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CHAPTER 4 When a contract of sale is fictitious, and therefore

void and inexistent, as there was no consideration for the


PRICE AND OTHER CONSIDERATION same, no title over the subject matter of the sale can be
conveyed.

Nemo potest nisi quod de jure potest no man can


What is Price? do anything except what he can do lawfully. 11
Price signifies the sum stipulated as the equivalent of the 2. Price Must Be in Money or Its Equivalent:
thing sold and also every incident taken into consideration for Valuable Consideration
the fixing of the price put to the debit of the buyer and agreed
to by him. 1 Article 1458 of the Civil Code, in defi ning the
obligation of the buyer, provides that he must pay the price
REQUISITES FOR VALID PRICE certain in money or its equivalent.
(a) It must be REAL; 2 Nevertheless, even Article 1468 of the Civil Code
recognizes that if the consideration of the contract consists
(b) It must be in MONEY OR ITS EQUIVALENT, (i.e., it must
partly in money, and partly in another thing, the transaction
be VALUABLE CONSIDERATION);3
can still be considered a contract of sale when this is the
(c) It must be CERTAIN or ASCERTAINABLE. 4 manifest intention of the parties.

1. Price must be real This shows that the consideration for a valid
contract of sale can be the price and other additional
a. When Price is Real consideration.

Price is real when at the perfection of the sale, a. Adequacy of Price to Make It Real; Concept of
there is legal intention on the part of the buyer to pay the Valuable Consideration
price, and legal expectation on the part of the seller to receive
such price as the value of the subject matter he obligates In the case of Ong v. Ong,12 considered the validity
himself to deliver. of a sale of real property where the consideration stated in the
deed was One Peso (P 1.00) and the other valuable
b. When Price is Simulated considerations.

When the price is simulated because neither party The essence of the Ong ruling is that in our
to the Deed of Sale had any intention whatsoever that the jurisdiction, it is possible for parties to a sale to agree on an
amount will be paid, the sale is void,5 although the act may be adequate consideration, and though they will state a false or
shown to have been in reality a donation, or some other nominal consideration in their covering deed, it would not
contract.6 affect the validity of the contract of sale, provided that
valuable consideration was in fact agreed upon.
c. When Price is False
3. Price must be certain or ascertainable at
If the price indicated in the covering instrument is perfection
false, the contract of sale is valid, but the underlying deed is
subject to reformation to indicate the real price upon which Price is CERTAIN when it has been expressed
the minds of the parties have met.7 and agreed in terms of specific pesos and/or
centavos
d. Meeting of the Minds as to Price
Price is ASCERTAINABLE when it is
In Mapalo v. Mapalo,8 the spouses Mapalo, who sufficient that I be so with reference to another
were simple illiterate farmers, were made to sign a deed of sale thing certain, or that the determination thereof is
over their registered land although they were told that they left to the judgment of a specified person/s
were signing a donation for the eastern half of said property
in favor of the brother. Although the deed of sale stated a a. Price fixed by Third Party
consideration of P500.00, no such consideration was paid.
The designation of a third party to fix the price is
The Court differentiated between a contract that valid, and such designation by itself makes the price
had no consideration from one which merely contained a false ascertainable as to give rise to a valid contract of
consideration. It ruled that according to Manresa, what is sale.
meant by a contract that states a false consideration is one
that has in effect a real consideration but the same is not the Two (2) instances where the parties to the contract
one stated in the document. can seek court remedy to fix the price:

e. Effect of Non-Payment of Price a. When the third party fixes the price in bad faith;
or
The failure to pay the price or the balance thereof
does not render the sale inexistent or invalid, but merely gives b. When the third party fixes the price by mistake.
rise to a right in favor of the seller to either demand specific
If the third party is either unable or unwilling to fix
performance or rescission of the contract of sale. 9
the price, the contract of sale is inefficacious.
f. Accommodation Does Not Make Sale Void for Lack
When the third party is prevented from fixing the
of Price
price by fault of either seller or buyer, the party not
Yu Bun Guan v. Ong,10 held that when the Deed of at fault may demand from court for the fixing of
Sale was executed merely to facilitate the transfer of the price.
property to the buyer pursuant to an agreement to enable the
b. Fixing of subject matter by Third Party
buyer to construct a commercial building and to sell the
property to the children, but that in truth the agreement was The designation of a third party to choose among the subject
a mere subterfuge on the part of the buyer, the agreement matter is NOT ALLOWED. This would not give rise to a
cannot be taken as a consideration for the sale which the Court binding and valid sale.
held to be void.
c. Price ascertainable in reference to other things
g. Simulation of Price Affects Delivery of Subject certain
Matter
The price of securities, grain, liquids, and other Article 1474 uses the word inefficacious rather
things shall be considered certain when: than void, because within the coverage of preceding
articles are Articles 1469 and 1972, which provide for sales
a. the price fixed is that which thing would have on which are not void because the price, though not certain, is
a definite day; ascertainable.
b. the price fixed is that which thing would have in The use of term inefficacious was not meant to
a particular exchange or market; or exclude void sale, but more to be able to include valid
conditional contracts of sale (which have become
c. fixed above or below the price on such a day or in inefficacious) in the same group as void contracts, for the focal
such exchange or market. point of price.
d. Effect of Unascertainability Even before the fixing of price by designated party,
there was already an existing contract of sale. However, such
When the price cannot be determined in
contract was a contract subject to a suspensive condition, i.e.,
accordance with any of the preceding rules, or in
that the price will be fixed by the designated third party.
any other manner, the contract is inefficacious.
If condition imposed on the contract of sale has not
The law does not use the term void because there
happened, and its non-happening extinguished the
is existence of the formula allowed by law at the
underlying contract; consequently, there is no longer a
point of perfection which rendered a contract valid
contract upon which the courts have any jurisdiction to fix the
but conditional.
price. In such case, the law declares the contract of sale
4. Manner of payment of price must be agreed upon inefficacious.

Parties must include the terms or manner of In spite of lack of an agreement as to price or defect
payment of the price, the same is deemed to be an in the agreement as to price, there would nevertheless be a
essential ingredient before a valid and binding valid contract of sale upon which an action for specific
contract of sale can be said to exist, since it is part performance would prosper for the recovery of the price.
of the prestation of the contract.
In order to recover the price the following elements
However, if the manner of payment is discussed should be present:
after acceptance, it is not binding and enforceable
a.) There was a meeting of minds of the parties of
since there is no complete meeting of the minds.
sale and purchase as to the subject matter;
Although there is downpayment but the manner of
b.) There was an agreement that price would be
payment was not agreed upon, there is still no valid
paid which fails to meet the criteria of being certain
sale.
or ascertainable; and
Proper understanding of Doctrine on Agreement on
c.) There was delivery by the seller and
Terms of Payment of Price
appropriation by the buyer, of the subject matter of
Meeting of the minds of the parties on the terms of the sale.
payment of the price does not always have to be
Article 1474 is meant to cover the situation of
expressly agreed when the law supplies by default
acceptance by the buyer as the counterpart of delivery on the
such terms.
part of the seller, and having treated thereafter the subject
In the absence of any stipulation or agreement on matter as his own, even when it does not involve
the term of payment, the price is deemed to be by transformation. At that point a valid contract of sale is deemed
operation of law immediately demandable upon the to have come into being, and consequently, the binding
perfection of the contract. effect of the contract is deemed to have kicked in.

5. When there is sale even when no price has been Concept of Appropriation
agreed upon
The case-law basis of Article 1474 is attributed to
Article 1474 is the only exception where there would Robles V. Lizarraga Hermanos,1 which established the
still be a valid sale even when there has been no appropriation doctrine under Art. 1474 founded on the
meeting of the minds as to the price or any other principles of unjust enrichment and estoppel.
consideration.
As the defendant partially frustrated the appraisal, it
This is where the thing or any part thereof has been violated a term of the contract and made itself liable for the
delivered to and appropriated by the buyer. true value of the thing contracted about, as such value may
be established in the usual course of proof. Furthermore, it
Preceding Articles as stated in Article 1474 must occur to any one, as the trial judge pointed out, that an
unjust enrichment of the defendant (buyer) would result
These refer to Articles 1469 to 1473 which provide from allowing it to appropriate the movables without
ascertainable of price and prohibition of any of the compensating the plaintiff therefor.
parties.
There are two important points that can be drawn from the
Inefficacious as stated in Article 1474 foregoing, thus:

Inability to produce the effect wanted; inability 1. The doctrine is based on the Principle of Unjust
to get things done Enrichment directed against the buyer who is not
allowed to retain the subject matter of the sale
Inefficacious and Appropriation without being liable to pay the price even when no
such agreement on the price was previously made,
Art. 1474 of the New Civil Code provides: Where
and;
the price cannot be determined in accordance with the
preceding articles, or in any other manner, the contract is 2. The doctrine applies even when there is a no
inefficacious. However, if the thing or any part thereof has contract situation because of no meeting of the
been delivered to and appropriated by the buyer, he must pay minds as to the price, although there was a meeting
reasonable price therefore. What is reasonable price is a of minds as to subject matter, and may also apply to
question of fact dependent on the circumstances of each void sale contract situation where the defect is as to
particular case. price2
Essential elements of accion in rem verso The general rule in a contract of sale is that consideration is
different from the motive.
(1) that the defendant has been enriched,
Cause V. Motive
(2) that the plaintiff has suffered a loss,
Cause is the essential reason which moves the contracting
(3) that the enrichment of the defendant is without parties to enter into it, and si the immediate, direct and
just or legal ground, and proximate reason which justifies the creation of an obligation
thought the will of the contracting parties.
(4) that the plaintiff has no other action based on
contract, quasi-contract, crime or quasi-delict. 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 purpose of the contract
Art. 1470 provides specifically for contract of sale, In Uy v. CA (G.R. No. 120465. September 9, 1999), which
that gross inadequacy of price does not affect the contract of covered a contract of sale of a piece of land, the Court observed
sale, except as it may indicate a defect in consent , or the that the cause of the vendor in entering into the contract is to
parties really intended a donation or some other act or obtain the price, while that for the vendee is the acquisition of
contract. the land. The motive of the vendor (NHA), on the other hand,
is to use said lands for housing. The court ruled: Ordinarily.
There is a Gross Inadequacy in Price if a reasonable
The partys motive for entering into the contract do not affect
man will not agree to dispose of his property at that amount.
the contract. However, when the motive predetermined the
Thus, it has been held in Tayengco v. CA (15 SCRA cause , the motive may be regarded as the cause. xxxxxx That
306, 1965), that inadequacy of price may be a ground for NHA would not have entered into the contract were the lands
setting aside an execution sale, but it is not sufficient ground not suitable for housing. In other words, the quality of the
for cancellation of voluntary contract of sale which is land was an implied condition for the NHA to enter into the
otherwise free from invalidating defects such as vitiated contract. On the part of the NHA, therefore, the motive was
consent, even if shocking to conscience. 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
As a matter of fact, even where the contract itself negation of the motive/cause thus rendering the contract
expressly states that the consideration for the sale of a piece inexistent.
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) GROUP 2.
Simulation of Contract V. Gross Inadequacy of Price Danica Aguirre
Simulation of Contract has no real agreement Charmaine Maghirang
between the parties, hence VOID
Kenneth Arroyo
Gross Inadequacy of Price does not affect the
validity of contract, unless it signifies a defect in the consent

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