52 SM Land VS Bcda

52 SM LAND VS BCDA
FACTS
BCDA Bases Conversion and Development Authority opened for

disposition and development its Bonifacio South Property pursuant
to RA 7227 Bases Conversion and Development Act of 1992
SM Land Inc submitted to the BCDA unsolicited proposals for the
development of the lot
BCDA then entered into negotiations witn SM Land until BCDA finally
accepted the terms of the final unsolicited proposal
Thereafter, their agreement was reduced into writing through the
issuance of the Certification of Successful Negotiations in 2010
It was agreed that BCDA accepted SM Lands unsolicited proposal
and declared SMLI eligible to enter into the proposed Joint Venture
activity.
It also agreed to subject SM Lands Original Proposal to Competitive
Challenge pursuant to NEDA Joint Venture Guidelines, which
competitive challenge process shall be immediately implemented
following the Terms of Reference.
Moreover, said Certification provides that the BCDA shall commence
the activities for the solicitation for comparative proposals. Years
later however, the BCDA through the issuance of Supplemental
Notice No. 5 terminated the competitive challenge for the selection
of BCDAs joint venture partner for the development of a portion of
Fort Bonifacio.
SMLI, argued that BCDAs unilateral termination of the competitive
challenge is a violation of SMLIs rights as an original proponent and
constitutes abandonment of BCDAs contractual obligations. BCDA,
on the other hand, responded that it is justifiable since NEDA JV
Guidelines is a mere guideline and not a law, and that the
Government has a right to terminate the competitive challenge
when the terms are disadvantageous to public interest.
ISSUE
Whether BCDA and SM land have a contract that would bestow upon
the latter the right to demand that its unsolicited proposal be
subjected to a competitive challenge
HELD
There exists a valid agreement between SMLI and BCDA
Article 1305 of the New Civil Code defines a contract as a meeting

of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service.
It is a juridical convention manifested in legal form, by virtue of
which one or more persons bind themselves in favor of another or
others, or reciprocally, to the fulfilment of a prestation to give, to do,
or not to do. The succeeding Article 1318 of the Code lays down the
essential requisites of a valid contract, to wit:
(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract; and
(3) Cause of the obligation which is established.
In the case at bar, there is, between BCDA and SMLI, a perfected
contracta source of rights and reciprocal obligations on the part of
both parties. Consequently, a breach thereof may give rise to a
cause of action against the erring party.
The first requisite, consent, is manifested by the meeting of the

offer and the acceptance upon the thing and the cause which are to
constitute the contract.2 In the case at bar, when SMLI
submitted the first Unsolicited Proposal to BCDA on
December 14, 2009, the submission constituted an offer to
undertake the development of the subject property. BCDA
then entered into negotiations with SMLI until the BCDA
finally accepted the terms of the final unsolicited
proposal. Their agreement was thereafter reduced into writing
through the issuance of the Certification of Successful Negotiations
where the meeting of the parties minds was reflected in this wise:
o NOW, THEREFORE, for and in consideration of the

foregoing, BCDA and SMLI have, after successful
negotiations pursuant to Stage II of Annex C xxx, reached
an agreement on the purpose, terms and conditions on the
JV development of the subject property, which shall become
the terms for the Competitive Challenge pursuant to Annex C
of the JV Guidelines xxx.4
(emphasis ours)
Then, to manifest their assent to the terms thereof and their

respective obligations, both partiesBCDA and SMLI, represented by
Gen. Narciso L. Abaya and Ms. Ana Bess Pingol, respectively
affixed their signatures on the Certification of Successful
Negotiations and had it notarized on August 6, 2010.
Cause, on the other hand, is the essential reason which moves the
parties to enter into the contract. It is the immediate, direct and
proximate reason which justifies the creation of an obligation
through the will of the contracting parties. Complementing this is
Article 1350 of the New Civil Code which provides that [i]n onerous
contracts the cause is understood to be, for each contracting party,
the prestation or promise of a thing or service by the other. As
such, the cause of the agreement in the case at hand is their
interest in the sale or acquisition and development of the
property and their undertaking to perform their respective
obligations, among others, as reflected in the Certificate of
Successful Negotiations and in the Terms of Reference (TOR)
issued by BCDA.
Lastly, object certain refers to the subject matter of the contract. It
is the thing to be delivered or the service to be performed. Here,
when the BCDA Board issued, on August 6, 2010, the
Certification of Successful Negotiations, it not only accepted
SMLIs Unsolicited Proposal and declared SMLI eligible to
enter into the proposed JV activity. It also agreed to subject
[SMLI]s Original Proposal to Competitive
Challenge pursuant to Annex C [of the NEDA JV Guidelines],
which competitive challenge process shall be immediately
implemented following the [TOR] Volumes 1 and 2. Moreover,
said Certification provides that the BCDA shall, thus, commence the
activities for the solicitation for comparative proposals xxx starting
on August 10, 2010, on which date [SMLI] shall post the required
Proposal Security xxx.
The elements of a valid contract being present, there thus exists
between SMLI and BCDA aperfected contract, embodied in the
Certification of Successful Negotiations, upon which certain rights
and obligations spring forth, including the commencement of
activities for the solicitation for comparative proposals.
ISSUE no. 2
W/N the NEDA JV Guidelines has the binding effect and

force of law
Yes. Administrative issuances, such as the NEDA

JV Guidelines, duly promulgated pursuant to the rule-making power
granted by statute, have the force and effect of law. Being an issuance in
compliance with an executive edict, the NEDA JV Guidelines has the same
binding effect as if it were issued by the President himself, who
parenthetically is a member of NEDA. As such, no agency or
instrumentality covered by the JV Guidelines can validly deviate from the
mandatory procedures set forth therein, even if the other party
acquiesced therewith or not.

52 SM Land VS Bcda

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What is the issue in the case?

What are the elements of a valid contract according to the case?

52 SM LAND VS BCDA

BCDA Bases Conversion and Development Authority opened for

There exists a valid agreement between SMLI and BCDA

Article 1305 of the New Civil Code defines a contract as a meeting

(1) Consent of the contracting parties;

The first requisite, consent, is manifested by the meeting of the

o NOW, THEREFORE, for and in consideration of the

Then, to manifest their assent to the terms thereof and their

W/N the NEDA JV Guidelines has the binding effect and

Yes. Administrative issuances, such as the NEDA

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