Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract. (Civil Code)


Effect where price is simulated.

  1. If the act is shown to have been in reality a donation or some other act or contract, the sale is void but the contract may be valid as a donation.
  2. If the contract is not shown to be a donation or any other act or contract transferring ownership because the parties do not intent to be bound at all, the ownership of the thing is not transfered. The contract is void and inexistent. 

● If there is no price to support a contract of sale, then it is void for lack of cause or consideration.

● A contract of purchase and sale is null and null and void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to vendor.

●  When the price is simulated because neither party to the deed of sale had any intention whatsoever that the amount will be paid, the sale is void. (Yu Bun Guan vs Ong, G.R. No. 144735, October 18, 2001)


Is there a need of an independent action to rescind or annul a simulated contract of sale?

A simulated contract of sale is without any cause or consideration, and is, therefore, null and void; in such case, no independent action to rescind or annul the contract is necessary, and it may be treated as non-existent for all purposes. A void or inexistent contract is one which has no force and effect from the beginning, as if it has never been entered into, and which cannot be validated either by time or ratification. A void contract produces no effect whatsoever either against or in favor of anyone; it does not create, modify or extinguish the juridical relation to which it refers. (Heirs of Ureta vs Heirs of Ureta, G.R. No. 165748, September 14, 2011)