CHAPTER 4: PRICE AND OTHER CONSIDERATION

Price which for him a catch-all or a totality which effectively brings within a whole
or a sum certain in Money or its equivalent.
The essence of sale is the transfer of title or an agreement to transfer it for price
paid or promised to be paid.

Requisites of a valid sale:

a)

b)
c)
I.
1.

Must be real
-legal intention on the part of the buyer to pay the price
-legal expectation on the part of the seller to receive such price and obligates
himself to deliver.
Must be in money or its equivalent or must be in valuable consideration
Must be certain or ascertainable
Price Must be real:

When price is simulated (Void)

-no intention by the parties at the time of perfection to pay and to receive the price
agreed upon or stipulated
- sale is void for lack of consideration
- In absolute simulation, there is colorable contract but without any substance,
the parties have no intention to be bound by it.
-parties may recover from each other what they may have given
General Rule: When the price in a purported contract of sale is completely
simulated,then pari delicto non oritor action shall apply,which denies the recovery
to the guilty parties.Such principle applies to cases where the nullity arises from
the illegality of the consideration or the purpose of the contract.
Exception: When the principle is invoked with respect to inexistent and void
contracts.

2.

-specific performance
-rescission

When Price is False (Valid)

-Upon the meeting of minds of the parties, there is a real price but not declared
and what is stated in the covering deed is not the one intended to be paid.
Relative simulation( valid and enforceable but subject to reformation)
Rationale: This is said to be valid because there is a presumption that
consideration exists and that it is lawful. Even though it is not stated in the
contract. (Civil Code Art.1354,Civil Code)
a.
b.
c.

Effect of Non-payment of Price

Does not cancel a sale for lack of consideration
Does not render the sale inexistent or invalid
Gives right in favour of the seller to either demand:

Rationale: Contract of sale,being consensual is perfected by mere

consent. Delivery of the thing bought or payment of the price is not
necessary for the perfection of the contract.
II.

PRICE MUST BE IN MONEY OR ITS EQUIVALENT

ARTICLE 1458 of the New Civil Code states that 'By the contract of sale one of the
contracting parties obligates himself to transfer the ownership and to deliver a determinate
thing, and the other to pay therefor a price certain in money or its equivalent.
General Rule is that it requires that there must be something representative of money,
check or draft to effect the contract of sale.
Exception: Article 1468 If the consideration of the contract consists partly in money, and
partly in another thing, the transaction shall be characterized by the manifest intention of the
parties

This article explains that the consideration for a valid contract

of sale can be the PRICE and OTHER ADDITIONAL
CONSIDERATION. Or at the very least, true contract must
have price as part of its consideration.

As cited in the case of Republic vs. Phil Resources

Development, the Supreme court held that the Government's
contentions were untenable. As provided by Art. 1458 of the
Civil Code, that a purchaser may pay a certain price in money
or its equivalent, which means payment of the price need not
be exactly in money. As the small payment was remitted by
Apostol who was acting on behalf of Philippine Resources
Development to Bureau of Prisons, and that he was also able
to deliver goods from PRD to Bureau of Prisons as payment
for the outstanding debt. The Supreme court credited Apostol's
account that was said to be sufficient payment thereof
applying Art.1458 of the Civil Code.

Does 'service falls on the category of equivalent to compensate the same to be

considered valid?
No, it has been raised in the case of Bagnas vs. CA that Art. 1458 that a contract is not true
sale where the price consists of services or prestations.

III.

PRICE MUST BE CERTAIN OR ASCERTAINABLE AT PERFECTION

Perfection refers to OFFER and ACCEPTANCE.

A contract of sale is born from the moment there is a meeting of the minds upon the thing
which is the object of the contract and upon the price.

Article 1474. 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
therefor. What is a reasonable price is a question of fact dependent on the circumstances of
each particular case.
COVERAGE OF PRECEDING ARTICLES

PRICE FIXED BY A THIRD PARTY

General Rule: The designation of a third party to fix a price is VALID. However, the fixing of
price cannot be validly left to the sole discretion of one of the contracting parties.

As illustrated in the case of Barretto vs. Santa Marina, in this case even
before the designated third-party had fixed a price, there was already an
existing contract of sale, to prevent party from unilaterally withdrawing
from contract; however was subject to a suspensive condition that the
price will be fixed by the third party designated by the parties.

As also provided in Article 1469 of Civil Code, that if third party fixes the
price in bad faith or by mistake, the courts may fix the price.

And if such persons were unable or unwilling to fix the price, the contract
shall be ineffecacious.

When the third party is prevented from fixing the price or termsof either
buyer of the seller, the party not at fault may have such remedies
against the party in fault.

FIXING OF SUBJECT MATTER BY THIRD PARTY

It is invalid for a third party to fix the subject matter in a contract of sale because it is beyond
his capacity to act as the actual seller to comply with his obligations and to deliver the same.

PRICE OF SECURITIES, GRAINS, LIQUIDS AND OTHER THINGS

Article 1472 provides that: The price of securities, grain, liquids, and other things are
considered certain when the price fixed is that which the thing sold 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.'
WHEN THERE IS SALE EVEN WHEN NO PRICE HAS BEEN AGREED UPON

Article 1469. In order that the price may be considered certain, it shall be
sufficient that it be so with reference to another thing certain, or that the
determination thereof be left to the judgment of a special person or persons.
Should such person or persons be unable or unwilling to fix it, the contract shall be
inefficacious, unless the parties subsequently agree upon the price. If the third
person or persons acted in bad faith or by mistake, the courts may fix the price.
Where such third person or persons are prevented from fixing the price or terms by
fault of the seller or the buyer, the party not in fault may have such remedies
against the party in fault as are allowed the seller or the buyer, as the case may
be.
Article 1470. 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. (n)
Article 1471. If the price is simulated, the sale is void, but the act may be shown to
have been in reality a donation, or some other act or contract. (n)
Article 1472. The price of securities, grain, liquids, and other things shall also be
considered certain, when the price fixed is that which the thing sold 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.
Article 1473. The fixing of the price can never be left to the discretion of one of the
contracting parties. However, if the price fixed by one of the parties is accepted by
the other, the sale is perfected.

COMPARATIVE:
ARTICLES
INCLUDED

NATURE

EFFECT

1469

Price is fixed in
reference to another
thing certain or left to
rd
a
3
partys
determination

Not Void

1470

Gross
of price

Generally
does
not
invalidate a
contract,
unless,
there has
been fraud,
mistake or
undue
influence or
in
cases
specified
by law.
VOID

inadequacy

DEFINITION OF INEFFICACIOUS AND APPROPRIATED

REASON
Price,
though
certain
ASCERTAINABLE

not
is

INEFFICACIOUS

APPROPRIATED

1471

Price is completely
simulated

There
is
agreement
parties

1472

Price of securities,
grain, liquids based
on trading price

Not Void

Price,
though
certain
ASCERTAINABLE

1473

Formula for the fixing

of the price is left to
the discretion of
party

VOID
except
accepted
by
the
other party

Absence of the element

of consent.

STANDARD DEFINITION
lacking the power to
produce a desired effect.
(Merriam
Webster
Dictionary)

a sum of money or total of

assets devoted to a
special purpose(GOOGLE)

ARTICLE 1474
The use of the term is in view if
the coverage of
preceding
articles . The term implies nonexclusivity of the provision only
to sales of contract which are
valid but rendered inefficacious
but also to void contracts, from
the focal point of price

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.

Return is not legally

possible.

no
real
between

not
is

ELEMENTS WHEN THERE IS SALE EVEN WHEN NO PRICE HAS BEEN AGREED
UPON:
v

MEETING OF MINDS OF THE PARTIES OF SALE AND PURCHASE AS TO THE

SUBJECT MATTER;

AGREEMENT THAT PRICE WOULD BE PAID WHICH FAILS TO MEET THE

CRITERIA OF BEING CERTAIN OR ASCERTAINABLE; AND

DELIVERY BY THE SELLER AND APPROPRIATION BY THE BUYER, OF THE

SUBJECT MATTER OF THE SALE.

JURISPRUDENCE:
1.

Robles vs. Lizarraga Hermanos

Doctrine: APPROPRIATION DOCTRINE
Two Important Points:
a. The doctrine is based on principle of unjust enrichment directed against the
buyer who is not allowed to retain the subject matter of the sale without

b.

being liable to pay the price even when no such agreement on the price was
previously made; and
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 contract
situation where the defect is as to the price.

JURISPRUDENCE:
1.

LIMSON Vs COURT OF APPEALS:

HELD:
LIMITATION: Article 1474 is not applicable to real estate instead; the principles of builders in
good faith should apply.
RULINGS ON RECEIPTS AND OTHER DOCUMENTS EMBODYING PRICE

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.

General Rule: Sales invoices are NOT evidence of payment since they are only evidence of
the receipt of goods; and that the best evidence to prove payment of the PRICE is the
OFFICIAL RECEIPT.

2.

(El Oro Engravers vs CA

STATUTE OF FRAUDS
Article 1403. The following contracts are unenforceable, unless they are ratified:

LAGON VS. HOOVEN COMALCO INDUSTRIES, INC., (COMMERCIAL

IMPORTANCE OF RECEIPTS AND INVOICES)
HELD: In most cases, these commercial forms are not always fully
accomplished to contain all the necessary information describing the whole
business transaction.xxxxxxxxxxxxxxx. These documents are not mere
scraps of paper bereft of probative value but vital pieces of evidence of
commercial transactions. They are written memorials of the details of the
consummation of contracts.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

UNADEQUACY OF PRICE

(2) Those that do not comply with the Statute of Frauds as set forth in this number.
In the following cases an agreement hereafter made shall be unenforceable by
action, unless the same, or some note or memorandum, thereof, be in writing, and
subscribed by the party charged, or by his agent; evidence, therefore, of the
agreement cannot be received without the writing, or a secondary evidence of its
contents:

Art. 1470- Gross inadequacy of price does not affect a contract of sale, except as it may
indicate a defect in consent, or that the parties really intended a donation or some other act
or contract.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

NATURE

(d) An agreement for the sale of goods, chattels or things in action, at a price not
less than five hundred pesos, unless the buyer accept and receive part of such
goods and chattels, or the evidences, or some of them, of such things in action or
pay at the time some part of the purchase money; but when a sale is made by
auction and entry is made by the auctioneer in his sales book, at the time of the
sale, of the amount and kind of property sold, terms of sale, price, names of the
purchasers and person on whose account the sale is made, it is a sufficient
memorandum;
NOTE: Unenforceability applies only to executory contracts.
By executory, this means that either of the party is yet to perform his obligations to
the contract. If by any means one party has already rendered or fulfilled his part of the
obligation, then the other party has to legally perform his part of the obligation, the defect in
the agreement (i.e. only in oral form) notwithstanding.

General Rule: Except in cases specified by law, lesion or inadequacy of price does not
invalidate a contract, UNLESS there has been FRAUD, MISTAKE or UNDUE INFLUENCE.

A.
CONTRACTS
1381)

EFFECT/S OF INADEQUATE PRICE

RESCISSBLE
(Under Art.

Ground for rescission of conventional sale

B. JUDICIAL SALE

Judicial sale may be avoided or set aside except when

there is right of redemption

C. SALES WITH RIGHT TO

REPURCHASE

Raises a presumption of equitable mortgage.

Remedy (Seller)- reformation
(Buyer)- foreclose

Article 1381. The following contracts are rescissible:

transferred to Poe. Article 559 applies only to a person who is in

possession in good faith of the property,and not the owner thereof. In
the case at bar,Roxas was the owner, and,thus,Santiago acquired the
title of the car.

(1) Those which are entered into by guardians whenever the wards whom they
represent suffer lesion by more than one-fourth of the value of the things which are
the object thereof;

Non-payment of the price in a contract of sale does not render

ineffective the obligation to deliver. The obligation to deliver a thing is
different from the obligation to pay its price.

(2) Those agreed upon in representation of absentees, if the latter suffer the
lesion stated in the preceding number.
xxxxxxx
2.
WHEN MOTIVE NULLIES SALE
GENERAL RULE:In a contract of sale, consideration is, as a rule, different from the motive
of the parties, and when the primary motive is illegal, the sale is VOID .

Question: XX died intestate, YY and ZZ are his only relatives. On 1998, YY and
ZZ registered deed of sale purporrtedly executed by the deceased in their
favor,provided the consideration of PHP 5.00 and services rendered. YY and ZZ
contended that the execution was valid and made for valuable consideration.
Whether or not the sale is valid for want of consideration?
Answer:
No. The contract of sale is void. In this case, there was no consideration
since price must be in money or its equivalent; services are not
equivalent in money insofar as the requirement of price is
concerned.Therefore, properties purportedly conveyed remained part of
the estate of the deceased.

REASON:Because illegal motive predetermined the purpose of the contract.

CAUSE vs MOTIVE( Uy vs. Court of Appeals)

Cause- essential reason which moves the contracting parties to enter into it
-

The immediate, direct and proximate reason which justifies the creation of an
obligation through the will of the contracting parties.

Motive- particular reason of a contracting party which does not affect the other party.

3.

Question: Jose placed a purchase order of engine parts to the Spare Parts
Incorporated. Pursuant thereto, the company placed an order in its supplier to avail
a 30% discount over the items. Thereafter, the spare parts were delivered and
accepted and used by Jose even without payment yet. So supplier demand
payment from Jose. But Jose refused contending that the company pursued with
the order even though there were no proper consideration. Whether the
Jose(buyer) is liable to pay the items?

QUESTIONS AND ANSWERS:

1. Question: Duterte sold his car to Roxas who issued a postdated
check in full payment therefor. Before the check matures, Roxas sold his
car to Poe who later sold it to Santiago. When presented for
payment,the check issued by Roxas was dishonoured by the bank
because Roxas already closed his account even before he issued his
check. Duterte sued to recover the car from Santiago alleging that he
had been unlawfully deprived of it by reason of Roxasdeception. Will
Dutertes case prosper?
Answer:
No. The suit will not prosper because Duterte was not unlawfully
deprived of the car although he was unlawfully deprived of the price. The
perfection of the sale and the delivery of the car was enough to allow
Roxas to have a right of ownership over the car, which can be lawfully

Answer:
Yes, Jose is liable under Article 1474. 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 therefor. What is a reasonable price is a question of fact
dependent on the circumstances of each particular case.