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Does Gross Inadequacy of Price Affect a Contract of Sale?

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Does Gross Inadequacy of Price Affect a Contract of Sale?
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Read also: Distinguishing Contract of Sale from Contract to Sell

  • Inadequacy of cause will not invalidate a contract unless there has been fraud, mistake or undue influence.
  • Gross inadequacy of price by itself will not result in a void contract.
  • A valuable consideration, however small or nominal, if given or stipulated in good faith is, in the absence of fraud, sufficient.

There are certain instances where a vendor may be eager to sell his property quickly. He would then put it on sale at a really low price. On the part of the buyer, this good bargain. And who does not want to buy a property on a bargain? 

There are also instances where vendors would sell their property to their children or relatives. And since they would want to dispose the property to persons they know or trust, they would sell it at a really low price. 

In these instances, would the contract of sale be voided if the buyer purchased the property  at a really low rate?

Civil Code provides that: 

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. 

Gross inadequacy of price by itself will not result in a void contract.  Gross inadequacy of price does not even affect the validity of a contract of sale, unless it signifies a defect in the consent or that the parties actually intended a donation or some other contract.

Inadequacy of cause will not invalidate a contract unless there has been fraud, mistake or undue influence.

In a contract of sale, mere inadequacy of the price or alleged hardness of the bargain generally does not affect its validity when both parties are in a position to form an independent judgment concerning the transaction. This rule holds true in voluntary contracts of sale otherwise free from invalidating defects. A valuable consideration, however small or nominal, if given or stipulated in good faith is, in the absence of fraud, sufficient.

Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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