Buyer Rights When Sellers Demand Additional Payments After Agreement in the Philippines

Introduction

In the Philippine legal system, contracts form the bedrock of commercial and personal transactions, ensuring predictability and fairness between parties. When a buyer and seller reach an agreement on the terms of a sale—particularly the price—the law generally prohibits unilateral changes by either party. However, instances arise where sellers attempt to demand additional payments post-agreement, citing reasons such as increased costs, errors in quotation, or unforeseen circumstances. This practice can undermine the integrity of the agreement and leave buyers vulnerable to exploitation.

This article explores the comprehensive rights of buyers in such scenarios under Philippine law. It delves into the foundational principles of contract law, identifies when such demands constitute a breach, outlines available remedies, and examines special protections in consumer, real estate, and other contexts. By understanding these rights, buyers can better protect themselves and enforce the original terms of their agreements.

The Legal Foundation: Contracts and Obligations in Philippine Law

Philippine contract law is primarily governed by the Civil Code of the Philippines (Republic Act No. 386), which emphasizes the autonomy of contracts and the binding nature of agreements. Under Article 1305, a contract is defined as "a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service." Once perfected—typically through offer and acceptance—the contract has the force of law between the parties (Article 1159).

Key principles relevant to additional payment demands include:

Mutuality of Contracts (Article 1308): Contracts must bind both parties mutually; neither can unilaterally alter terms without consent. A seller's demand for extra payment violates this unless the contract explicitly allows for adjustments (e.g., escalation clauses in long-term supply agreements).
Perfection of Contracts (Article 1315): Contracts are perfected by consent, and from that moment, parties are bound not only to the fulfillment of what has been expressly stipulated but also to all consequences that, according to their nature, may be in keeping with good faith, usage, and law (Article 1315).
Obligations Arising from Contracts (Article 1156): These include obligations to give, to do, or not to do. In a sale, the seller's obligation is to deliver the thing sold at the agreed price, without imposing new financial burdens.

If the agreement is in writing, the Parol Evidence Rule (Rule 130, Section 9 of the Rules of Court) prevents the introduction of extrinsic evidence to vary the terms, reinforcing that the written agreement prevails over subsequent verbal demands.

In essence, any post-agreement demand for additional payment is presumptively invalid unless justified by law or mutual consent.

When Does a Seller's Demand Constitute a Breach?

A seller's insistence on extra payments after an agreement can manifest in various forms, such as:

Inflation or Cost Increases: Sellers may claim rising material costs justify higher payments. However, unless the contract includes a price adjustment clause, this is not permissible. The risk of cost fluctuations typically falls on the seller under the principle of res perit domino (the thing perishes with the owner).
Errors or Miscalculations: If a seller underquotes due to mistake, Article 1361 allows reformation of the contract only if the mistake is mutual and proven in court. Unilateral mistakes do not entitle the seller to demand more without the buyer's agreement.
Hidden Fees or Charges: Demands for undisclosed taxes, shipping, or handling fees post-agreement may breach implied warranties of good faith (Article 19, Civil Code, on abuse of rights).
Force Majeure or Fortuitous Events (Article 1174): Extraordinary events like natural disasters might excuse performance but do not automatically allow price increases. The seller must prove the event directly caused the need for additional funds, and even then, the buyer may opt for contract termination rather than paying more.

Such demands often amount to a breach of contract under Article 1169, where delay or non-performance triggers liability. If the seller refuses delivery without the extra payment, this constitutes default, entitling the buyer to remedies.

Buyer's Remedies Under the Civil Code

Buyers facing such demands have several legal avenues to enforce their rights:

Specific Performance (Article 1191): The buyer can compel the seller to fulfill the original terms through a court action for specific performance. This is common in unique transactions, like real property sales, where damages alone are insufficient.
Rescission or Resolution (Article 1191): If the breach is substantial, the buyer may rescind the contract, recovering any payments made plus interest and damages. Rescission restores parties to their pre-contract status.
Damages (Articles 1170-1174): Buyers can claim actual damages (e.g., costs incurred due to delay), moral damages (for mental anguish), exemplary damages (to deter similar conduct), and attorney's fees. Negligence or bad faith by the seller strengthens these claims.
Injunction: In urgent cases, buyers may seek a temporary restraining order or preliminary injunction to prevent the seller from disposing of the goods or property to third parties.

To pursue these, buyers should first send a formal demand letter outlining the breach and seeking compliance. If ignored, file a complaint with the appropriate court (Municipal Trial Court for small claims under P1,000,000, or Regional Trial Court for larger amounts).

Prescription periods apply: Actions based on written contracts prescribe in 10 years (Article 1144), while oral ones in 6 years (Article 1145).

Consumer Protection Under Special Laws

For consumer transactions, additional layers of protection exist:

Consumer Act of the Philippines (Republic Act No. 7394): This law safeguards buyers against deceptive, unfair, and unconscionable sales acts. Article 50 prohibits misleading representations about prices, and Article 52 deems unconscionable any gross disparity in obligations. Demanding extra payments could be seen as an unfair trade practice, allowing buyers to file complaints with the Department of Trade and Industry (DTI). Remedies include refunds, replacements, or price reductions.
Price Act (Republic Act No. 7581): Regulates prices during emergencies but also addresses profiteering. In non-emergency contexts, it empowers the DTI to investigate arbitrary price hikes.
E-Commerce Act (Republic Act No. 8792): For online sales, electronic contracts are binding, and sellers cannot alter terms post-confirmation without consent.

Consumers can avail of administrative remedies through the DTI's Fair Trade Enforcement Bureau, which offers mediation and can impose fines on erring sellers.

Special Contexts: Real Estate, Services, and Goods

Real Estate Transactions

In property sales, demands for additional payments are common due to complexities like taxes or development costs.

Maceda Law (Republic Act No. 6552): Protects buyers in installment sales of residential realty. If a seller demands extras beyond the agreed installments, buyers can enforce the original schedule. After paying at least two years' worth, buyers gain rights to refunds (50% of payments minus penalties) upon default, or grace periods.
Subdivision and Condominium Buyer's Protective Decree (Presidential Decree No. 957): Requires full disclosure of costs. Post-agreement demands violate Section 23, allowing buyers to demand compliance or rescission with refunds.

Buyers should verify titles and annotations at the Registry of Deeds to prevent hidden encumbrances leading to extra costs.

Sales of Goods and Services

Warranty Against Hidden Defects (Articles 1547-1560, Civil Code): If defects emerge post-sale requiring extra payments for repairs, the seller is liable, not the buyer.
Service Contracts: In construction or professional services, if costs overrun due to seller negligence, the buyer isn't obligated to pay more unless agreed via change orders.

For imported goods, fluctuations in forex or tariffs are seller risks unless specified.

Defenses Sellers May Raise and Buyer Counterarguments

Sellers might argue:

Novation (Article 1291): Claiming a new agreement supersedes the old. Buyers can counter that novation requires express consent and extinguishment of the original obligation.
Estoppel: If the buyer acquiesces to the demand. Buyers should avoid partial payments or acknowledgments that could imply agreement.
Custom or Industry Practice: Unless incorporated into the contract, this doesn't override express terms.

Buyers should document all communications to refute such defenses.

Preventive Measures and Practical Advice

To avoid disputes:

Draft Clear Contracts: Include clauses on price finality, no hidden fees, and dispute resolution.
Due Diligence: Verify seller credibility through references or DTI registrations.
Seek Legal Advice: Consult a lawyer before signing, especially for high-value deals.

If a demand arises, negotiate amicably first, but escalate to authorities if needed. Small claims courts offer expedited resolution for amounts up to P1,000,000 without lawyers.

Conclusion

Philippine law robustly protects buyers from sellers' post-agreement demands for additional payments, viewing such actions as breaches of the sacred mutuality of contracts. Through the Civil Code's remedies, consumer protection statutes, and specialized laws, buyers can enforce original terms, seek compensation, or exit unfavorable deals. Awareness of these rights empowers buyers to transact confidently, fostering a fair marketplace. In cases of doubt, prompt legal consultation is essential to preserve claims within prescription periods.