Short answer. The valuer's determination becomes binding only once it has been made known to both contracting parties. Until both of you have actually learned of the decision, it has no binding effect on either side, even if the valuer has already privately reached a figure.
What the law says
The determination of the performance may be left to a third person, whose decision shall not be binding until it has been made known to both contracting parties.
Civil Code, Article 1309 — Determination by a Third Person. Read the full provision →
The binding moment is communication, not decision
The statute allows the parties to leave the determination of performance — here, the price — to a third person. But it fixes a specific moment for that determination to take effect: the third person's decision shall not be binding until it has been made known to both contracting parties. The valuer arriving at a figure internally is not itself the operative event; what makes it binding is that both of you have learned of it.
Why the rule requires both parties, not just one
The statute specifies both contracting parties, not just whichever party the third person happens to inform first. If the valuer discloses the figure to you but not yet to the other party, the determination is not yet binding on either of you, because the condition the law sets — that it be made known to both sides — has not been fully satisfied. This protects each party from being held to a figure the other side may not even be aware of yet.
Practical consequences of this timing rule
Until the determination is communicated to both of you, either party generally still has room to raise objections about the process or to argue the determination has not yet taken legal effect. Once it has been made known to both sides, however, the price the valuer set becomes the price the contract fixes for performance, and the parties are expected to perform on that basis going forward, subject to whatever other grounds might otherwise let a party challenge the determination itself.
Why the law ties bindingness to communication
Leaving the price to a third person is meant to give the parties a neutral, workable way to fill a gap they chose not to fix themselves in the contract. But an undisclosed figure sitting in the valuer's notes does not actually let either party know what they owe or are owed, so treating it as binding before either side is aware of it would create obligations neither party could act on. Requiring communication to both sides before the determination binds anyone keeps the mechanism practical: neither party is expected to perform against a number they have not yet been told.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- United Coconut Planters Bank vs. Editha F. Ang and Violeta M. Fernandez, G.R. No. 222448, November 24, 2021 — read the decision on LawPhil →