Remedy for a Broken Promise to Buy Real Property in the Philippines A comprehensive doctrinal and practical guide (updated to 2025)

1. The Landscape: What kind of “promise” was broken?

Kind of Undertaking	Typical Instrument	Key Feature	Governing Rules
Contract of Sale	Deed of Absolute Sale (may be preceded by a notarized Contract of Sale)	Ownership transfers upon delivery; price is certain	Civil Code arts. 1458 – 1637
Contract to Sell	“Contract to Sell,” “Reservation Agreement,” or “Pre-Need Purchase Agreement”	Ownership reserved by seller until buyer fully pays or meets a suspensive condition	Case law: San Miguel Properties v. Huang (G.R. 135634, June 30 2000), Spouses Abalos v. CA
Option Contract	“Option to Purchase”	Separate consideration keeps offer irrevocable for a fixed period	Civ. Code arts. 1319, 1324; Spouses Rodriguez v. CA
Letter/Promise of Sale	LOI, Memorandum of Agreement, SMS/e-mail	Mere offer unless accepted in writing; may fall under Statute of Frauds	Civ. Code art. 1403(2), art. 1356
Installment Sale of Residential Real Estate	Maceda-Law compliant “Contract to Sell” or subdivision/condo CTS	Special buyer protection and refund rights	Rep. Act 6552 (Maceda Law), P.D. 957 & HLURB/DHSUD rules

Before choosing a remedy, determine first which of the above was executed and why performance failed (buyer’s breach vs. seller’s breach vs. both).

2. Substantive Remedies Under the Civil Code

Breached Party	Primary Relief	Authority	Notes
Buyer (seller refuses to convey)	Specific performance plus damages	Arts. 1165, 1170; Heirs of Malate v. Gamboa	File an ordinary civil action; court may compel seller to execute a deed and deliver title.
	Rescission (resolution) with restitution & damages	Arts. 1191, 1381	Proper if reciprocal obligations exist (e.g., seller already delivered possession but buyer paid nothing).
	Refund of earnest money or installments	Art. 1482; R.A. 6552 §3	Earnest money forms part of the price; if sale fails due to seller, buyer may recover it with interest.
Seller (buyer reneges)	Cancellation / Rescission	Art. 1592 (for cash sales); Art. 1191 (contracts to sell)	Requires judicial or notarial cancellation unless Maceda Law procedure applies.
	Forfeiture of earnest money	Art. 1482; jurisprudence	Allowed if parties so stipulated; cannot be unconscionable (Art. 1229).
	Action for damages (lost profit, moral, exemplary)	Arts. 1170, 2200-2229	Must be proven; moral damages require bad faith or fraud.

Tip: Rescission under Art. 1191 is not the same as rescission under Arts. 1380-1383 (lesion or vitiated consent). The former is a principal action; the latter is subsidiary.

3. Statutory Buyer-Protection Regimes

Maceda Law (R.A. 6552, 1972) – Applies to installment buyers of residential real estate (house-and-lot, lot only, condominium) outside subdivision/condo projects covered by P.D. 957.
- If buyer has paid ≥2 years of installments: right to a grace period of one month per year paid and, if cancelled, to a cash-surrender value (CSV) equal to 50 % of total payments, plus 5 % more per additional year (max 90 %).
- Cancellation requires 30-day written notice + 30-day notarial notice of cancellation.
P.D. 957 (Subdivision and Condominium Buyers Protective Decree, 1976) – Regulates developers. Failure to deliver title or complete development despite buyer compliance lets the buyer:
- Recover all payments with interest;
- Demand specific performance; and/or
- Seek administrative, civil, and even criminal sanctions against the developer (Sec. 38, P.D. 957).
Other Special Laws
- R.A. 4726 (Condominium Act) – Remedies parallel to P.D. 957 if the project is a true condominium.
- R.A. 11032 (Ease of Doing Business Act) – Mandates time-bound processing of subdivision/condo titles; failure may bolster a damages case.
- Batas Pambansa 220 projects – Similar protections as P.D. 957 for socialized housing.

4. Procedural Gateways: Where and How to Sue

Forum	Jurisdiction	Typical Cases
Regional Trial Court (RTC)	> ₱2 million in assessed value OR actions involving title to real property	Specific performance, rescission, annulment of title
Metropolitan/ MTC	≤ ₱2 million or ejectment	Small property disputes, “unlawful detainer” if possession already delivered
DHSUD-Adjudication (formerly HLURB)	P.D. 957 / Maceda Law disputes, subdivision/condo issues	Refunds, developer sanctions
Barangay Katarungang Pambarangay	Compulsory for purely civil actions where parties reside in same city/municipality	Required unless an exception applies; tolls prescription
Arbitration	If CTS or DOS contains an arbitration clause (common in developer forms)	Enforcement via ADR Act (R.A. 9285); result is binding & enforceable by RTC

Prescription periods

Action on written contract: 10 years (Art. 1144).
Action on implied or oral contracts: 6 years (Art. 1145).
Quasi-delict or abuse-of-rights (Art. 20/21): 4 years.
Fraud must be filed within 4 years from discovery (Art. 1391).

5. Effect of the Statute of Frauds and Documentation Gaps

Contracts for the sale of real property must be in writing (Art. 1403[2][e]) to be enforceable; but once fully or partly executed (e.g., payment + acceptance), they become enforceable by exception.
Part performance doctrine: delivery of possession + partial payment may take the contract out of the Statute of Frauds (Art. 1405).
Electronic documents (emails, scanned contracts) are admissible under the E-Commerce Act (R.A. 8792) and the Rules on Electronic Evidence.

Even a broken text-message promise can ground a civil action if combined with proof of payment and the seller’s acceptance.

6. Damages Computation and Practical Litigation Issues

Actual/Compensatory – Out-of-pocket expenses, loan interest, broker’s fees, cost to rent while waiting for title.
Temperate (Moderate) – If exact damages cannot be proven but a pecuniary loss is undeniable (Art. 2224).
Moral – Allowed when breach is accompanied by fraud, bad faith, or wanton disregard (Montecillo v. Reynes, G.R. 193374, Mar 18 2015).
Exemplary – To set an example; requires showing of egregious conduct (Art. 2232).
Liquidated – Enforceable if not iniquitous (Art. 1229).

Interest: Legal interest is 6 % p.a. on loans or forbearance of money (Bangko Sentral-MB Circular 799). Upon final judgment, 6 % p.a. until satisfaction (Nacar v. Gallery Frames, G.R. 189871, Aug 13 2013).

7. Criminal Liability: When does it arise?

Law	Offense	Penalty
P.D. 957, §38	Selling unlicensed subdivision/condo units, failure to turn over title	Fine ≤ ₱20,000 and/or imprisonment ≤ 10 years
Revised Penal Code	Estafa (Art. 315 §2[a]) for double-selling, pocketing deposits	Prision correccional to prision mayor + fine
R.A. 8799 (Securities Regulation Code)	Selling unregistered condo “investment contracts”	Administrative/criminal sanctions by SEC

Criminal action does not preclude the civil remedies; it may even toll or interrupt prescription of the civil claim (Art. 29, New Civil Code).

8. Jurisprudential Highlights (selected)

Oñate v. Abrogar, G.R. 42522 (Oct 13 1993) – Earnest money binds the sale; failure by seller → buyer may compel execution of deed.
Litonjua v. Court of Appeals, G.R. 117435 (June 5 1997) – Option without separate consideration may be revoked unless buyer has accepted in writing and tendered price within period.
San Miguel Properties, Inc. v. Huang, G.R. 135634 (June 30 2000) – Distinguishes contract to sell from contract of sale; seller may refuse to execute deed until full payment.
Sps. Benito v. CYDC Humanware Corp. (DHSUD Case HLURB — CVR-06/20-041) – Developer liable to refund plus interest for failure to deliver clean title within period.
Montecillo v. Reynes, supra – Moral damages recoverable where seller acted in bad faith in backing out after receiving payments.

9. Negotiated (Out-of-Court) Solutions

Earnest-money refund with penalty – Common compromise: seller returns double the earnest money (Art. 1599 analog).
Novation – Parties may modify price or extend payment schedule (Art. 1291).
Deed of Cancellation & Quitclaim – Avoids litigation; include waiver wording but ensure Maceda/P.D. 957 compliance.
Mediation at DHSUD or barangay – Cost-effective; oftentimes a prerequisite before filing in court.

10. Practical Checklist for Parties

For the aggrieved Buyer ✅ Gather all written communications, official receipts, proof of fund transfers. ✅ Secure a certified copy of the property’s title (Registry of Deeds). ✅ Compute total payments and incidental losses (document them). ✅ Send a notarized demand letter (keeps interest running, may satisfy Maceda notice). ✅ Verify venue clauses and arbitration provisions before filing.

For the aggrieved Seller ✅ Preserve buyer’s default notices and returned checks. ✅ Observe Art. 1592 or Maceda cancellation steps (notarial notice, grace period). ✅ Avoid self-help eviction; secure court order if buyer already in possession. ✅ Keep property taxes current to avoid an equitable defense by buyer.

11. Key Take-Aways

Identify the instrument. The remedy hinges on whether the document is a sale, a contract to sell, or merely an option.
Mind special laws. Installment buyers enjoy powerful refund and grace-period rights under R.A. 6552 and P.D. 957.
Specific performance is favored in Philippine jurisprudence when the seller reneges without valid cause; rescission is subordinate unless performance is impossible.
Cancellation is never automatic. Except for Maceda Law and Art. 1592 procedures, judicial or notarial action is mandatory.
Documentation matters. A written contract or at least partial execution is crucial for enforcement; otherwise, the Statute of Frauds is a barrier.
Damages require proof. Keep receipts and quantify losses; temperate damages bridge evidentiary gaps but courts still want credible bases.
Act within prescriptive periods and use compulsory mediation where required; otherwise, suits may be dismissed outright.

12. Final word

The Philippine legal system offers layered protection for both buyers and sellers—but the party who documents diligently and follows statutory procedures almost always holds the upper hand. When in doubt, send a timely demand letter, observe notice requirements, and seek professional counsel early.