuality of obligatory force.
Even before the fixing of the price the designated 3
rd
party, a contract of
sale is deemed to be perfected and existing, albeit condition.

Barreto v. Santa Marina even before the designated party had fixed a
price there was already an existing contract of sale, as to prevent one party
from unilaterally withdrawing from the contract; however, such contract was
a contract subject to a suspensive condition, i.e. that the price will be fixed
by the 3
rd
party designated by the parties.

Under Art. 1469, if the designated 3
rd
paty fixes the price in bad faith or by
mistake, those are the only two instances where the parties to the contract
can seek court remedy to fix the price.

When the designated 3
rd
pary is either unable or unwilling to fix the price,
the parties do not have a cause of action to seek from the court the fixing of
the price because, in a manner of speaking, the condition imposed on the
contract of sale has not happened, and its happening extinguished the
underlying contract; consequently, there is no longer a contract upon which
the courts have any jurisdiction to fix the price. In such a case, the law
declares the contract of sale inefficacious.

Art. 1186, CC The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfilment.

When the 3
rd
party designated is prevented from fixing the price by fault
of either the seller or the buyer, the party not at fault may have such
remedies against the party in fault as are allowed the seller or the buyer, as
the case may be. The party may demand from the courts for the fixing of
the reasonable price.

ii. Fixing of Subject Matter by 3
rd
party
Although under Art. 1469 of the CC, the designation by the parties of a
third party to fix the price gives rise to a valid (albeit condition) contract of
sale, such formula is NOT ALLOWED for the determination of the subject
matter of sale contract is a void contract of sale.

The designation of a 3
rd
party to fix the subject matter is not provided by
law. In order that a contract of sale can exist, the parties must have agreed
on a subject matter which is determinate or determinable. The test of
whether the subject matter is determinate is one of fact: whether the subject
matter has been physically segregated or particularly designated. The test of
being determinable covers the test of capacity: based on the formula agreed
by the parties at the time of perfection, could the subject matter be
physically segregated or particularly designated by the courts without further
agreement between the contracting parties.

iii. Price Ascertainable in reference to other things Certain
The price of securities, grain, liquids, and other things shall also be
considered certain, when the price fixed is that which the thing would have
on a definite day, or in a particular exchange or market, or when an amount
is fixed above or below the price on such day, or in such exchange, or
market, provided said amount be certain

iv. Effect of Unascertainability
Where the price cannot be determined in accordance with any of the
preceding rules, or in any other manner, the contract of sale is inefficacious.
(the law does not use the term void because of the implied
acknowledgement that the existence of the formula allowed by law at the
point of perfection has actually rendered a contract valid albeit conditional,
which cannot be rendered void by what happens after perfection)
(4) MANNER OF PAYMENT OF PRICE MUST BE AGREED UPON
Although the CC provisions governing the contract of sale do not explicitly
require that a meeting of the minds of the parties must include the terms or
manner of payment of the price, the same is deemed to be an essential ingredient
before a valid and binding contract of sale can be said to exist, since it is part of
the prestation of the contract, and without which there can be no valid sale, nor
can an action for specific performance be made against the alleged seller. Manner
of payment of price goes into the essence of what makes price certain or
ascertainable.

Velasco v. CA where the parties had agreed on the determinate subject matter (a
parcel of land), and the total purchase price, but not on the manner of payment
of the agreed price, held that although downpayment had already been made by
the buyer and received by the seller, there was still no valid sale. The Court held
that although part of the downpayment has been paid, a definite agreement on
the manner of payment of the purchase price was an essential element in the
formation of a binding and enforceable contract of sale.

The terms of payment, being an integral part of the price, would have the same
requisites that the law imposes on the price to support a valid contract of sale-
certain or at least ascertainable. If a price, unknown to both parties, can support
a valid and binding contract of sale, such as when the fixing of the price is left to
a third party, then also, if the terms of payment are provided for in a formula to
work, then the terms of payment are deemed to have been agreed upon and the
sale would be valid, but subject to the same condition affixed to the price.

i. Proper understanding of doctrine on agreement on Terms of Payment
of Price
The terms of payment do not always have to be expressly agreed, when the
law supplies by default such terms.

A close reading of the ruling isn Navarro, Velasco and Leabres indicates clearly
that in each of the cases, the parties were to have a mode of payment of the
price other than immediate payment. In each of those cases therefore, there
could not have been a final meeting of the minds of the parties as to the
price because both parties in each case knew and expected that certain
negotiations still had to be made with respect to the manner of payment of
the price.

In all other cases, price is deem to be demandable at once. Under Art. 1179
of the CC, every obligation whose performance does not depend upon a
future or uncertain event, or upon a past event unknown to the parties, is
demandable at once. Therefore, in the absence of any stipulation or agreement
or actuation indicating that a different term of payment would be applicable
and for which a meeting of the minds must be achieved, the price is deemed
to be by operation of law immediately demandable upon the perfection of
the contract.

(5) WHEN THERE IS SALE EVEN WHEN NO PRICE HAS BEEN
AGREED UPON
Article 1474 of the CC Where the price cannot be determined in accordance
with the preceding articles, or in any other manner, the contract is inefficacious.
However, if the thing or any part thereof has been delivered to, and appropriated by the buyer,
he must pay a reasonable price therefore. What is reasonable price is a question of fact
dependent on the circumstance of each particular case.

The court have authority to fix the reasonable price for the subject matter
appropriated by the buyer. Art. 1474 seems to present the only exception
where there would still be a valid sale even when there has been no
meeting of the minds as to the price or any other consideration.

Raet v. CA Contract of sale was declared invalid despite the fact that the buyers
were already in possession of the housing units, delivered by the seller itself, on
the ground that the evidence shows that the price was merely estimate.
(Opinion of Villanueva following Art. 1474 of the CC the court could have
directed the trial court to fix the reasonable prices of the housing units already
appropriated by the buyers.)

Same ruling was adapted in National Housing Authority v. Grace Baptist Church,
involving the sale of parcels of land by the NHA, where possession had been
turned over to the buyer which had introduced improvements thereon, when it
was still clear that the final price had yet to be agreed upon.

i. What does Art. 1474 mean by Preceding Articles?
It is posited that the phrase preceding articles should start with Art. 1469
which provides ascertainable of price with reference to another thing
certain, or a specified formula, etc., up to Art. 1473, which prohibits the
fixing of the price by any of the parties. (Art. 1469-1473)

Within the coverage of the preceding articles is Art. 1471 which covers
the situation when the price is completely simulated and therefore gives rise
to a void contract of sale, although it may still be saved as a donation where
the consideration is shown to be pure liberality.

It also covers Art. 1473 where the formula for the fixing of the price is left
to the discretion of a party, which makes the contract entirely void. Under
such scenario, the proposition of ejusdem generis to qualify Art. 1474 only to
situations where the price is certain or ascertainable would be totally
inapplicable.

Preceding Articles cannot be interpreted to cover only Art. 1469 (price is
fixed in reference to another thing certain or left to a third-partys
determination) and 1472 (price of securities, grain, liquids based on a trading
price) especially when: (a) Art. 1469 and 1472 are not even consecutive
articles and the non-joinder of the articles in-between is wholly arbitrary;
and (b) the position does not seem to be supported by the immediately
subsequent term or in any other manner by which price cannot be
ascertained, which clearly implies the non-exclusivity of the provision only
to sales of contract which are valid but rendered inefficacious.

ii. What does Art. 1474 mean by Inefficacious?
Article 1474 uses the word inefficacious rather than void, because
within the coverage of preceding articles are Articles 1469 and 1472,
which provides for sales which are not void because the price, though not
certain, is ascertainable.

Inefficacious means the inability to produce the effect wanted; inability
to get things done.

The use of the word inefficacious does not exclude void sale contracts
when the price is neither certain or ascertainable. In other words, the use of
the term inefficacious was not meant to exclude void sales, but more to be
able to include valid conditional contracts of sale (which have become
inefficacious) in the same group as void contracts, from the focal point of
price.

iii. Concept of Appropriation; Summation
Article 1474 is a new provision in the CC, not under the Old CC.

The case-law basis of Article 1474 is attributed to Robles v. Lizragge Hermanos,
which established the appropriation doctrine under Art. 1474 founded on
the principles of unjust enrichment and estoppels, thus:
as the defendant partially frustrated the appraisal, it violated a term of the
contract and made itself liable for the true value of the things contracted
about, as such value may be established in the usual course of proof.
Furthermore, it must occur to any one, as the trial judge pointed out, that an
unjust enrichment of the defendant [buyer] would result from allowing it to
appropriate the movables without compensating the plaintiff thereof.

There are two important points that can be drawn from the foregoing, thus:
(a) The doctrine is based on the principle of unjust enrichment directed
against the buyer who is not allowed to retain the subject matter of sale
without being liable to pay the price even when no such agreement on
the price was previously made; and
(b) The doctrine applies even when there is a no contract situation
because of no meeting of the minds as to the price, although there was
a meeting of the minds as to the subject matter, and may also apply to void
sale situation where the defect is as to the price.

Art. 1474 actually meant to cover all sale contract situations where there
must have been at least a meeting of the minds or an agreement to buy and
sell the subject matter, which is coupled with tradition; and that it is meant
to be a remedy clause in favor of the seller who has delivered the subject
matter in accordance with an agreement (though it may not be a full
contract yet) with the buyer who has received it and appropriated it.

Suppose the seller does wish to take advantage of the remedy, and seeks to recover the
subject matter?
Not possible if the subject matter has already been appropriated, especially
when the buyer had already incurred expenses, and also because it would
violate the essential characteristic of binding effect of every contract,
including contract of sale.

Article 1474 uses the twin concept of delivery and appropriation, it
seems to say that it would not apply to a situation where there has only been
delivery but no appropriation, because undoing of the contract and the
return of the subject matter of the seller would not present unjust
enrichment to either party.

The use of the word appropriate under Art. 1474 is meant to cover the
situation of acceptance by the buyer as the counterpart of delivery on the
part of the seller, and having treated thereafter the subject matter as his own,
even when it does not involve transformation.

At that point a valid contract of sale is deemed to have come into being,
and consequently, the binding effect of the contract is deemed to have
kicked-in; and even if the subject matter has remained the same, the return is
not legally possible, as it would amount to unilateral withdrawal from the
binding effect of the contract. (Of course, if both buyer and seller agree to
the return, that would be valid since it would constitute mutual withdrawal
which is one of the modes of extinguishment of a valid contract).

The gravamen of Art. 1474 would mean that in spite of the lack of
agreement as to price or defect in the agreement as to price, there would
nevertheless be a valid contract of sale upon which an action for specific
performance would prosper for the recovery of the price when the
following elements are present:
(a) There was a meeting of the minds of the parties of sale and purchase as
to the subject matter;
(b) There was an agreement that price would be paid which fails to meet
the criteria of being or ascertainable; and
(c) There was delivery by the seller and appropriation by the buyer of the
subject matter of the sale.

Article 1474 is not applicable to real estate and that the rights of the
parties to a purported sale would be under the principles applicable to
builders in good faith.

Rulings on Receipt and Other Documents Embodying Price

El Oro Engravers v. CA Court held that sales invoices are not evidence of
payment since they are only evidence of the receipt of the goods; and that
the best evidence to prove payment of the price is the official receipt issued
by the seller.

Leabres v. CA where the buyer sought to enforce his purchase of a parcel
of land based primarily on a receipt signed by the seller acknowledging the
sum of Php 1,000.00. Basing its ruling on the language of the receipt, the
Court held:
An examination of the receipt reveals that the same can neither be regarded
as a contract of sale or a promise to sell. There was merely an
acknowledgement of the sum of One Thousand Pesos (Php 1,000.00). There
was no agreement as to the total purchase price of the land nor to the
monthly instalment to be paid by the [buyer]. The requisites of a valid
Contract of Sale namely (1) consent or meeting of the minds of the parties;
(2) determinate subject matter; (3) price certain in money or its equivalent
are lacking in said receipt and therefore the sale is not valid nor
enforceable.

Toyota Shaw, Inc. v. CA a written agreement was entered into between the
prospective buyer of a vehicle and the sales representative of the car dealer,
which provided and acknowledged a downpayment of Php 100,000.00 on a
Toyota pick-up, with an understanding on a separate subsequent instrument
that the balance would be financed through a financing company. The Court
held that there was never any perfected contract between the parties under
the agreement that only provided for a downpayment of Php 100,000.00,
but did not indicate the total purchase price nor the manner by which the
balance shall be paid.

Lim v. CA it was held that when there is nothing in the receipt to indicate
that the Php 20,000.00 earnest money was part of the purchase price,
much less was there showing of a perfected sale between the parties nor any
indication that the buyer was bound to pay any balance of purchase price,
then the only conclusion that could be made was that there was no sale.

Coronel v. CA The seller executed a Receipt of Down Payment in favor
of the buyer acknowledging the receipt therein of the downpayment as
purchase price of the property described therein, and indicating the balance
of the purchase price, with specific obligation to transfer the title upon full
payment of the balance. The court held that there was a perfected sale, there
being no reservation of any title until full payment of the purchase price. =
Consisted with the doctrine that sale being governed by the Statute of
Frauds, requires that the memorandum that would evidence the contract
should contain all the essential requisites of the subject matter and price.

Cheng v. Genato the receipt signed by the seller acknowledging receipt of the
sum of Php 50,000.00 as partial payment for the real property described
by titles in the receipt, did not provide further stipulations as to the full
contract price or the manner of payment thereof. The Court ruled that there
was neither a valid nor enforceable sale since the requisites of a valid
contract of sale are lacking in said receipt.

If one were to consider that a sale is a consensual contract and if upon the
meeting of the minds of the parties all the essential requisites are present,
then generally it does not matter if the written evidence issued pursuant
thereto (be it an agreement or a receipt) does not contain all of the
requisites, then a valid contract of sale should nevertheless exist and the only
issue would be its enforceability under the Statute of Frauds (SoFs). The fact
of having received part of the purchase price would therefore have placed
the contract outside of the coverage of the SoFs as partially executed
contract and therefore parol evidence presented to prove the other elements
of the Contract of Sale would have been the order of the day.

David v. Tiongson the court clarified that the sale of real property on
instalments even when the receipt or memorandum evidencing the same
does not provide for the stated instalments, when there has already has been
partial payment, the SoFs is not applicable because it only applies to
executory and not to completed, executed, or partially executed
contracts.

Inadequacy of Price
Under Art. 1355 of the CC, which governs contracts in general, and except in cases
specified by law, it is provided that lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake, or undue influence. Specifically, Art.
1470 on the contracts of sale, provides that gross inadequacy of price does not affect a
contract of sale, except as it may indicate a defect in the consent, or that the parties
really intended a donation or some other act or contract.

Bautista v. CA mere inadequacy of the price does not affect the validity of the sale
when both parties are in a position to form an independent judgement concerning the
transaction, unless fraud, mistake or undue influence indicative of a defect in consent is
present.

Although sale is an onerous contract and commutative contract, there is no requirement
that the price given should be exactly the value of the subject matter delivered. As
discussed previously, the characteristics that the contract of sale is onerous is met
whenever the consideration is valuable consideration; and the test for its
commutativeness is met when parties believe honestly that they received good value
for what they have given up in exchange.

Tayengco v. CA inadequacy of price may be ground for setting aside an execution sale,
but it is not sufficient ground for the cancellation of a voluntary contract of sale which
is otherwise free from invalidating defects such as vitiated consent, even if shocking to
the conscience.

Contracts are valid even though one of the parties entered into it against his own wish
and desire, or even against his better judgement.
(1) Distinguished from Simulated Price
Bravo-Guerrero v. Bravo has held that simulation of contract and gross
inadequacy of price are distinct legal concepts, with different effects, and that
the concept of a simulated sale is incompatible with inadequacy of price, thus:
When the parties to an alleged contract do not really intend to be bound by it,
the contract is simulated and void. A fictitious contract has no legal effect
whatsoever because there is no real agreement between the parties Gross
inadequacy of price by itself will not result in a void contract, and it does not
even affect the validity of a contract of sale, unless it signifies a defect in the
consent or that the parties actually intended a donation or some other
contract.

(2) Rescissible Contract of Sale
Inadequacy of price is a ground for rescission of conventional sale in case of
rescissible contracts covered under Art. 1381 of the CC, namely:

(a) Those entered into by guardians whenever the ward whom they represent
suffer lesion by more than one-fourth (1/4) of the value of the object of
the sale; and
(b) Those agreed upon in representation of absentees, if the latter should
suffer lesion by more than one-fourth (1/4) of the value of the object of
the sale.

(3) Judicial Sale
Gross inadequacy of price may avoid judicial sale of real property. The
difference in ruling for judicial sale is because the contract of sale is not the
result of negotiations and bargaining; in fact, the property of the supposed
seller would be sold at public auction without his intervention. In such a case,
the courts must be allowed to come in to protect the supposed seller from bad
bargain that is really not of his own doing.

Judicial sale is best set aside on the ground of inadequacy of price, the
inadequacy must be such as to be shocking to the conscience of man. In
addition, there must be showing that, in the event of a resale, a better price can
be obtained.

Judicial sale will not be set aside by the court when there is a right of
redemption, since the more inadequate the winning bid at public sale, the more
easily it is for the owner to redeem the property. In such case, the proper
remedy is not rescission, but to exercise the right of redemption.

(4) Sales with Right of Repurchase
In a conventional sale with a right to repurchase feature, the gross inadequacy
of price rises a presumption of equitable mortgage. The proper remedy of
the alleged seller, who is actually an equitable mortgagor, is not to rescind the
contract of sale, but to have it reformed or declared a mortgage contract, and
to pay off the indebtedness which is secured. On the other hand, the remedy
of the alleged buyer would not be appropriate the subject matter as a buyer for
that would be pactum commissorium, but to foreclose on the quitable mortgage.

When Motive Nullifies Sale
In a contract of sale, consideration is, as a rule, different from the motive of the parties
and when the primary motive is illegal, such as when the sale was executed over a parcel
of land illegally frustrate a persons right to inheritance and to avoid payment of estate
tax, the sale is void because illegal motive predetermined the purpose of the contract.

Uy v. CA distinguished cause which is the essential reason which moves the
contracting parties to enter into it, and is the immediate, direct, and proximate reason
which justifies the creation of an obligation through the will of the contracting parties,
from motive, which is the particular reason of a contracting party which does not affect
the other party.

the court observed that the cause of the vendor in entering into the contract is to obtain
the price, while that for the vendee is the acquisition of the land. The motive of the
vendor (NHA), on the other hand, is to use the said lands for housing. The courst ruled:
Ordinarily, a partys motive for entering into the contract do not affect the contract.
However, when the motive predetermines the cause, the motive may be regarded as the
cause. Xxx The realization of the mistake as regards the quality of the land resulted the
negation of the motive/cause thus rendering the contract inexistent, under Art. 1318 of
the CC defining the essential requisites of contracts.

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