The Principle of Substitution in the Cost Approach: A Legal-Economic Analysis of Philippine Supreme Court Jurisprudence

The principle of substitution holds that an informed purchaser will pay no more for an asset than the cost of an acceptable substitute of comparable utility. The cost of a new substitute is not, however, the value of an existing asset, and neither is necessarily the amount a court will award. This article examines how the Philippine Supreme Court has treated substitution, replacement cost, depreciated replacement cost and the evidence offered to support them. Eight keyword searches of the CD Asia database returned 136 aggregate hits, from which six litigation matters (seven judicial documents) were selected purposively.