Professional Documents
Culture Documents
2) OFFERS
● An offer with a period expires at the end of the period without further act, or by its
withdrawal at any time prior to acceptance.
● Prior to its acceptance, it remains subject to the complete will of the offeror, can
be withdrawn or destroyed, and not even necessary the offeree learns learns of
the withdrawal.
● Right of the Offeror: the right to attach to his offer any term or condition he
desires, and may fix the time, place and manner of acceptance.
● Right of the Offeree: No authority to treat it as consisting of separate and
distinct parts, since he must accept and comply with all the requirements
provided in the offer; he had only the choice to accept or reject the offer in its
entirety; he has no choice to reject that portion of the offer which is
disadvantageous and accept only that which is beneficial.
3) OPTION CONTRACTS
Unaccepted offer: it states the terms and A contract of sale fixes definitely the relative
conditions on which the owner is willing to sell rights and obligations of both parties at the
his land, if the holder elects to accept them time of its execution, and leaves no choice to
within the time limited. If the holder does so either party whether to withdraw or to proceed
elect, he must give notice to the other party, with the contract.
and the accepted offer thereupon becomes a
valid and binding contract. The offer and the acceptance are concurrent,
since the minds of the contracting parties
If an acceptance is not made within the time meet in the terms of the agreement.
fixed, the owner is no longer bound by his
offer, and the option is at an end.
● Option contract not covered by the Statute of Frauds, and can be proved by parol
evidence.
● With the exercise of an oral option. the resulting sale contract itself would be subject to
the Statute of Frauds and cannot be proved by oral evidence, except if there has been
partial execution of the underlying sale.
A valid option contract, imposes the following additional obligations on the offeror:
a) Not to offer to any third party the sale of the object of the option during the option period;
b) Not to withdraw the offer or option during the option period;
c) To hold the subject matter of the sale and to transfer it to the offeree in the event that
offeree exercises his option during the option period.
● Salame v. CA. An option, in order to be valid and binding upon the promissor, it must
contain a price certain.
● Kilosbayan, Inc,v. Morato. An option contract can only arise when the minds of the
parties have met as to the specific object thereof, the price and the manner of payment
thereof.
● The option must have all the requisites required for subject matter and the price.
Otherwise, even if the option is supported by a separate consideration, it is void as an
option contract, and its exercise would not result into a valid sale.
f) Meaning of “Separate Consideration”
● In an option contract, the consideration may be anything or undertaking of value. The
more controlling concept is the “separateness” of such consideration from the purchase
price agreed upon.
● Villamor v. CA. The Consideration of the option is “the why of the contracts, the
essential reason which moves the contracting parties to enter into the contract.”
● Without a consideration separate from the purchase price, an option contract would
be void as a contract but would still constitute a valid offer, so that if the option
contract is exercised prior to its withdrawal, that is equivalent to an offer being
accepted prior to withdrawal and would give rise to a valid and binding sale. It can be
withdrawn notwithstanding the acceptance made previously by the offeree.
● In an accepted unilateral promise to sell, since there may be no valid contract without
cause or consideration, the promissor 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/
● Article 1479 NCC
● In an option contract, the offeree has the burden of proving that the option is supported
by a separate consideration.
● “an option contract would be void as a contract but would still constitute a valid
offer” can only apply if the option has been accepted and such acceptance is
communicated to the offeror.
An option to purchase embedded into a contract of lease when not exercise within the
original period is extinguished and cannot be deemed to have been included in the implied
renewal of the lease.
● When the option contract does not contain a period, it cannot be presumed that the
exercise thereof can be made indefinitely, otherwise it would render uncertain the status
of the subject matter.
○ Article 1144(1) NCC,actions upon written contract must be brought within 10
years, and thereafter, the right of option would prescribe.
○ The action for specific performance to enforce the option to purchase must be
filed within 10 years after the accrual of the cause of action/
● Notice of the exercise of the option 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.
● The acceptance or exercise of the option must still be made within the option period to
give rise to a valid and binding sale, and it is only then that the principle of substantial
compliance (Court allowed the exercise of the option beyond the original option period)
would have relevance.
● The refusal of the offeror to comply with the demand by the offeree to comply with the
option may be enforced by an action for specific performance.
k) Effects of Exercise of Option
● When an option is properly exercise, there is already a sale existing, and the laws
applicable to sales shall then apply.
● In an option contract, “timely, affirmatively and clearly acceptance of the offer” would
convert the option contract into “a bilateral promise to sell and to buy where both parties
are then reciprocally bound to comply with their respective undertakings.”
The applicable rules where “a period is given to the offeree within which to accept a
certain offer”, thus:
1) If the period itself is NOT FOUNDED upon a separate consideration, the offeror has the
right to withdraw the offer before its acceptance, or if an acceptance has been made,
before the offeror’s coming to know of such fact, by communicating that withdrawal to
the offeree.
2) The withdrawal must not exercised arbitrarily; otherwise, it could give rise to a damage
claim under Article 19 NCC.
3) If there is a separate consideration, a contract of option is deemed perfected, and it
would be a breach of contract to withdraw the offer during such period.
4) The option is an independent contract by itself, and it should be distinguished from the
projected main agreement of sale which is obviously yet to be concluded. If, in fact, the
offeror withdraws the offer before its acceptance by the offeree, the latter may not sue
for specific performance on the proposed contract since it has failed to reach its own
stage of perfection. The offeror, however, renders himself liable for damages for breach
of the option.
● Carceller Case
○ The Court granted the offeree the leeway to enforce the conditional exercise of
his option right even after the option period and after the offer-lessor had in fact
given clear notice of the withdrawal of the option; and granting the remedy of
specific performance requested by the offeree to compel the offeror to execute
the covering Deed of Absolute Sale.
● If the option is without any consideration, the offeror may withdraw his offer by
communicating such withdrawal to the offeree at any time before acceptance; if it is
founded upon a consideration, the offeror cannot withdraw his offer before the lapse of
the period agreed upon.
3) Right of First Refusal
● A promise on the part of the owner that if he decides to sell the property any time
in the future, he would first negotiate its sale to the promissee.
● In Guerero Case, the Court would not allow an action for specific performance or
a rescisson of the sale to a third party which constituted the breach of the
promise, even the third-party buyer was entering into the purchase of the subject
property in bad faith. The only remedy afforded to the promissee was an
action to recover damages (under Article 19 NCC).
● Ang Yu Asuncion v. CA. Right of First Refusal is an innovative juridical relation; It
cannot be deemed a perfect sale under Article 1458 of the Civil Code, nor an
option contract under either Articles 1319 and 1479 thereof, because it merely
pertains to a specific property without containing an agreement as to the price or
the terms of payment in case of exercise of the right of first refusal.
● Preparatory juridical relations governed by the pertinent provisions of the Civil
Code on human relations.
● Equatorial Realty case. There need not be a separate consideration in a right of
first refusal since such stipulation is part and parcel of the entire contract of lease
to which it may be attracted to; the consideration for the lease includes the
consideration for the right of first refusal.
● A right of first refusal clause or contract cannot be the subject of an action for
specific performance because of lack of an agreement on the price.
● The right of first refusal when not stipulated in the lease contract, it cannot be
exercised, and verbal grants of such right cannot be enforceable since the right
of first refusal must be clearly embodied in a written contract.
● The price of which it was sold to a third party should have likewise been first
offered to the party entitled to the option.
● Third party cannot claim to be a stranger to the arrangement and not a proper
party in the action for rescission since such buyer actually steps into the shoes of
the owner-lessor.
● Riviera Filipina case. “A lease with a proviso granting the lessee the right of first
priority ‘all things and conditions being equal,’ meant that there should be identity
of the terms and conditions to be offered to the lessee and all other prospective
buyers, with the lessee to enjoy the right of first priority.”
○ It means that should the lessor-promissor decide to sell the leased
property during the term of the lease, such sale should first be offered to
the lessee; and the series of negotiations that transpire between the
lessor and the lessee on the basis of such preference is deemed a
compliance of such clause even when no final purchase agreement is
perfected between the parties.
○ If previous to the sale to third party, a written notice was sent by the
lessor to the lessee confirming that the latter has lost his right of first
refusal.
○ A sale entered into a violation of a right of first refusal of another person
found in a valid principal contract is rescissible.
○ The basis of the right of first refusal must be the current offer of the seller
to sell or the offer to purchase of a prospective buyer. Only after the
lessee grantee fails to exercise its rights under the same terms and within
the period contemplated can the owner validly offer to sell the property to
a third person, again under the same terms as offered to the grantee.
● A right of first refusal is a contractual grant of the first priority to buy the property
in the event the owner sells the same.
● In a right of first refusal, while the object might be made determinate, the
exercise of the right of first refusal would be dependent not only on the owner’s
eventual intention to enter into a binding juridical relation with another but also on
terms, including the price, they are yet to be firmed up.
● An enforceable right of first refusal does not need consideration for its validity
and effectivity, since it is merely a stipulation in a valid principal contract.
● Sublessee cannot avail the right of first refusal granted in the contract if lease in
favor of the lessee.
● The right of first refusal is trigerred only in case where the owner of the property
intends to sell it to a third party.
A sale is at once perfected when a person (the seller) obligated himself for a price
certain, to deliver and to transfer ownership of a specified thing or right to another (the
buyer) over which the latter agrees.
CONSENT MAY BE VITIATED BY ANY OF THE FOLLOWING: 1) mistake; 2) violence;
3) intimidation; 4) undue influence; and 5) fraud.
o They do not make the contract void ab inition but only voidable, and the contract
is bindg upon the parties unless annulled by proper court action, which when
obtained would restore the parties to the status quo ante insofar as legally and
equitably possible.
Until a sale is perfected, it cannot be an independent source of obligation, nor serve as a
binding juridical relation.
Contract of sale cannot be considered valid when the evidence presented shows that
there had been no meeting of the minds between the supposed seller and the
corresponding buyer.
In order for an acceptance to have the effect of converting an offer into a perfected
contract, it must be plain and unconditional, and it will not be so, if it involves any new
prposition, for in tha case, it will not be in conformity with the offer, and constitute a
counter-offer.
Acceptance of a proposition or offer to be efficacious and binding upon the parties
thereto, it is necessary that such acceptance and proposition shall be without any
variation whatsoever; and that any modfication or deviation of the offer annuls the latter
and frees the offeror to offer it to another person.
The word “noted” and signing such note at the bottom of the written offer cannpot be
considered an acceptance that would give rise to a valid sale.
Villonco Doctrine: An acceptance may contain a request for certain changes in the
terms of the offer and yet be a binding acceptance. ‘So long as it is clear that the
meaning of the acceptance is positively and unequivocally to accept the offer, whether
such request is granted or not, a contract is formed.
A sale of land is valid regardless of the form it may have been entered into. The requisite
form (Art. 1358) was merely for greater efficacy or convenience and the failure to comply
therewith did not affect the validity and binding effect of the act between the parties.
Uraca v. CA. From the moment a party accepts without qualfication another party’s offer
to sell within the period stipulated therein, a sale is perfected. And although
subsequently, the seller required a much higher price than the original offer, and the
buyer negotiated on the matter but not final agreement was reached, the first sale
remained valid and binding and was not novated by the fact of negotiation thereafter
done on the price.
Place of Perfection
Expenses of execution and registration of the sale shall be borne by the seller, unless
there is a stipulation to the contrary.
Sale being a consensual contract, the ability or inability of the parties to perform the
contract (after perfection) does not affect the perfection of the contract.
Articles 1305 and 1474.
Non-payment of the price does not render void nor reverse the effects of the perfection
of the contract of sale. Non-payment only creates a right to demand the fulfillment of the
obligation or to rescind the contract.
When the seller is no longer the owner of the land sold at the time of sale, the contract is
void. Refer to Article 1402 and 1459.
FORM OF SALES
Art. 1483
Form not generally important for validity of sale. A contract of sale may be made inw
riting, or by word of mouth, or partly in writing and partly in word of mouth, or may be
inferred from the conduct of the oarties,
Sale of land under private instrument is valid, and that the sale would be consummated
and title transferred upon delivery of the land to the buyer.