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Question
D owns Parcel Y and sells to E for PHP 6,000,000. They execute a deed of sale drafted by D’s attorney, identifying the subject as Parcel Y and stating there are no encumbrances and that title is marketable. Unknown to E, D knows Parcel Y is not the subject of the sale: he actually owns Parcel X adjacent to Parcel Y; the deed conveys Parcel Y by mistake. Parcel Y is burdened by an unrecorded mortgage in favor of Bank C and there is a long-standing occupant with a lease on Parcel Y not disclosed. E pays the price and the deed is delivered with the intention that title pass. After discovery of the misdescription and encumbrances, E seeks rescission and damages. (a) Identify the essential contract element defective in these facts and name the doctrine governing it. (b) Is the contract voidable or void? Explain the applicable remedy. (c) How do third-party encumbrances (the mortgage and occupant) affect the remedies and the outcome if E rescinds?