CHAPTER 4
void and inexistent, as there was no consideration for the
PRICE AND OTHER CONSIDERATION
What is 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 debit of the buyer and agreed
to by him. 1
REQUISITES FOR VALID PRICE
(a) It must be REAL; 2
(b) It must be in MONEY OR ITS EQUIVALENT, (i.e., it must
be VALUABLE CONSIDERATION);3
(c) It must be CERTAIN or ASCERTAINABLE. 4
1. Price must be real
a. When Price is Real
Price is real when at the perfection of the sale,
there is 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.
b. 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,5 although the act may be
shown to have been in reality a donation, or some other
contract.6
c. When Price is False
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.7
d. Meeting of the Minds as to Price
In Mapalo v. Mapalo,8 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. Although the deed of sale stated a
consideration of P500.00, no such consideration was paid.
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 that states a false consideration is one
that has in effect a real consideration but the same is not the
one stated in the document.
e. Effect of Non-Payment of Price
The failure to pay the price or the balance thereof
does not render the sale inexistent or invalid, but merely gives
rise to a right in favor of the seller to either demand specific
performance or rescission of the contract of sale. 9
f. Accommodation Does Not Make Sale Void for Lack
of Price
Yu Bun Guan v. Ong,10 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.
g. Simulation of Price Affects Delivery of Subject
Matter
When a contract of sale is fictitious, and therefore
same, no title over the subject matter of the sale can be
conveyed.
Nemo potest nisi quod de jure potest no man can
do anything except what he can do lawfully. 11
2. Price Must Be in Money or Its Equivalent:
Valuable Consideration
Article 1458 of the Civil Code, in defi ning the
obligation of the buyer, provides that he must pay the price
certain in money or its equivalent.
Nevertheless, even Article 1468 of the Civil Code
recognizes that if the consideration of the 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 of sale can be the price and other additional
consideration.
a. Adequacy of Price to Make It Real; Concept of
Valuable Consideration
In the case of Ong v. Ong,12 considered the validity
of a sale of real property where the consideration stated in the
deed was One Peso (P 1.00) and the other valuable
considerations.
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 or
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.
3. Price must be certain or ascertainable at
perfection
Price is CERTAIN when it has been expressed
and agreed in terms of specific pesos and/or
centavos
Price is ASCERTAINABLE when it is
sufficient that I be so with reference to another
thing certain, or that the determination thereof is
left to the judgment of a specified person/s
a. 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.
Two (2) instances where the parties to the contract
can seek court remedy to fix the price:
a. When the third party fixes the price in bad faith;
or
b. When the third party fixes the price by mistake.
If the third party is either unable or unwilling to fix
the price, the contract of sale is inefficacious.
When the third party is prevented from fixing the
price by fault of either seller or buyer, the party not
at fault may demand from court for the fixing of
price.
b. Fixing of subject matter by Third Party
The designation of a third party to choose among the subject
matter is NOT ALLOWED. This would not give rise to a
binding and valid sale.
c. Price ascertainable in reference to other things
certain
 The price of securities, grain, liquids, and other
things shall be considered certain when:
a. the price fixed is that which thing would have on
a definite day;
b. the price fixed is that which thing would have in
a particular exchange or market; or
c. fixed above or below the price on such a day or in
such exchange or market.
d. Effect of Unascertainability
When the price cannot be determined in
accordance with any of the preceding rules, or in
any other manner, the contract is inefficacious.
The law does not use the term void because there
is existence of the formula allowed by law at the
point of perfection which rendered a contract valid
but conditional.
4. Manner of payment of price must be agreed upon
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.
However, if the manner of payment is discussed
after acceptance, it is not binding and enforceable
since there is no complete meeting of the minds.
Although there is downpayment but the manner of
payment was not agreed upon, there is still no valid
sale.
Proper understanding of Doctrine on Agreement on
Terms of Payment of Price
Meeting of the minds of the parties on the terms of
payment of the price does not always have to be
expressly agreed when the law supplies by default
such terms.
In the absence of any stipulation or agreement on
the term of payment, 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 is 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.
This is where the thing or any part thereof has been
delivered to and appropriated by the buyer.
Preceding Articles as stated in Article 1474
These refer to Articles 1469 to 1473 which provide
ascertainable of price and prohibition of any of the
parties.
Inefficacious as stated in Article 1474
Inability to produce the effect wanted; inability
to get things done
Inefficacious and Appropriation
Art. 1474 of the New Civil Code provides: 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
reasonable price therefore. What is reasonable price is a
question of fact dependent on the circumstances of each
particular case.
Article 1474 uses the word inefficacious rather
than void, because within the coverage of preceding
articles are Articles 1469 and 1972, which provide for sales
which are not void because the price, though not certain, is
ascertainable.
The use of term inefficacious was not meant to
exclude void sale, but more to be able to include valid
conditional contracts of sale (which have become
inefficacious) in the same group as void contracts, for the focal
point of price.
Even before the fixing of price by designated party,
there was already an existing contract of sale. However, such
contract was a contract subject to a suspensive condition, i.e.,
that the price will be fixed by the designated third party.
If condition imposed on the contract of sale has not
happened, and its non-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 case, the law declares the contract of sale
inefficacious.
In spite of lack of an 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.
In order to recover the price the following elements
should be present:
a.) There was a meeting of 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 certain
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 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.
Concept of Appropriation
The case-law basis of Article 1474 is attributed to
Robles V. Lizarraga Hermanos,1 which established the
appropriation doctrine under Art. 1474 founded on the
principles of unjust enrichment and estoppel.
As the defendant partially frustrated the appraisal, it
violated a term of the contract and made itself liable for the
true value of the thing 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 therefor.
There are two important points that can be drawn from the
foregoing, thus:
1. The doctrine is based on the Principle of Unjust
Enrichment directed against the buyer who is not
allowed to retain the subject matter of the sale
without being liable to pay the price even when no
such agreement on the price was previously made,
and;
2. 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 minds as to subject matter, and may also apply to
void sale contract situation where the defect is as to
price2
Essential elements of accion in rem verso
(1) that the defendant has been enriched,
(2) that the plaintiff has suffered a loss,
(3) that the enrichment of the defendant is without
just or legal ground, and
(4) that the plaintiff has no other action based on
contract, quasi-contract, crime or quasi-delict.
The general rule in a contract of sale is that consideration is
different from the motive.
Cause V. Motive
Cause is the essential reason which moves the contracting
parties to enter into it, and si the immediate, direct and
proximate reason which justifies the creation of an obligation
thought the will of the contracting parties.
Motive is the particular reason of a contracting party which
does not affect the other party.

The sale is void if the illegal motive predetermined the

Inadequacy of price
Art. 1470 provides specifically for contract of sale,
that gross inadequacy of price does not affect the contract of
sale, except as it may indicate a defect in consent , or the
parties really intended a donation or some other act or
contract.
There is a Gross Inadequacy in Price if a reasonable
man will not agree to dispose of his property at that amount.
Thus, it has been held in Tayengco v. CA (15 SCRA
306, 1965), that inadequacy of price may be a ground for
setting aside an execution sale, but it is not sufficient ground
for cancellation of voluntary contract of sale which is
otherwise free from invalidating defects such as vitiated
consent, even if shocking to conscience.
As a matter of fact, even where the contract itself
expressly states that the consideration for the sale of a piece
of land is only one peso (P1.00), it does not follow that the
contract or sale is void or inexistent for lack of cause or
consideration. The reason is obvious. There is consideration.
The contract may be voidable because of inadequacy of cause
or consideration, but certainly, it is not void or inexistent.
(Jurado, Comments & Jurisprudence on Obligations and
Contracts, 2010ed. at P.473)
Simulation of Contract V. Gross Inadequacy of Price
Simulation of Contract has no real agreement
between the parties, hence VOID
Gross Inadequacy of Price does not affect the
validity of contract, unless it signifies a defect in the consent
purpose of the contract
In Uy v. CA (G.R. No. 120465. September 9, 1999), which
covered a contract of sale of a piece of land, 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 said lands for housing. The court ruled: Ordinarily.
The partys motive for entering into the contract do not affect
the contract. However, when the motive predetermined the
cause , the motive may be regarded as the cause. xxxxxx That
NHA would not have entered into the contract were the lands
not suitable for housing. In other words, the quality of the
land was an implied condition for the NHA to enter into the
contract. On the part of the NHA, therefore, the motive was
the cause for its being a party to the sale. The realization of the
mistake as regards the quality of the land resulted in the
negation of the motive/cause thus rendering the contract
inexistent.
GROUP 2.
Danica Aguirre
Charmaine Maghirang
Kenneth Arroyo

Inadequacy of price Sales (T. 0730-90930) - Atty. Bundac

Is a ground for rescission of conventional sale in case of

rescissible contracts covered under Art. 1381 of the New
Civil Code, namely:
Those entered into by guardians whenever the ward
whom they represent suffer lesion by more than
one-fourth of the value of the object of the sale; and
Those agreed upon in representation of absentees,
if the latter should suffer lesion by more than one-
fourth of the value of the object of the sale.
It 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 and the court must be allowed to come into
protect the supposed seller from a bad bargain that is
really not of his own doing.
Even if there is an inadequacy of price, a judicial
sale will not be set aside by the court when there is
right of redemption.
It raises a presumption of equitable mortgage.

The proper remedy of the alleged seller 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 alleged buyer would

not to appropriate the subject matter as a buyer for that
would be partum commissorium, but to foreclose on the
equitable mortgage.

WHEN MOTIVE NULLIFIES SALE