Contract of Sale is perfected at the moment there is a meeting of minds upon Before the lapse of the 1yr period
od PELA had set to pay the remaining
the thing which is the object of the contract and upon the price
Elements of a Perfected Contract of Sale:
 consent or meeting of the minds
 determinate subject matter
 price certain in money or its equivalent
3 Stages of a Contract
1. Negotiation - from the time the prospective contracting parties
indicate interest in the contract and ends at the moment of their
agreement
2. Perfection or birth - parties agree upon all the essential elements
of the contract
3. Consummation - parties fulfill or perform the terms agreed upon,
culminating in the extinguishment thereof
1. Robern Devt Corp vs. People’s Landless Assn
Facts: Al-Amanah Islamic Devt Bank of the Phils. owned a lot in
which informal settlers (PELA) reside on. PELA offered to purchase
Al-Amanah’s lot for P300k. In response, Al-Amanah wrote “Offer has
been acknowledged but pay partial amount of P150k on or before
April 15, 1993 to process the offer”.
On May 3, PELA deposited P150k as “partial payment/deposit”. On
Nov. 29, Al-Amanah informed PELA of the disapproval of its offer for
being way below the selling price, that PELA can withdraw its
deposit anytime and that they vacate the lot.
However, PELA insisted it had an agreement with Al-Amanah already
based on their offered price & the deposit. Meanwhile, Al-Amanah
accepted Robern Devt Corp’s offer to buy the lot for P400k with 20%
downpayment already deposited. Robern was also tasked to eject
the informal settlers.
Robern informed Al-Amanah of its uncertainty on purchasing the lot
as PELA members went to them with the bank receipts stated as
“partial payment/deposit on sale of TCT #138914”. In response, Al-
Amanah gave copies of the rejection letter of PELA’s bid, demand
letters to vacate, and proof of consignment of PELA’s P150k deposit
to the RTC Davao City that PELA refused to withdraw.
Robern paid the balance and was issued a Deed of Sale.
PELA consigned the P150k balance in the RTC Davao City and sent a
letter asking Al-Amanah to withdraw the amount consigned. PELA
then filed suit for Annulment & Cancellation of Void Deed of Sale
against Al-Amanah & Robern.
RTC: dismissed; CA: reversed; Robern filed MR.
Issue: WON there was a perfected Contract of Sale
Ruling: NO. The contract between Al-Amanah and PELA was still in
the negotiation stage only. It lacked the element of consent of both
parties because:
 Al-Amanah did not consent, but merely acknowledged
receipt of the offer; it still has to evaluate WON PELA’s
offer is acceptable; no oral or documentary evidence
categorically proves that Al-Amanah expressed
amenability to the offered P300,000.00 purchase price
 PELA merely offered
An offer without an acceptance is NOT a contract. Offer never
materialized into a perfected sale.
 NO meeting of minds
 NO price certain
balance, Al-Amanah expressly rejected its offered purchase price,
altho it took Al-Amanah 7 months to inform PELA. PELA is entitled to
award of damages.
2. Bugatti vs. CA and Baguilat
Contract of Lease - consensual contract perfected at the moment there is a
meeting of minds upon the thing and the cause or consideration which are to
constitute the contract
Facts: Sometime in December 1987, Bugatti offered to lease the land
of Baguilat. They discussed the Terms and Conditions (9 yrs lease for
P500/month, construct a bldg., reimburse Bugatti for the cost of the
bldg. by applying the rentals, & bldg. shall belong to Baguilat upon
termination of lease) which were to be included in a written
Contract of Lease to be prepared by Bugatti and presented to
Baguilat for their approval.
Even before preparation of Contract, Bugatti occupied the land and
began construction on Jan 1988. However, he assured Baguilat that
he was preparing the Contract. On March 1988, he presented the
Contract but without the T/Cs agreed upon. Instead of rewriting,
Bugatti came up with counter-proposals. Despite not having a
contract and Baguilat’s demand to vacate, Bugatti continued to
occupy the land.
Baguilat filed case for recovery of the land and damages. Bugatti
contends that the terms and conditions agreed upon were
embodied in the lease contract he prepared, except for the price of
the bldg., that Baguilats did not express their disapproval of the
ongoing construction during any of their visits to the site, and that
the Baguilats pretended to be shocked when they learned that bldg..
expenses reached P120k and refused to sign the contract.
RTC: no consent = no contract
CA: there is a lease contract, but it had already terminated on
January 1997 so Bugatti must vacate the property
Bugatti contends that CA varied the terms the contract when it
ordered him to vacate the premises when the lease has not yet
expired, to commence payment of rental from Jan 1988 and not
from the date of the completion of the building, and to remand the
case to the RTC to determine the value of the bldg. when the cost is
already determined at P120k.
Issue: WON there was a perfected Contract of Lease between
Bugatti & the Baguilats
Ruling: NO. Bugatti and the Baguilats were merely negotiating. The
Terms & Conditions agreed upon must be embodied in the contract
to be prepared by Bugatti and presented to the Baguilats for their
approval before Bugatti can occupy the land and start construction.
However, they did not agree with the T/Cs as evidenced by the
counter-proposals made by Bugatti.
The Baguilats verbally objected the construction and sent 2 demand
letters to vacate the property and terminate all construction work
NO perfected contract because it lacked consent or the meeting of
minds as there was NO concurrence of offer & acceptance with
respect to material points of the intended lease.
 Baguilat: lease only a portion to start in Jan 1988; limit of
P40k for the construction cost
 Bugatti: lease entire lot to start when he opens for
business; no mention of any limits as to construction cost
3. Sps. Cabahug vs. NAPOCOR
A contract constitutes the law between the parties who are bound by its
stipulations which, when couched in clear and plain language, should be
applied according to their literal tenor.
Courts cannot supply material stipulations, read into the contract words it
does not contain or, for that matter, read into it any other intention that
would contradict its plain import.
Facts: NPC filed a suit for expropriation on land of Sps. Cabahug
which was dismissed when NPC paid easement fee of 10% of the
property’s value in accordance with Sec. 3-A, RA 6395 with fixed
valuation of P45/sqm. Sps. Cabahug granted NPC a Right of Way for
its transmission lines with agreement not to construct any structure
nor plant, except agricultural crop, and reserved the option to seek
additional compensation for easement fee based on SC’s Gutierrez
ruling.
Sps. Cabahug filed complaint for payment of the balance of the just
compensation (P1.2M) in accordance with the reservation.
NPC averred it had already paid in full and that the reservation was
meant for additional compensation for easement fee, not for the full
payment based on Sec. 3-A, RA 6395.
RTC: Gutierrez ruling was applied stating that Sps. Cabahug has right
to seek easement fees as the deprivation was within the power of
eminent domain; NPC to pay Sps. Cabahug P1.3M + 5% attys fees
CA: Gutierrez ruling cannot be applied because the facts are
different. Sps. Cabahug has accepted the payment of easement fees
in 1996 so NPC already has vested right since then and contract has
been perfected. Seeking of additional compensation amounts to
unjust enrichment.
Issue: WON Sps. Cabahug has right to collect additional easement
fees
Ruling: YES. Sps. Cabahug’s receipt of easement fee did not bar
them from seeking additional compensation from NPC based on the
reservation clause: That I hereby reserve the option to seek
additional compensation for Easement Fee, based on the SC Decision
in the “NPC vs. Gutierrez” case.
Gutierrez ruling: In an easement of right of way, just compensation is
still the money equivalent of the property even tho title is not
transferred to expropriator (NPC) because the easement imposes
limitations against the use of the land for an indefinite period and
deprives the owner of its ordinary use.
NPC not to determine amount of just compensation because it is a
judicial function. Partially paid easement fee is to be deducted from
the P1.3M value of the property (full JC).
4. Acol vs. PCI Bank
Facts: On April 18, Acol discovered he lost his Bankard credit card
On April 19:
 Acol called PCI Bank to report the loss
 PCIB said his card will be immediately included in the
circular of lost cards
On April 20:
 Acol reiterated the loss
 PCIB said it has acknowledged the loss thru a letter sent by
Acol which was received on April 22
On April 21, PCIB issued a special cancellation bulletin informing its
accredited establishments of the loss of the card but someone has
used Acol’s card to buy commodities amounting to P76k. PCIB billed
Acol, but Acol informed PCIB that he would not pay for purchases
made after April 19 or the day that he notified PCIB of the loss.
But PCIB insisted on collecting as it was the most practicable
procedure and it was written on Provision 1 of the Terms &
Conditions that: holders responsibility for all charges continues until
card is returned or until a “reasonable time” after receipt by the
Bank of a written notice of loss & its actual inclusion in the
Cancellation Bulletin”.
Acol denied liability. PCIB filed suit for collection of sum of money
plus interest and penalty charges.
RTC: dismissed the case; CA: reversed the ruling
Issue: WON the provision is valid and binding given that the contract
was a contract of adhesion
Ruling: NO. Provision 1 is not valid and binding for being iniquitous
and contrary to public policy.
 The effectivity of the cancellation that the provision talks
about rests upon an act beyond the control of Acol.
 The reasonable time gives the Bank the opportunity to
actually profit from unauthorized charges despite receipt
of immediate written notice from the holder.
5. Carmelcraft Corp. vs. NLRC
Facts: Carmel Employees Union (CEU) was a registered labor union
but Carmelcraft Corp did not recognize it. Carmelcraft then ceased
operations due to serious financial losses. CEU executed a waiver on
the understanding that despite cessation of operations, Carmelcraft
will implement all benefits under existing labor standard laws.
CEU then filed a Complaint with DOLE for: illegal lockout, unfair
labor practices, and payment of unpaid wages, holiday pays,
emergency cost of living allowances and other benefits.
NLRC: Carmelcraft’s shutdown is illegal and violative of its
employees right to self-organization; granted CEU’s claim for unpaid
benefits + separation pay
Issue: WON employees are estopped from claiming the benefits
Ruling: NO. Even though the waiver was voluntarily made, it is still
invalid for being contrary to public policy. Employees are vulnerable
to blandishments, importunings & intimidation by the management.
Therefore, quitclaims of benefits will NOT estop the employees from
asserting them just the same.
Signing a satisfaction receipt is NOT a waiver of rights. It is not valid
to receive less compensation than what one is entitled to recover.
Release and quitclaim is inequitable and incongruous to the declared
public policy to afford protection of labor and assure rights of
workers to security of tenure.
Real reason for cessation of operations was the establishment of the
Union. Claimed financial losses were not serious.
Company made the employees waive their claims to compensation
due them, refused to recognize their union and closed the company
when they insisted on their demands.
A Contract of Adhesion is just as binding as ordinary contracts even as the
courts remain careful in scrutinizing the factual circumstances underlying
each case to determine the respective claims of contending parties on their
efficacy.
Ambiguities in the contract are construed against the party that prepared it.
Courts cannot stipulate for the parties nor amend their agreement if
it does not contravene law, morals, good customs, public order or
public policy, for to do so would be to alter the real intent of the
parties, and would run contrary to the function of the courts to give
force and effect thereto.

6. PILTEL vs. Tecson 8. Land Bank vs. Heirs of Spouses Soriano

A compromise is a contract whereby the parties, by making reciprocal
Facts: Tecson was approved 6 cellphone subscriptions, each with its
concessions, avoid a litigation or put an end to one already commenced.
own service agreement. Tecson filed Complaint for Sum of Money
and Damages at the RTC Iligan. Facts: Sps. Soriano’s properties were subject to Operation Land
Transfer valued at P10k/ha by the Land Bank and DAR. Heirs of Sps.
PILTEL contended that the filing was made at an improper venue as
Soriano filed an action for just compensation claiming that the
it was stated in the contract that: venue of suits shall be in Makati.
valuation was too low and asked for final valuation at P1.8M based
Subscriber expressly waives any other venues.
on AO 61 & RA 6657.
RTC & CA: denied PILTEL’s motion to dismiss
Land Bank disagreed and contended that the valuation must be
based on PD27 and EO28 and that it only pays the landowners based
Issue: WON the provision is valid & binding
on the valuation of DAR.
Ruling: YES. The provision is exclusive in nature & intent as it was
RTC&CA: ruled in favor of the Heirs; Land Bank to pay P1.2M with
expressed in writing and entered into before filing of suit. The line in
6% legal interest per annum from date of taking until fully paid
the provision stating that the subscriber “expressly waives any other
venue” indicates that the venue stipulation is preclusive to the filing
Land Bank submitted a Manifestation informing the Court that the
of suits.
parties had filed by registered mail their Joint Motion to Approve the
Attached Agreement indicating that the parties have freely &
The contract is a Contract of Adhesion that is not per se inefficious
voluntarily entered into a Compromise Agreement.
since the stipulations are not obscure but are rather clear to which
its literal meaning must be held controlling.
Issue: WON the compromise is valid
Tecson had 6 agreements with him. He should’ve read that
Ruling: YES. As a contract, a compromise is perfected by mutual
provision.
consent, but a judicial compromise must be approved by Court thru
judgment. The compromise at hand is a judicial compromise which
7. Tiu vs. Platinum Plans Phil. will terminate the pending litigation by fully settling the dispute
Facts: On Jan.1993, Platinum rehired Tiu as its Senior Asst. VP for 5
years. On Sept. 1995, Tiu stopped going to work and became VP for The objective to determine the just compensation has already been
Sales of Professional Pension Plan on Nov. 1995. achieved when the Heirs accepted the revaluation and filed a motion
to approve.
Platinum sued Tiu for damages contending that his employment in
Professional PP is violative of the “non-involvement clause”: an
employee must not engage or be involved, within 2 years from
separation, with any corporation in the same pre-need industry.

Tiu contended that the clause is against public policy as it deprives

her right to engage in the work she only knew and that the transfer
to a rival company is an accepted practice in the industry.

Platinum countered that non-involvement clause is reasonable and

needed since her job gave her access to the company’s confidential
marketing strategies and that it did not prohibit her from marketing
other service plans

RTC&CA: valid

Issue: WON the non-involvement clause is valid

Ruling: YES. It is not necessarily void as long as there are reasonable

limitations:
o Time - restriction is only good for 2 years
o Trade - restricted employment pertains only to pre-
need industry
o Place

Tiu’s high position in Platinum Plans made her privy/vulnerable to

“trade secrets” which are confidential and highly sensitive.
9. PS Bank vs. Sps. Castillo and Sps. Capati&Lobo
Any stipulation regarding the validity or compliance of the contract left solely
to the will of one of the parties is invalid.
Contract changes must be made with the consent of the contracting parties.
Facts: Sps. Castillo and Sps. Capati & Lobo mortgaged their
respective lots to obtain a loan from PSBank with Promissory Note
valued at P2.5M that reads: “the rate of interest and/or bank
charges, its extensions, renewals or other modifications, may be
increased, decreased or changed from time to time as the PSBank
may prescribe for its debtors”. (17% per annum originally)
From May 1997 to December 1999, PSBank had increased and
decreased the rate of interest (29%, 17%) which were
communicated to the respondents but they neither confirmed nor
questioned the changes. When respondents requested for
reduction, PSBank denied such requests.
Respondents defaulted in payment until the outstanding obligation
reached P2.5M on Feb 11, 2000. PSBank demanded payment but
respondents failed to pay. PSBank then extrajudicially sold the
mortgaged properties and credited it. Respondents failed to redeem
the property within the 1yr redemption period.
Respondents filed a case for Reformation of Instruments,
Declaration of Nullity of Notarial Foreclosure Proceedings and
Certificate of Sale.
RTC: increase of interest is unreasonable, excessive and arbitrary;
PSBank to refund the amount of interest collected in excess of 24%
per annum; extrajudicial foreclosure is void ab initio;
CA: increase of interest is unreasonable, excessive and arbitrary;
PSBank to refund the amount of interest collected in excess of 17%
per annum; extrajudicial foreclosure is valid;
Issue: WON the unilateral determination & imposition of increased
rates is valid
Ruling: NO. It violates the principle of mutuality of contracts under
Article 1308: the contract must bind both contracting parties; its
validity or compliance cannot be left to the will of one of them.
Promissory Note: increase/decrease of interest rates is left solely on
the discretion of PSBank, doesn’t require consent/conformity of the
respondents.
Contract is one of Adhesion heavily weighed in favor of PSBank
leading to unconscionable result and is therefore void.
Lack of response of the respondents on the memos informing them
of the amendments in the interest rate does NOT mean they
consent to it because such memos were mere proposals.
Request to reduce the rates does NOT mean consent thereto, but
actually means questioning the propriety of the rates.
NO meeting of minds as there was NO consent from respondents to
increase/decrease the interest rates.
10. PNB vs. Padilla
A contract containing a condition which makes its fulfillment dependent
exclusively upon the uncontrolled will of one of the contracting parties is
void.
Facts: Padilla obtained a credit line from PNB secured by real estate
mortgage for a term of 2 yrs with 18% interest per annum. He then
executed a Credit Agreement, 2 Promissory Notes and a Real Estate
Mortgage Contract.
The promissory notes authorized PNB to increase the stipulated 18%
interest “within limits allowed by law at any time depending on
whatever policy PNB may adopt in the future”.
PNB, over objection of Padilla and without authority from the
Monetary Board, increased the interest rate three (3) times in 4
months from 32% to 41% to 48%.
RTC: increase was properly made; CA: reversed
Issue: WON PNB may unilaterally change or increase the interest
rate stipulated at will and often as it pleases in accordance with the
term of the loan
Ruling: NO. Though the unilateral increase is within the terms of the
contract, it is still null and void for being violative of the mutuality of
contracts. Article 1308: The contract must bind both contracting
parties; its validity or compliance cannot be left to the will of one of
them. It was a Contract of Adhesion that leaves the debtor to taking
it or leaving it.
The Monetary Board provides that “such changes shall not be made
oftener once every 12 months”. But PNB has increased the rates
three (3) times within 4 months.
Further, the Contract provides that the increase may be done within
limits allowed by law, but there was no law passed by the Monetary
increasing the rates. Rather, there were only PNB’s own resolutions
and circulars as basis for the increase.
The increase is also void for being in contravention with Art. 1956
which provides that interest shall not be due until it has been
expressly stipulated in writing. In the case Padilla never agreed in
writing to pay the interest increases fixed by PNB beyond 24%,
hence, he is not bound to pay a higher rate than that
11. Sps. Florendo vs. CA
Facts: 1 yr before she voluntarily resigned, Gilda Florendo obtained a
housing loan from its employer (Land Bank) payable within 25 years
with real estate mortgage and promissory note. 8 months later, Land
Bank increased the interest rate from 9% per annum to 17%as
ordered by Land Bank thru a resolution and PF memo circular.
Sps. Florendo refused to pay the increased interest/monthly
installments, but paid the original stipulated installment under the
original contract.
Land Bank anchors their demand on the escalation clause of the
housing loan agreement and real estate mortgage which states that:
rate of interest shall be subject to such an increase/decrease in
accordance with the rules of the Central Bank of the Philippines as
the PF Board of Trustees of the Mortgage may prescribe and shall
apply only to the remaining balance of the loan.
RTC: bank has authority to increase; CA: affirmed.
Issue: WON Land Bank has a valid and legal basis to impose an
increase interest rate
Ruling: NO. Land Bank knowingly agreed that the interest rate shall
remain at 9% unless a Central Bank issuance is passed authorizing
the increase/decrease in the rate and the PF BOT acts accordingly.
The resignation of Florendo is not a factor for the increase.
An Escalation clause are valid stipulations in commercial contracts to
maintain fiscal stability and to retain the value of money in long
term contracts BUT if it depends on the will of one of the parties, it
is void for being contrary to the principle of mutuality of contracts.
The increase only takes effect as authorized by the Central Bank thru
issuances or circulars and without such, any increased rate will never
become effective. The CB circulars lifting any interest rate ceiling
prescribed or under Usuary Law existed prior to perfection of the
contract and were deemed taken into consideration already, and yet
Land Bank settled for a stipulated 9% interest rate.
12. Sps. Juico vs. China Banking Corp
Facts: Sps. Juico obtained a P10.355M loan from CBC with two
Promissory Notes and a real estate mortgage. When they failed to
pay, the amount due totaled P19.2M and the mortgaged property
was sold at public auction for P10.3M. CBC then demanded payment
of the P8.9M balance.
Sps. Juico contend that they are only liable for P55k deficiency since
the loan was only P10.355M and P10.3M has already been credited
due to sale of the mortgaged property. They also contend that the
interest rates (tallied almost 9M) as they were not by virtue of any
BSP law or issuance but were unilaterally imposed by the bank.
CBC reiterated that interest rate changes every month based on
prevailing market rate and that such were communicated to Sps.
Juico thru phone calls.
RTC: ruled in favor of CBC; CA: affirmed
Issue: WON the interest rates imposed upon Sps. Juico by CBC are
valid
Ruling: NO. The escalation clause authorizing CBC to adjust based on
CB issuances must be read together with the provision that there
was no fixed interest rate stipulated as it was dependent on
prevailing market rates. The promissory was voluntarily agreed upon
and Sps. Juico did not protest the increased rates even when their
property was foreclosed
Despite this, the escalation clause is still void because it grants CBC
the power to impose an increased interest rate without a written
notice to Sps. Juico and their written consent. Monthly phone calls
are not sufficient. There must be a detailed billing statement signed
by Sps. Juico indicating their conformity to the new rates.
13. Sps. Silos vs. PNB
Facts: In Aug 1987, Sps. Silos obtained a credit line of P150k from
PNB with real estate mortgage. In July 1988, the credit line and
mortage increased to P1.8M. In July 1989, the credit line was
increased to P2.5M with additional mortgage property. Sps. Silos
issued 8 promissory notes with provision granting PNB to increase or
reduce interest rates “within limits allowed by law or by the MB”
the real estate mortgage: right to increase or reduce interest rate
“at any time depending on whatever policy PNB may adopt”
and signed a Credit Agreement with provision: PNB may modify the
interest rate depending on whatever policy it may adopt and without
need of notice to borrower, increase or decrease its spread over the
interest at any time..
In 1997, Sps. Silos faltered when interest rates soared due to the
Asian financial crisis and they were unable to make good on the
note. In March 2000, they filed a case seeking annulment of the
foreclosure sale and an accounting of the PNB credit alleging that
PNB’s unilateral determination of the interest rate are null and void.
PNB denied. RTC: in favor of PNB; CA: affirmed.
Issue: WON the interest rates were unilaterally and arbitrarily
imposed by PNB
Ruling: YES. The provision allowing PNB to increase or decrease the
interest rate “within limits allowed by law at any time depending on
whatever policy it may adopt” is not valid.
PD No. 1684 and CB Circular No. 905 does not allow parties to
stipulate freely regarding any adjustment in the interest rate nor
authorized them to unilaterally raise the rate without the other’s
consent. Contract changes must be made with consent of both
parties.
14. DKC Holdings vs. CA, Bartolome
Facts: DKC Holdings entered into a Contract of Lease with Option to
Buy with Enarnacion. DKC must exercise the option within 2 yrs from
signing of the Contract and pay P3k a month for the reservation of
such. In case DKC chose to lease the property, it may take actual
possession of the premises for a period of 6yrs with monthly rental
of P15k.
DKC paid P3k monthly until Encarnacion died leaving Victor as the
lone heir. But Victor refused to accept the payment and issued the
TCT in his name.
DKC informed Victor that it was exercising its option to lease the
property tendering P15k as rental fee, but Victor refused to accept
and surrender possession.
RTC & CA: contract was terminated upon death of Encarnacion
Issue: WON Contract entered into by the late Encarnacion was
terminated upon her death
Ruling: NO. Article 1311: heirs are bound by contracts entered into
by their predeccesorsininterest except when the rights and
obligations arising therefrom are not transmissible by their nature,
stipulation or provision of law.
NO contractual stipulation nor legal provision making the rights and
obligations intransmissible.
Intransmissible - those which are purely personal, either by provision
of law, such as in cases of partnerships and agency, or by the very
nature of the obligations arising therefrom, such as those requiring
special personal qualifications of the obligor
There is privity of interest between an heir and his deceased
predecessor—he only succeeds to what rights his predecessor had
and what is valid and binding against the latter is also valid and
binding as against the former.