Supreme Court Rules Acknowledgement Receipt Constitutes a Contract to Sell, Not a Contract of Sale

In the case of Chavez, et al. v. Spouses Gopez, G.R. No. 242366, 26 February 2025, the Supreme Court ruled that the absence of an express stipulation reserving ownership in an Acknowledgment Receipt (“AR”) does not automatically render it a Contract of Sale.

The Supreme Court held that the AR issued by the buyer, Spouses Gopez, constitutes a Contract to Sell. As such, Chavez, et al., the seller may validly terminate the contract upon the non-fulfillment of the conditions by Spouses Gopez.

The case stemmed from a Petition for Specific Performance and Damages filed by Spouses Gopez against Chavez, et al. Spouses Gopez sought to acquire Chavez, et al.’s properties, agreeing to pay ₱5 million as down payment and to prepare the necessary documentation. Gopez initially paid ₱200,000 as earnest money and issued an AR to formalize the agreement.

Due to delays in the preparation of contracts and failure to pay the full down payment, Chavez, et al. withdrew from the sale.

Spouses Gopez argued that the transaction was in the nature of a Contract of Sale hence, Chavez, et al. could be compelled to transfer ownership of the properties. To support their claim, they cited the payment of earnest money and the absence of any express reservation of ownership in the AR.

Chavez, et al., on the other hand, contended that the parties intended to enter into a Contract to Sell. He further argued that Spouses Gopez failed to fulfill their obligations under the agreement hence, he was entitled to rescind the contract.

The SC ultimately ruled in favor of Chavez, et al., holding that the key characteristic of a Contract to Sell is the lack of consent from the seller to transfer ownership of the subject. The Court cited relevant jurisprudence stating that even in the absence of an express stipulation to that effect, the intention of the parties to execute a Contract to Sell may be implied from the terms of the agreement. Thus, the SC ruled that even without an explicit reservation of ownership in the AR, the agreement remained a Contract to Sell.

Additionally, the Court clarified that while earnest money is typically associated with a perfected Contract of Sale, it may also be given in a Contract to Sell to represent the seller’s opportunity cost of not entertaining other buyers. The full text is available in this link.