PRICE AND OTHER CONSIDERATIONS

Bitor. Dulay. Mendoza. Navarro

Consideration
• PRICE – ideal consideration of a contract of sale
• Consideration can take different forms
• The obligation to pay the price does not play a critical role in
defining a sale provided that valuable consideration is present
because the obligation to transfer ownership and deliver
possession of the subject matter is the more defining element of a
sale
PRICE
• The sum stipulated as the quivalent of the thing sold and every incident
taking into consideration for the fixing of the price put to the debit of
the buyer and agreed to by him

• REQUISITES OF A VALID PRICE:

▫ Real
▫ Must be in money or its equivalent
▫ Ascertainable or certain

*NOTE: The abovementioned requisites are for the purpose of preserving

the integrity and enforceability of the underlying obligation of the buyer to
pay
The price must be REAL
When price is REAL
Legal intention on the part of the buyer: payment of price
 Legal expectation on the part of the seller: receipt of such price as the
value of the subject matter he obligates himself to deliver

When price is SIMULATED

 Neither party intended to pay the stipulated amount – VOID SALE
• Absolute simulation
o There is a colorable contract but without substance because the
parties had no intention to be bound by it
o Parties may recover what they may have given

• Principle of in pari delicto

o Denies all recovery to the guilty parties inter se
o Such applies where the nullity arises from the illegality of the
consideration or the purpose of the contract
o DOES NOT APPLY to void or inexistent contracts where the price
is merely simulated
When price is FALSE
 There is a real price upon which the parties had already agreed
upon, but not declared, and what is states in the covering deed is
not the one intended to be paid
 VALID CONTRACT OF SALE (subject to reformation to indicate
the real price upon which the minds of the parties have met)

Meeting of Minds as to Price

 Mapalo v. Mapalo – difference of a contract that had no
consideration from one which contained a false consideration
 Contract that states a false consideration – one that has in effect a
real consideration but the same is not the one stated in the
document
Effect of Non-Payment of Price
 The sale is not cancelled because there is still an existing consideration
 Gives rise in favor of the seller to either:
a. Demand specific performance
b. Recission
 The sale is void and produces no effect where the price which appears
as paid has in fact never been paid (Vda. De Catindig v. Heirs of
Catalina Roque)

Accomodation Does Not Make Sale Void for Lack of Price

 There is still a valid sale even when fraud may have been the intention
of the party accomodated; fraud is not an efficient cause to render a
contract void but VOIDABLE by reason of vice (Mate v. CA)
 Even when the stipulated price is relatively simulated, the underlying
sale would still be valid and enforceable provided that there is another
consideration to support the sale
Simulation of Price Affects Delivery of Subject Matter
When a contract of sale iss fictitious, no title of the subject matter
of the sale may be conveyed.
Nemo potest nisi quod de jure potest – No man can do anything
except what he can do lawfully
 Lack of consideration does not transfer ownership to the buyer
Price must be in MONEY or ITS EQUIVALENT
• Art 1548 requires that ‘equivalent’ be something representative of
money
• If consideration is partly in money and partly in another thing –
can still be considered a contract of sale when such is the manifest
intention of the parties
• SIGNIFICANCE: for the law to demonstrate the ideal example of
the onerous nature of sales
Adequacy of Price to Make It “Real”;
Concept of “Valuable Consideration”
 It is possible for the parties to a sale to agree on an adequate
consideration, and though they will state a false of nominal
consideration in their covering deed, it would not affect the
validity of the contract of sale, provided valuable consideration
was agreed upon (Ong v. Ong)
Price Must Be ASCERTAINABLE or CERTAIN
• Price is CERTAIN – when expressed and agreed in terms of
specific persons and/or centavos; which affirms the proposition
that money represents the best model for valuable consideration
• Art. 1469 – In order that a 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
Price Fixed by Third Pary
 Valid, and such designation makes the price ascertainable
 Fixing of the price cannot be validly left to the will of either party as it
violates the rules on mutuality and obligatory force of contracts
 Even before the fixing of price by the third party, the contract of sale is
already perfected and existing, although conditional.
 Instances when parties can seek court remedy to fix the price:
a. Third party fixes the price in bad faith; or
b. By mistake
If third party is unable or unwilling to fix the price – INEFFICACIOUS
CONTRACT; no cause of action to seek from the court the fixing of price
 If third party is prevented by seller or buyer from fixing the price, the
party not at fault may have such remedies against the other (may demand
from courts)
Fixing of Subject Matter by Third Party
 NOT ALLOWED; would not give rise to a valid and binding sale,
and would authorize any of the parties to withdraw from the
arragement
 Cannot be left to the will of the third person who may choose a
subject matter beyond the capacity of the seller to comply with his
obligation

Price Ascertainable in Reference to Other Things Certain

 Price of securities, grain, liquids and other things is considered
certain when the price fixed is that which the thing would have on
a definite day, in a particular exchange in the market, whn the
amount is fixed above or below the price on such day
Effect of “Unascertainability” of Price
 Where the price cannot be determined in accordance with any of
the preceding rules, the contract of sale is INEFFICACIOUS
 NOT 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 valit, albeit conditional
Manner of Payment of Price Must Be Agreed Upon
• An essential ingredient before a valid and binding contract may
exist since it is part of the prestation of the contract
• A disagreement in the manner of payment is tantamount to a
failure to agree on the price, and no contract of sale is deemed to
have been perfected
Proper Understanding of Doctrine on Agreement on Terms of
Payment
 May not always be expressly agreed, when the law supplies by
default
 Art. 1179 – 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
Instances When There is a Sale Even When There is
No Price Agreed Upon
• Art. 1474 – gives the only exception to the rule that 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
What does Art 1474 mean by the term “Preceding Articles”
 Starting from Art. 1469

Meaning of Inefficacious
 Inability to produce the effect wanted; in ability to get things
done
 Does not mean to exclude void sales, but more to be able to
include valid conditional contracts of sale in the same group as
void contracts
Concept of Appropriation
 Doctrine of Appropriation (Robles v. Lizarraga Hermanos) – basis of
Art. 1474
 Two key points:
a. Based on the principle of unjust enrichment directed against the
buyer who is not allowed to retain the subject matter of a sale wthout
being liable to pay the price even when no scuh agreement on the price
was previously made
b. Applies even when there is a “no contract” situation because no
meeting of the minds as to the price, although there was a meeting of the
minds on the subject matter and may also apply to void sale contract
situation where the defect is as to the price
 Covers all sale contract situations where there is at least a meeting of
the minds or an agreement to buy and sell the subject matter which is
coupled with a tradition
INADEQUACY OF PRICE
• Lesion or inadequacy of cause shall not invalidate a contract (Art.
1355)
▫ Exception: In cases specified by law
• Gross inadequacy of price does not affect a contract of sale
▫ Exceptions: a. When it indicates a defect in consent; or b. When the
parties really intended a donation or some other act or contract
• The 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 is indicative of a defect in consent (Bautista v. CA)
Distinguished from Simulated Price
Inadequacy of Price Simulated Price
• Does not result to a void contract • The parties to an alleged contract do not
• Does not affect the validity of the contract intend to be bound by it
of sale (unless it signifies a defect in the • Void
contract) • Produces no legal effect because there is no
real agreement
Rescissible Contracts of Sale
• Inadequacy of price is a ground for rescission of conventional sale
covered under Art. 1381:
a. Entered into by guardians whenever the ward whom they
represent suffer lesion by more than one-fourth of the value of the
object of sale;
b. Those agreed upon in representation of absentees, if the latter
should suffer lesion by more than one-fourth of the value of sale
Judicial Sale
• Inadequacy of price may avoid judicial sale
• In judicial sale, the contract of sale is not the result of negotiations
and bargaining
• For a judicial sale to be set aside on the ground of inadequacy of
price, the inadequacy must be such as to be shocking to the
conscience of man
Sales with a Right to Repurchase
• Gross inadequacy of price raises a presumption of equitable
mortgage

▫ Proper remedies of alleged seller:

a. Reformation; or
b. Declaration of a mortgage contract

▫ Proper remedies of alleged buyer: foreclose on the equitable

mortgage
WHEN MOTIVE NULLIFIES A SALE
• Motive is different from consideration
• WHEN PRIMARY MOTIVE IS ILLEGAL: void sale
• Cause – essential reason which moves the parties to enter into a
contract; “immediate, direct, and proximate reason which justifies
the creation of an obligation”
• Motive – particular reason of a contracting party which does not
affect the other party