Perfection v. consummation of contract of sale

By Atty. Eduardo T. Reyes III

Is an un-notarized deed of sale valid and effective?

Land sales transactions have become common because of the consciousness that land valuation increases over time with optimum returns.

Yet sometimes in haste, the signing of the deed of sale may come ahead of its notarization. What is the legal implication of having two material dates involving one transaction?

In the recent case of Esteban Yau, substituted by heirs Gloricita S. Yau, Lullete S. Yau, Cliffson S. Yau, and Stevenson S. Yau v. Hon. Ester M. Veloso, Presiding Judge of Branch VI, Regional Trial Court, Cebu City, Ricardo C. Silverio, Sr., and Ricardo S. Silverio, Jr., G.R. No. 200466, which came down on April 19, 2023, the Supreme Court clarified that “perfection of sale” should not be confused with its “consummation.”

The “signing” of the deed of sale is evidence of the “perfection” of the contract, ie., that the seller and buyer have already had “a meeting of the minds” or an agreement as to the price, its terms of payment, and the identity of the land subject of the sale. In turn, “consummation” takes place when there is “delivery” of the land. Delivery, under the law, may take the form of “executing a public instrument,” or its “notarization.” Thus:

“The deed of sale, as it appears in the rollo of this case, has fields for the inscription of the date and place of execution, but these were left blank.  The acknowledgment thereon shows that the deed was notarized on October 8, 2010, a mere twenty-two (22) days after September 16, 2010, and eighteen (18) days removed from the date of Silverio Jr.’s Motion to Discharge. Taking all these circumstances together, we find that the sale of the Cambridge property to Ocampo was perfected on September 16, 2010, and consummated on October 8, 2010, upon the notarization of the deed of sale. A contract of sale is perfected upon the meeting of the parties’ minds upon the object of the contract and price therefor;  but the contract is consummated only upon delivery of the thing sold.  “[W]hen the sale is made through a public instrument, the execution thereof is equivalent to the delive1y of the thing which is the object of the contract, unless the contrary appears or can be inferred. x x x As between the seller and the buyer, the transfer of ownership takes effect upon the execution of a public instrument covering the real property.”

The common notion therefore that an un-notarized deed of sale is invalid, should be clarified. Any contract as a rule, including a contract of sale, is perfected by sheer meeting of the minds of the parties thereto. It does not require any form. It may even be amorphous.

But since a contract of sale requires the “delivery” of the land, then it could be done either by physically transferring possession to the buyer, or by executing a notarized deed of sale. The latter is known as “constructive delivery.” Compliance with this is considered as “consummation” of the contract of sale.

Finally, ownership is deemed transferred to the buyer not upon the “perfection” of the contract of sale, but upon its “consummation.”

            (The author is the senior partner of ET Reyes III & Associates– a law firm based in Iloilo City. He is a litigation attorney, a law professor, MCLE lecturer, bar reviewer and a book author. His website is etriiilaw.com).