LEIZL A.

VILLAPANDO November 17, 2019

LAW1828469

1. Does notice of a creditor’s decision to exercise his/her option need to be coupled with
actual payment of the price? Explain. (2 points)

ANSWER:

No, notice of a creditor’s decision to exercise his/her option need not be coupled with
actual payment of the price. In the case of Nietes vs CA, the Court explained that in the
case of an option to buy, creditor may validly and effectively exercise his right by merely
advising the debtor of the former’s decision to buy and expressing his readiness to pay
the stipulated price, provided that the same is available and actually delivered to the
debtor upon execution and delivery by him of the corresponding deed of sale. Unless and
until the debtor shall have done this, the creditor is not and cannot be in default in the
discharge of his obligation to pay. In other words, notice of the creditor’s decision to
exercise his option to buy need not be coupled with actual payment of the price, so long
as this is delivered to the owner of the property upon performance of his part of the
agreement. (Nietes v. CA 46 SCRA 654 [1972].)

2. What are the principles laid down in the case of Sanchez v Rigos? (2 points)

ANSWER:

The principles laid down in the case of Sanchez vs. Rigos as as follows:
-Promise in an accepted unilateral promise to sell must prove existence of
consideration.-In order that said unilateral promise may be “binding” upon the promisor,
Article 1479 requires the concurrence of a condition, namely, that the promise be
“supported by a consideration distinct from the price.” Accordingly, the promisee cannot
compel the promisor to comply with the promise, unless the former establishes the
existence of said distinct consideration. In other words, the promise has the burden of
proving such consideration (Sanchez v. Rigos 45 SCRA 368, [1972].)

-Accepted promise to sell is an offer to sell and when accepted becomes a

contract of sale. -In accepted unilateral promise to sell, since there may be no valid
contract without a cause or consideration, the promisor is not bound by his promise and
may, accordingly withdraw it. Pending notice of its withdrawal, his accepted promise
partakes, however, of the nature of an offer to sell which if accepted, results in a
perfected contract of sale (Sanchez v. Rigos 45 SCRA 368, [1972].)
 -Exceptions not favored, unless dearly intended.- The decision in
SOunthwestern Sugar So Molasses Co. vs. Atlantic Gulf aand Pacific Company, holding
Article 1324 is modified by Art. 1479 of the Civil Code, in effect, considers the latter as
an exception to the former, exceptions are not favored, unless the intention to the
contracry is clear, and it is not so insofar as said two articles are concerned (Sanchez v.
Rigos 45 SCRA 368, [1972].)

3. Did the Supreme Court apply the Sanchez case in the case of Vasquez v Court of
Appeals? Why or why not? (3 points)
ANSWER:

No, the Supreme Court did not apply the Sanchez case in the case of Vasquez vs. Court
of Appeals. In the case of Vasquez vs. CA, it is clear that the right to repurchase was not
supported by consideration distinct from the price. The rule is that the promise has the
burden of proving such consideration. Unfortunately, the private respondents, promises in
the right to repurchase failed to prove such consideration. They did not even allege the
existence thereof in their complaint.

In order that the Sanchez case can be applied, the evidence must show that the private
respondents accepted the right to repurchase. In the Sanchez case, the Court affirmed the
lower court’s decision although the promise to sell was not supported by a consideration
distinct from the price. It was obvious that Sanchez, the promisee, accepted the option to
buy before Rigos, the promisor, withdrew the same. Under such circumstances, the
option to purchase was converted into a bilateral contract of sale which bound both
parties.

4. Do you agree with the court ruling in Vasquez v Court of Appeals? Explain. (3
points)

ANSWER:

Yes, I agree with the ruling of the Supreme Court. In this case, there was no explicit
acceptance of the “Right to Repurchase”. The said document was signed by petitioners
Cipriano Vasquez and the respondents did not sign the offer. Acceptance should be made
by the promisee, in this case, the private respondents and not the petitioners herein. It
would be absurd to require the promisor of an option to buy to accept his own offer
instead of the promisee to whom the option is given.

Further, the annotation and registration at the back of the certificate of title of the
petitioners cannot be considered as acceptance of the right to repurchase. Annotation at
 the back of the certificate of title of registered land is for the purpose of binding
purchasers of such registered land.

Finally, in this case, there was no valid acceptance, thus the right to repurchase can’t be
perfected as compared to Sanchez vs. Rigos case as discussed in the preceding number.

5. Differentiate an “option to buy” from a “right of first refusal”. (2 points)

ANSWER:

An option to buy, as used in the law of sales, is a continuing offer or contract by which
the owner stipulates with another that the latter shall have the right to buy the property at
a fixed price within a certain time, or under, or in compliance with, certain terms and
conditions, or which gives to the owner of the property the right to sell or demand a sale.
It is also sometimes called an “unaccepted offer.” An option is not of itself a purchase,
but merely secures the privilege to buy. It is not a sale of property but a sale of the right
to purchase. It is simply a contract by which the owner of the property agrees with
another person that he shall have the right to buy his property at a fixed proce within a
certain time. He does not sell his land; he does not then agree to sell it; but he does sell
something, that is, the right or privilege to buy at the election of option of the other party.
Its distinguishing characteristic is that it imposes no binding obligation on the person
holding the option, aside from the consideration for the offer. Until acceptance, it is not,
properly speaking, a contract, and does not vest, transfer, or agree to transfer, any title to,
or any interest or right in the subject matter, but is merely a contract by which the owner
of property gives the optionee the right or privilege of acception the offer and buying the
property on certain terms. (Adelfa Properties v. CA 310 Phil 623 [1995].)

On the other hand, the right of first refusal is a contractual right that gives its holder the
option to enter into a business transaction with the owner of something, according to
specified terms, before the owner is entitled to enter into the transaction with a third
party.

In the law on sales, the so-called “right of first-refusal” is an innovative juridical relation.
Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458
of the Civil Code, neither can the right of first refusal understood in its normal concept,
per se be brought within the purview of an option under the second paragraph of Article
1479, aforeqouted, or possibly of an offer under Article 1319 of the same Code. (Ang Yu
v. CA 238 SCRA 602 (1994)

6. What are the various stages of contract? Describe each stage. (2 points)
 ANSWER:

The various stages of contract of sale are as follows:

a. Negotiation- covering the period from the time the prospective contracting
parties indicate interest in the contract to the time the contract is perfected;
b. Perfection- takes place upon the concurrence of the essential elements of the
sale which are the meeting of the minds of the parties as to the object of the
contract and upon the price; and
c. Consummation- which begins when the parties perform their respective
undertakings under the contract of salem culminating in the extinguishment
thereof (San Miguel Properties Philippines, Inc. vs. Huang 336 SCRA
737[2000].)

7. Is a “right of first refusal” covered by the statute of frauds? Explain. (2 points)

ANSWER:

No, a “right of first refusal” is not covered by the Statute of Frauds. A right of first
refusal is not among those listed as unenforceable under the Statute of Frauds---as such, it
need not be written to be enforceable and may be proven by oral evidence. A right of first
refusal is not by any means a perfected contract of sale of real property. (Rosencor v.
Inquing 354 SCRA 119 [2001].)

Furthermore, the application of Article 1403, par.2 € of the New Civil Code presupposes
the existence of a perfected albeit unwritten, contract of sale. A right of first refusal such
as the one involved in the instant case, is not by any means a perfected contract of sale of
real property. At best, it is a contractual grant, not of the sale of the real property
involved, but of the right of first refusal over the property to be sold. It is thus evident,
that the statute of fraud does not contemplate cases involving a right of first refusal. As
such, a right of first refusal need not be written to be enforceable and may be proven by
oral evidence. (Rosencor v. Inquing 354 SCRA 119 [2001].)

8. Can a contract of sale entered into in violation of a third party’s “right of first
refusal” be rescinded so that the said third party can exercise said “right of first
refusal”? (2 points)

ANSWER:

Yes, the contract of sale entered into in violation of a party’s “right of first refusal” can
be rescinded. The prevailing doctrine is that a contract of sale entered into in violation of
a right of first refusal of another person, while valid is rescissible; however, where there
 is no showing of bad faith on the part of the vendee, the Deed of Absolute Sale may not
be rescinded, and the remedy of the person with the right of first refusal is an action for
damages against the vendor. (Rosencor v. Inquing 354 SCRA 119 [2001].)

9. Can the validity of a sale of real property embodied in a private document be

impugned? (2 points)

ANSWER:

No, the validity of a sale of real property embodied in a private document cannot be
impugned. The sale of land in a private instrument is valid and binding upon the parties,
for the time-honored rule is that even a verbal contract of sale of real estate produces
legal effects between the parties since sale is a consensual contract and is perfected by
mere consent. (Carbonell vs. Court of Appeals, 69 SCRA 99 [1976] as as cited in DE
LEON AND DE LEON, JR., COMMENTS AND CASES ON SALES AND LEASE
[2014 ed.].)

10. Is a sale of land appearing in a private document binding on third parties? (2

points)

ANSWER:

No, a sale of land appearing in a private document is not binding on third parties. While
a sale of a piece of land appearing in a private deed is binding between the parties, it
cannot be considered binding on third persons, if it is not embodied in a public instrument
and recorded in the Registry of Property. (Secuya v. vda de Selma 326 SCRA 244
[2000].)
For the sale of real property to be effective agains third persons, the sale must be
registered in the registry of Deeds (or Property) of province or city where the property is
located. The sale must be in public documents for otherwise, the registration will be
refused.
The real purpose of registration of a contract of sale being to give notice to third persons
and to protect the buyer against claims of third persons and to protect the buyer against
claims of third persons arising from subsequent alienations by the vendor, it is certainly
not necessary to give efficacy to the deed of sale, as between the parties to the contract
(Phil. Suburban Dev. Corp. vs. The Auditor in General, 63 SCRA 397 [1975], as as cited
in DE LEON AND DE LEON, JR., COMMENTS AND CASES ON SALES AND
LEASE [2014 ed.].)
11. When is a statute of frauds applicable? Refer to the case of Inigo v. Manoloto. (2
points)

ANSWER:

The Statute of Frauds is applicable only to executory contracts, not to contracts either
totally or partially performed. Thus, where a contract of sale is alleged to be
consummated, it matters not that neither the receipt for the consideration nor the sale
itself was in writing, because oral evidence of the alleged consummated sale is not
forbidden by the Statute of Frauds and may not be excluded in Court (Inigo v. Estate of
Maloto 21 SCRA 246, [1967].).

12. Is the sale of a piece of land where the authority of the agent to sell is not in writing
valid or void?

ANSWER:

A sale of a piece of land when made through an agent is void unless the agent’s authority
is in writing as provided in article 1874 of the Civil Code. To wit:

“Art. 1874. When a sale of a piece of land or any interest therein is through an
agent, the authority of the latter shall be in writing; otherwise, the sale shall be
void. (n)”

In addition, as stated in jurisprudence, “when the sale of a piece of land or any interest
therein is through an agent, the authority of the latter shall be in writing; otherwise, the
sale shall be void” (City Lite v. CA 325 SCRA 385 [2000].)

13. What are the requirements for an electronic signature to be equivalent to the
signature of a person on a written document? (2 points)

ANSWER:
The requirements for an electronic signature to be equivalent to the signature of a person
on a written document are stated in Section 8 of the Electronic Commerce Act Republic
Act. 8792. To wit:

“Sec. 8. Legal Recognition of Electronic Signatures. An electronic signature on the

electronic document shall be equivalent to the signature of a person on a written
document if that signature is proved by showing that a prescribed procedure, not alterable
by the parties interested in the electronic document, existed under which:
 (a) A method is used to identify the party sought to be bound and to indicate said
party’s access to the electronic document necessary for his consent or approval through
the electronic signature;

(b) Said method is reliable and appropriate for the purpose for which the
electronic document was generated or communicated, in the light of all the
circumstances, including any relevant agreement;

(c) It is necessary for the party sought to be bound, in order to proceed further
with the transaction, to have executed or provided the electronic signature; and

(d) The other party is authorized and enabled to verify the electronic signature and
to make the decision to proceed with the transaction authenticated by the same.”

14. What are the applicable rules in a sale by auction? (2 points)

ANSWER:

The applicable rules in a sale of auction are found in Article 1476 of the Civil Code. To
wit:
“Art. 1476. In the case of a sale by auction:
(1) Where goods are put up for sale by auction in lots, each lot is the subject of a
separate contract of sale.

(2) A sale by auction is perfected when the auctioneer announces its perfection by the
fall of the hammer, or in other customary manner. Until such announcement is made,
any bidder may retract his bid; and the auctioneer may withdraw the goods from the
sale unless the auction has been announced to be without reserve.

(3) A right to bid may be reserved expressly by or on behalf of the seller, unless
otherwise provided by law or by stipulation.

(4) Where notice has not been given that a sale by auction is subject to a right to bid
on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ
or induce any person to bid at such sale on his behalf or for the auctioneer, to employ
or induce any person to bid at such sale on behalf of the seller or knowingly to take
any bid from the seller or any person employed by him. Any sale contravening this
rule may be treated as fraudulent by the buyer. (n)”