The Supreme Court’s decision in XYST Corporation v. DMC Urban Properties Development Inc. emphasizes that a contract requires clear consent to all terms. If a party introduces new conditions or amendments, it constitutes a counter-offer, not an acceptance, preventing the formation of a binding agreement. This ruling clarifies that during real estate negotiations, any changes to the original offer must be unequivocally accepted by all parties to establish a valid and enforceable contract. In this case, XYST Corporation’s proposed changes to a property sale were deemed a counter-offer, leading to the deal’s failure.

Citibank Tower Deal: Did XYST’s Amendments Sink the Sale?

The case revolves around the intended sale of a condominium floor in the Citibank Tower. DMC Urban Properties Development Inc., with prior consent requirements from Citibank N.A., negotiated with Saint Agen Et Fils Limited (SAEFL), later replaced by XYST Corporation, for the sale. XYST Corporation sought to purchase the 18th floor of the Citibank Tower from DMC. However, XYST introduced amendments to the pro-forma Contract to Sell provided by DMC, particularly concerning Citibank N.A.’s conformity, leading to disagreements. Because Citibank N.A. did not consent to XYST’s proposed amendments, DMC called off the deal and offered to return XYST’s reservation fee of P1,000,000.00. This prompted XYST to file a complaint for specific performance with damages, arguing that a perfected contract of sale existed.

At the heart of the dispute is whether the September 14 and 16, 1994 letter agreements constituted a perfected contract to sell. The court needed to determine if DMC could be compelled to fulfill obligations under the agreement. XYST argued a contract existed because of a meeting of the minds on the object and price, pointing to the reservation fee as earnest money confirming the agreement. Conversely, DMC maintained they only entered into a contract to sell, and the element of absolute consent was missing due to XYST’s conditional acceptance, marked by imposed terms and amendments. The critical point of contention was whether XYST’s introduction of new conditions constituted a counter-offer rather than an absolute acceptance of the original offer.

The Supreme Court found that no perfected contract existed. The Court emphasized that contracts are consensual and require a meeting of the minds on definite terms. The Court stated:

Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.

Since XYST introduced amendments, its acceptance wasn’t absolute but a counter-offer, which DMC did not accept. In contractual agreements, parties go through various stages including negotiation, perfection, and consummation. Negotiation spans from initial interest to final agreement; perfection occurs upon agreement on essential terms; and consummation involves fulfilling the agreed terms, leading to the contract’s fulfillment. XYST and DMC were still in the negotiation phase, and since there was no consensus, no perfected contract arose. The Court clarified that in the absence of genuine consent, no agreement exists, which voided the claim for specific performance.

Furthermore, the court rejected XYST’s argument that the reservation fee acted as earnest money. Earnest money solidifies a perfected sale, which didn’t occur in this case due to the lack of consent. Hence, the payment remained merely a refundable reservation fee. Regarding attorney’s fees, the Court ruled that such fees were inappropriately awarded to DMC, referencing Article 2208 of the Civil Code, which stipulates that attorney’s fees are generally not recoverable unless certain exceptional circumstances are present, none of which applied here. Consequently, XYST’s obligation to pay DMC attorney’s fees was removed.

FAQs

What was the key issue in this case?	The main issue was whether a perfected contract existed between XYST Corporation and DMC Urban Properties for the sale of a condominium floor. The Court examined whether XYST’s conditional acceptance constituted a counter-offer, thus preventing contract perfection.
What is the significance of “consent” in contract law?	Consent is a fundamental element of contract law. It signifies a meeting of the minds between parties on the terms of the contract; the acceptance must be absolute and unqualified.
What happens when an acceptance includes changes to the original offer?	If the acceptance modifies or includes additional terms, it becomes a counter-offer. This counter-offer effectively rejects the original offer and requires acceptance from the original offeror.
What are the stages of a contract?	The stages of a contract are negotiation, perfection, and consummation. Negotiation involves preliminary discussions, perfection occurs when there is a meeting of the minds, and consummation is the fulfillment of the contractual obligations.
What is the difference between a reservation fee and earnest money?	A reservation fee secures property availability temporarily. Earnest money, on the other hand, signifies a completed sale and forms part of the purchase price.
Under what conditions can attorney’s fees be awarded?	According to Article 2208 of the Civil Code, attorney’s fees are generally not awarded unless there is a specific legal provision or contractual stipulation allowing for them. This may be the case when exemplary damages are awarded or the defendant acted in bad faith.
What was the outcome regarding the attorney’s fees in this case?	The Supreme Court removed the award of attorney’s fees to DMC, because none of the circumstances for its recovery under Article 2208 of the Civil Code were present.
What was the final ruling of the Supreme Court?	The Supreme Court denied XYST’s petition, affirmed the RTC decision, and ruled that no perfected contract existed, while deleting the award of attorney’s fees to DMC.

In summary, the Supreme Court affirmed the importance of unqualified consent in contract law, emphasizing that introducing new conditions during acceptance constitutes a counter-offer, thereby preventing the creation of a binding agreement. This ruling provides critical guidance on real estate transactions, clarifying the necessity of explicit and absolute consent to ensure enforceable contracts.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: XYST CORPORATION VS. DMC URBAN PROPERTIES DEVELOPMENT INC., G.R. No. 171968, July 31, 2009