MEMORANDUM

TO : Atty. Jacildo

FROM : Li Carl T. Benito

DATE : 24 July 2019

RE : Sale of a parcel of land (farmland) containing an

Area of Two (2) Hectares Situated In Cebu City

STATEMENT OF FACTS

Our client, Mrs. Erlinda Bilmoko (“Erlinda”) intends to buy a farmland with an area of two (2)
hectares located in Cebu City for and in consideration of the sum of ONE HUNDRED
THOUSAND PESOS (Php100,000.00), Philippine Currency from “Mr. X”, the guardian of
“Ms. Y”, the beneficial owner of the said property.

STATEMENT OF LEGAL ISSUES

a) Whether or not an oral contract with regard the sale of the subject parcel of land is
deemed valid.

b) Whether or not issuance of an earnest money of Mrs. Erlinda will constitute a valid sale
and thus obstruct the owner to offer the subject property to another.

c) Whether or not a gross inadequacy of price will render the contract of sale void.

d) Whether or not, a sale of guardian with respect to the property of the person under his/her
guardianship is deemed void.

e) Whether or not the fixing of price by the vendee affect the validity of the contract/ may
the seller and the buyer request to a third party to first determine the price of the property
based on his assessment of its value before executing the sale.

DISCUSSION

a) Whether or not an oral contract with regard the sale of the subject parcel of land is
deemed valid.

Mrs. Erlinda is wondering if she and the buyer can orally establish the conditions
governing the sale of the subject property.

Considering that sale is a consensual contract, it is constituted by mere meeting of the

minds between the parties involved, provided that all essential requisites were also
 attendant. Hence, generally speaking, an orally constituted contract of sale will be
considered as valid.

But since the subject matter of the contract is a real property, it will fall under the Statute
of Frauds which requires that a sale of real property cannot be constituted by an oral
agreement because it cannot be a basis for action for damages which will rise if there is
non-performance therein.

An oral contract will be valid but it will be still unenforceable to both parties even to a
third person claiming rights over the same, hence, I can only encourage Mrs. Erlinda to
execute a written instrument with regard to the sale of the subject property.

b) Whether or not issuance of an earnest money of Mrs. Erlinda to Mr. “X” will
constitute a valid sale and thus obstruct the latter to offer the subject property to
another.

Mrs. Erlinda wants to secure the property from other prospective buyers until she has
decided to proceed with the execution of the sale.

The best course of action to take is for her give an earnest money to the seller. According
to Article 1482 of the Civil Code of the Philippines, earnest money is a consideration to
the seller’s promise to reserve the subject property for the buyer. Hence, by giving the
same, the property cannot be offered to a third person other than the one who gave the
earnest money.

Further, whenever an earnest money is given by a prospective buyer in a sale, it will be

considered as a part of the purchase price but failure by the latter to pay the balance will
not give rise to the forfeiture of the earnest money by the seller. Hence, buy giving an
earnest money, Mrs. Erlinda will both secure the subject property and still has an option
to withdraw from the contract and keep the guarantee money.

c) Whether or not a gross inadequacy of price will render the contract of sale void.

No, gross inadequacy of price does not affect the validity of the contract.

According to Article 1970 of the Law on Sales, gross inadequacy of price will not affect
a contract of sale provided that a defect in the consent of either one of the contracting
parties will be attendant, or if the parties really intended to execute another act or contract
such as a donation.

A contract of sale being onerous and commutative in nature, does not require that the
consideration to a sale is exactly the value of the subject matter, it is suffice when the
parties honestly believe that they have received good value for what they have given up
in exchange.

Further, the fear of the client that the court may render the contract void because the
consideration, having gross inadequacy of price will amount to simulation, does not pose
much concern.
d) Whether or not a sale of guardian with respect to the property of the person under
his/her guardianship be deemed void.

Yes, there is a risk that the court will find the contract void.

Article 1491 specifically prohibits the sale of a guardian with respect to the property of
the person under their guardianship.

Generally speaking, minor, wards, or other incapacitated persons cannot enter into a valid
contract to sale. But an exception to the said rule is that, if the necessaries, such as those
indispensable for the sustenance and rearing of the said individuals were the subject of
the contract. For such sale to be valid there must be a perfection of the contract of sale
and an actual delivery of the necessaries. Such requirements are not attendant in this case.

Due as aforesaid, there is a great possibility that the court renders the sale void.

e) Whether or not the fixing of price by the vendee affect the validity of the contract/ may
the seller and the buyer request to a third party to first determine the price of the
property based on his assessment of its value before executing the sale.

Generally speaking, a contract of sale is a consensual contract and will be perfected by

mere meeting of the minds of all the interested party therein.

The provisions of the New Civil Code provide that since a contract of sale is
commutative, all the rights and duties of the parties in that contract are of equivalent of
each other, hence the consideration of the contract, if only dependent upon one party shall
be void.

But since the intention of the parties is given a paramount importance, it is agreed upon
or there is a stipulation in affirmative that one party may set the price consideration, then
it shall be considered as valid.