Can a Sales Agent’s Promise to Issue a Contract to Sell After Payment of a Reservation Fee Constitute an “Advertisement” Under PD 957, and Does the Developer’s Failure to Honor the Promise Entitle the Buyer to a Refund?

The Supreme Court, in Empire East Land Holdings, Inc. v. John Edrem Bautista, G.R. No. 272556, February 3, 2026, clarified that a sales agent’s promise to issue a Contract to Sell after payment of a reservation fee is not an “advertisement” under Section 19 of Presidential Decree No. 957 (PD 957). However, the Court held that the buyer may still be entitled to a refund when the developer fails to honor the promise.

A Sales Agent’s Individual Promise Is Not an “Advertisement” Under PD 957

Section 19 of PD 957 makes developers liable for facilities, improvements, or other forms of development represented or promised in brochures, advertisements, and other sales propaganda disseminated by the developer or its agents.

The Court, however, applied the principle of ejusdem generis to determine the meaning of the phrase “or any other form” in the provision.

Because Section 19 specifically refers to newspapers, radio, television, leaflets, and circulars, the Court found that these forms share a common characteristic: they are mass media directed to the public generally. Thus, “or any other form” refers to similar forms of mass-media advertising, not a representation made by a sales agent to a specific individual buyer.

Accordingly, the sales agent’s representation concerning the issuance of a Contract to Sell did not constitute an advertisement under Section 19.

The Buyer May Still Recover the Reservation Fee

The Court emphasized that its ruling does not mean that buyers are without protection when a sales agent makes a promise that the developer later fails to fulfill.

The buyer may invoke the Civil Code provisions on agency, obligations, and contracts.

In the aforementioned case, the reservation agreement created reciprocal obligations: Bautista was required to pay the reservation fee, while Empire East was obliged to issue the Contract to Sell.

When Empire East failed to issue the Contract to Sell despite Bautista’s payment, the Court held that the reservation agreement could be rescinded under Article 1191 of the Civil Code.

Under Article 1385 of the Civil Code, rescission carries with it the obligation of mutual restitution. Thus, the buyer was entitled to recover the amount paid under the reservation agreement.

Key Takeaway for Real Estate Buyers

The Empire East ruling establishes an important distinction:

A sales agent’s individual representation may not be an “advertisement” under Section 19 of PD 957, but it may nevertheless create enforceable contractual obligations.

Therefore, when a buyer pays a reservation fee in exchange for the developer’s undertaking to issue a Contract to Sell, and the developer fails to perform that undertaking, the buyer may seek rescission and restitution under Articles 1191 and 1385 of the Civil Code. The case thus provides an important reminder: the failure of a sales agent’s promise to qualify as an advertisement under PD 957 does not necessarily defeat the buyer’s right to a refund. The buyer may still obtain relief based on the reciprocal obligations created by the reservation agreement.