Published — June 1, 2022
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
Aside from knowing earnest money, you may also read: Distinguishing Contract of Sale from Contract to Sell
-
Earnest money is considered part of the price in a contract of sale.
-
Earnest money is a proof of the perfection of the contract.
-
Absent proof of the concurrence of all the essential elements of a contract of sale, such as consent, object and consideration, the giving of earnest money cannot establish the existence of a perfected contract of sale.
In a contract of sale, the buyer may often give the seller an earnest money What then is an earnest money?
Civil Code provides that:
ART. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract.
Earnest money is something of value given by the buyer to the seller to show that the buyer is really in earnest, and to bind the bargain. It is actually a partial payment of the purchase price and is considered as proof of the perfection of the contract.
This is the money given to the seller by the prospective buyer to show that the latter is truly interested in buying the property, and its aim is to bind the bargain.
Since earnest money constitutes an advance payment, it must be deducted from the total price.
The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price.
Under the old Civil Code, it has been held that the delivery of part of the purchase price should not be understood as constituting earnest money to bind the agreement in the absence of something in the contract showing that such was the intention of the parties.
However, please note that absent proof of the concurrence of all the essential elements of a contract of sale, such as consent, object and consideration, the giving of earnest money cannot establish the existence of a perfected contract of sale.
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.
All rights reserved.
SUBSCRIBE NOW FOR MORE LEGAL UPDATES!
[email-subscribers-form id=”4″]