Asuncion vs Court of Appeals
relation. Needless to point out, it cannot be deemed a perfected contract of
Topic: Existence of An Obligation
A Complaint for Specific Performance was filed by Asuncion and Tiong, tenants of
Unijeng & Tan in Ongpin Street, Binondo. They have occupied the space since 1935
and have been religiously paying the rental. When the defendants decided to sell
the premises, they gave the tenants a priority to acquire it.
During negotiations, Unijeng offered 6M while the tenants made a counter offer of
5M. The tenants asked the defendants to put the offer in writing and specify the
terms and condition, but was not successful.
When defendants were about to sell the property, the plaintiff filed a complaint to
compel defendants to sell the property to them. The Lower Court ruled that the there
is no Contract of Sale since they did not agree upon the terms and conditions.
Nevertheless, it ruled that if the defendants will their property for 11M or less, the
plaintiffs has the option to purchase to property or of first refusal. The Court of
Appeals affirmed the decision, but found no reason not to grant the right for a price
in excess of 11M.
While the case was pending, the Unjieng spouses executed a deed of sale and
transferred the property to Buen Realty Development Corporation for 15M. BRDC
demanded the lessees to vacate the premises, but the lessees wrote back that there
is a pending case involving the subject property and contended. Petitioners filed a
motion for execution of the CA judgement. At first, CA directed the Sheriff to execute
an order directing the Unjiengs to issue a Deed of Sale in the Petitioner’s favour and
nullified the sale to De Buen Realty. But then, the CA reversed itself when the Private
Respondents Appealed.
There is no existing Obligation because there is no juridical tie.
An obligation is constituted upon the concurrence of the following elements, viz: (a)
The vinculum juris or juridical tie (b) the object and (c) the active (obligee) and
the passive (obligor) subjects.
Among the sources of an obligation is a contract. Until the contract is
perfected, it cannot, as an independent source of obligation, serve as a
binding juridical relation. In sales, particularly, the contract is perfected when a
person, called the seller, obligates himself, for a price certain, to deliver and
to transfer ownership of a thing or right to another, called the buyer, over which
the latter agrees.
In the law on sales, the so-called "right of first refusal" is an innovative juridical
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 (there is no option with consideration),
aforequoted, or possibly of an offer under Article 1319 of the same Code (there is
no meeting of minds since there is no certain offer and absolute acceptance). This
means that no vinculum juris is created between the seller-offeror and the
buyer-offeree.
a right of first refusal, while the object might be made determinate, the exercise of
the right, however, would be dependent not only on the grantor's eventual intention
to enter into a binding juridical relation with another but also on terms, including the
price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so
described as merely belonging to a class of preparatory juridical relations
governed not by contracts (since the essential elements to establish the vinculum
juris would still be indefinite and inconclusive) but by, among other laws of general
application, the pertinent scattered provisions of the Civil Code on human
conduct.LexLib
The proper recourse is an action for damages.
Even on the premise that such right of first refusal has been decreed under a final
judgment, like here, its breach cannot justify correspondingly an issuance of a writ
of execution under a judgment that merely recognizes its existence, nor would it
sanction an action for specific performance without thereby negating the
indispensable element of consensuality in the perfection of contracts. The proper
recourse is an action for damages in a proper forum for the purpose.
Buen Realty, not having been impleaded, cannot be subject to the WoE
Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be
held subject to the writ of execution issued by respondent Judge, let alone ousted
from the ownership and possession of the property, without first being duly afforded
its day in court.
Facts:
1. A Complaint for Specific Performance was filed by Ann Yu Asuncion and
Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan
before RTC
 2. Plaintiffs are tenants of the defendants in Ongpin Street, Binondo,
Manila; that they have occupied said spaces since 1935 and have been
religiously paying the rental and complying with all the conditions of the
lease contract
3. Defendants informed plaintiffs that they are offering to sell the premises
and are giving them priority to acquire the same
4. During the negotiations, Bobby Cu Unjieng offered a price of P6-million
while plaintiffs made a counter offer of P5- million;
5. plaintiffs thereafter asked the defendants to put their offer in writing to
which request defendants acceded;
6. Plaintiffs wrote back on October 24, 1986 asking that they specify the
terms and conditions of the offer to sell. The plaintiffs did not receive any
reply, they sent another letter.
7. The defendants failed to specify the terms and conditions of the offer to
sell and because of information received
8. Defendants were about to sell the property, so plaintiffs were
compelled to file the complaint to compel defendants to sell the property
to them.
9. Lower Court
a. Defendants' offer to sell was never accepted by the plaintiffs
for the reason that the parties did not agree upon the terms
and conditions of the proposed sale, hence, there was no
contract of sale at all.
b. Nonetheless, the lower court ruled that should the defendants
subsequently offer their property for sale at a price of P11-
million or below, plaintiffs will have the right of first
refusal.
10. Court of Appeals
a. The Court affirmed the decision of the lower court.
b. However, they find no reason not to grant the same right of
first refusal to herein appellants in the event that the subject
property is sold for a price in excess of Eleven Million pesos.
11. While the case was pending, the Cu Unjieng spouses executed a Deed of
Sale, transferring the property to petitioner Buen Realty and
Development Corporation (15M sold)
a. As a consequence, the TCT was cancelled and was issued in the
name of the BRDC. As the new owner, they wrote a letter to the
lessees demanding them to vacate the premises
b. the lessees wrote back stating that petitioner brought the property
subject to the notice of lis pendens (there is a pending case
involving the subject property)
c. The lessees filed a Motion for Execution
12. Petitioners filed a motion for execution of the CA judgement. At first, CA
directed the Sheriff to execute an order directing the Unjiengs to issue a Deed
of Sale in the Petitioner’s favour and nullified the sale to De Buen Realty. But
then, the CA reversed itself when the Private Respondents Appealed.
Issue: Whether there is an existing obligation
Ruling: None
Rationale:
There is no vinculum juris
An obligation is a juridical necessity to give, to do or not to do A( rt. 1156, Civil Code).
The obligation is constituted upon the concurrence of the essential elements thereof,
viz: (a) The vinculum juris or juridical tie which is the efficient cause established
by the various sources of obligations (law, contracts, quasi-contracts, delicts and
quasi-delicts); (b) the object which is the prestation or conduct; required to be observed
(to give, to do or not to do); and (c) the subject-persons who, viewed from the
demandability of the obligation, are the active (obligee) and the passive (obligor)
subjects.
Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a
meeting of minds between two persons whereby one binds himself, with respect to the
other, to give something or to render some service (Art. 1305, Civil Code).
Until the contract is perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation. In sales, particularly, to which the topic
for discussion about the case at bench belongs, the contract is perfected when a person,
called the seller, obligates himself, for a price certain, to deliver and to transfer
ownership of a thing or right to another, called the buyer, over which the latter agrees.
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, aforequoted, or possibly of an offer under Article 1319 9 of
the same Code. An option or an offer would require, among other things, 10 a clear
certainty on both the object and the cause or consideration of the envisioned contract.
The right of first refusal merely belongs to a class of preparatory juridical
relations governed not by contracts
In a right of first refusal, while the object might be made determinate, the exercise of
the right, however, would be dependent not only on the grantor's eventual intention to
enter into a binding juridical relation with another but also on terms, including the price,
that obviously are yet to be later firmed up. Prior thereto, it can at best be so described
as merely belonging to a class of preparatory juridical relations governed not by
contracts (since the essential elements to establish the vinculum juris would still be
indefinite and inconclusive) but by, among other laws of general application, the
pertinent scattered provisions of the Civil Code on human conduct.LexLib
Proper Recourse = Action for Damages
Even on the premise that such right of first refusal has been decreed under a final
judgment, like here, its breach cannot justify correspondingly an issuance of a writ of
execution under a judgment that merely recognizes its existence, nor would it sanction
an action for specific performance without thereby negating the indispensable element
of consensuality in the perfection of contracts.
The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded
a "right of first refusal" in favor of petitioners. The consequence of such a declaration
entails no more than what has heretofore been said. In fine, if, as it is here so conveyed
to us, petitioners are aggrieved by the failure of private respondents to honor the right
of first refusal, the remedy is not a writ of execution on the judgment, since there is
none to execute, but an action for damages in a proper forum for the purpose.
Buen Realty, not having been impleaded, cannot be subject to the WoE
Furthermore, whether private respondent Buen Realty Development Corporation, the
alleged purchaser of the property, has acted in good faith or bad faith and whether or
not it should, in any case, be considered bound to respect the registration of the lis
pendens in Civil Case No. 87-41058 are matters that must be independently addressed
in appropriate proceedings. Buen Realty, not having been impleaded in Civil Case
No. 87-41058, cannot be held subject to the writ of execution issued by respondent
Judge, let alone ousted from the ownership and possession of the property, without
first being duly afforded its day in court.
Others:
What is right of first refusal?
- When a lease contract contains a right of first refusal, the lessor is under a
legal duty to the lessee not to sell to anybody at any price until after he has
made an offer to sell to the latter at a certain price and the lessee has failed
to accept it. The lessee has a right that the lessor's first offer shall be in his
favor.18 Petitioner’s right of first refusal is an integral and indivisible part of
the contract of lease and is inseparable from the whole contract. The
consideration for the lease includes the consideration for the right of first
refusal19 and is built into the reciprocal obligations of the parties.
Stages of a Contract
This case is notable because it lays down the rules on options contracts and right of
first refusal as well as promises to buy and sell. First, the Supreme Court discussed the
stages of the formation of a sales contract, these are:
1. Negotiation – covers the period from the time the prospective
contracting parties indicate interest in the contract to the time the contract is
concluded (perfected).
2. Perfection – takes place upon the concurrence of the essential
elements thereof. In a sales contract this is governed by Art. 1458
3. Consummation – begins when the parties perform their
respective undertakings under the contract culminating in the extinguishment
thereof
Until the contract is perfected (No. 2), it cannot, as an independent source of obligation,
serve as a binding juridical relation. A sales contract is perfected when a person, called
the seller, obligates himself, for a price certain, to deliver and to transfer ownership of
a thing or right to another, called the buyer, over which the latter agrees (Art 1458).
Under Art. 1458, there is no perfection of a sale under a “Contract to Sell”. A Contract
to Sell is characterized as a conditional sale and the breach of the suspensive condition
will prevent the obligation to transfer title from acquiring obligatory force.
Promises to Buy and Sell
Unconditional mutual promise to buy and sell – As long as the object is made
determinate and the price is fixed, can be obligatory on the parties, and compliance
therewith may accordingly be exacted. The Right of First Refusal falls under this
classification.
Accepted unilateral promise – If it specifies the thing to be sold and the price to be
paid and when coupled with a valuable consideration distinct and separate from the
price, is what may properly be termed a perfected contract of option. This contract is
legally binding. (Par. 2 Art. 1458) Note however, that the option is a contract separate
and distinct from the contract of sale. Once the option is exercised before it is
withdrawn, a bilateral promise to sell and to buy ensues and both parties are then
reciprocally bound to comply with their respective undertakings.
Offers with a Period
Where a period is given to the offeree within which to accept the offer, the following
rules generally govern:
1. If the period is not itself founded upon or supported by a
consideration – Offeror may withdraw offer at any time before its acceptance
(or knowledge of its acceptance). However, the right to withdraw must not
be exercised whimsically or arbitrarily otherwise it can give rise to damages
under Art. 19 of the New Civil Code
2. If period is founded on a separate consideration – This is
a perfected contract of option. Withdrawal of the offer within the period of
the option is deemed a breach of the contract of option (not the sale). “If, in
 fact, the optioner-offeror withdraws the offer before its acceptance (exercise
of the option) by the optionee-offeree, the latter may not sue for specific Evangelista vs Screenex, Inc.
performance on the proposed contract (“object” of the option) since it has
failed to reach its own stage of perfection. The optioner-offeror, however, Topic: Impairment of Credit
renders himself liable for damages for breach of the option.”
3. Earnest money – This is not an offer with a period. Earnest money Recitation Version
is distinguished from the option contract if the consideration given will be
considered as a part of the purchase price of the object of the sale. Earnest
money is evidence of a perfected contract of sale. (Art. 1482)
Evangelista received 2 checks from Screenex, Inc. for a loan. As security for the
payment of the loan, Evangelista gave two (2) open-dated checks. Before the
Right of First Refusal checks were deposited, there was a personal demand from the family for
[Evangelista] to settle the loan and likewise a demand letter sent by the family
This is “an innovative juridical relation” because it is neither a perfected contract of sale lawyer. On 25 August 2005, Evangelista was charged with violation of Batas
under Art. 1458 nor an option contract under par. 2 Art 1479. The object might be made Pambansa (BP) Blg. 22 before the MeTC.
determinate, the exercise of the right, however, is dependent on the offeror’s eventual
intention to enter into a binding juridical relation with another but also on terms and
The METC acquitted Evangelista because Yu failed to prove that the notice, which
conditions such as price. There is no juridical tie or vinculum juris.
states that there is an insufficiency of funds, had actually been received by the
addressee. The RTC affirmed the decision of the METC. It ruled the obligation
Breach of the right cannot justify correspondingly an issuance of a writ of execution
subsisted because of the checks and the rule on prescription will not apply. Likewise,
under a court judgement that recognizes its existence, such as in Ang Yu Asuncion. An
action for Specific Performance is not allowed under a Right of First Refusal because the CA denied the petition.
doing so would negate the indispensable element of consensuality in the perfection of
contracts. The Court ruled that the delivery of the check produces the effect of payment
when through the fault of the creditor they have been impaired. In this
This right is not inconsequential because it gives right to an action for damages under case, since it has already been 10 years since the issuance and it was still
Art. 19. not yet encashed, the checks have become stale and the obligation is also
deemed fulfilled by operation of law. Lastly, the prescription has already set in,
Other Acts that Won’t Bind so the cause of action has prescribed.
Public advertisements or solicitations – Construed as mere invitations to make offers
and/or proposals.

Facts:

1. In 1991, Evangelista received 2 checks from Screenex, Inc. because of

a loan
a. The first check was for 1M and the other one is for 500K.
2. As security for the payment of the loan, Evangelista gave two (2) open-
dated checks
a. From the time the checks were issued, they were held in safe
keeping.
3. Before the checks were deposited, there was a personal demand from
the family for [Evangelista] to settle the loan and likewise a demand letter
sent by the family lawyer.
4. On 25 August 2005, Evangelista was charged with violation of Batas
Pambansa (BP) Blg. 22 before the MeTC
 a. At the time of issue thereof, said accused did not have sufficient
funds in or credit with the drawee bank for the payment in full of
the face amount of such check upon its presentment which check
when presented for payment within ninety (90) days from the date
thereof, was subsequently dishonored by the drawee bank for the
reason "ACCOUNT CLOSED" and despite receipt of notice of such
dishonor, the said accused failed to pay said payee the face amount
of said checks or to make arrangement for full payment thereof
within five (5) banking days after receiving notice.
5. METC: Evangelista was acquitted
a. Although the accused issued a check which was subsequently
dishonored by the drawee bank for insufficiency of fund, the
prosecution failed to prove the third element; i.e., at the
time of the issuance of the check to the payee, the latter knew
he did not have sufficient funds in, or credit with, the drawee
bank for payment of the check in full upon its presentment.
i. In the instant case, the court held that while prosecution
witness Alexander G. Yu declared that the lawyer had
sent a demand letter to Evangelista, Yu failed to prove
that the letter had actually been received by
addressee. Because there was no way to determine
when the five-day period should start to toll, there
was a failure to establish prima facie evidence of
knowledge of the insufficiency of funds on the part of
Evangelista. Hence, the court acquitted him of the
criminal charges.
b. The creditor's possession of the instrument of credit was sufficient
evidence that the debt claimed had not yet been paid. In the end,
Evangelista was declared liable for the corresponding civil
obligation.
6. RTC: Dismissed the appeal and affirmed METC’s decision
a. Checks should be taken as evidence of Evangelista's indebtedness
to Gotuaco, such that even if the criminal aspect of the charge had
not been established, the obligation subsisted.
b. alleged payment by Evangelista was an affirmative defense that he
had the burden of proving, but that he failed to discharge.
c. As to the defense of prescription, the same cannot be successfully
invoked in this appeal. The 10-year prescriptive period of the action
under Art. 1144 of the New Civil Code is computed from the time
the right of action accrues. The terms and conditions of the loan
obligation have not been shown. The right of action in this case is
not upon a written contract, for which reason, Art. 1144, New Civil
Code, on prescription does not apply.
7. CA: Petition was denied
a. the reckoning time for the prescriptive period began when the
instrument was issued and the corresponding check returned by
the bank to its depositor;
b. the issue of prescription was raised for the first time on appeal with
the RTC;
c. (3) the writing of the date on the check cannot be considered as
an alteration, as the checks were undated, so there was nothing to
change to begin with;
d. (4) the loan obligation was never denied by petitioner, who claimed
that it was settled in 1992, but failed to show any proof of payment.
Issue: Whether Petitioner is considered discharged from his obligation to pay
Ruling: Yes
Rationale:
Prescription had set in
- A check is a bill of exchange drawn on a bank payable on demand.
- It is a negotiable instrument — written and signed by a drawer containing an
unconditional order to pay on demand a sum certain in money.
- It is an undertaking that the drawer will pay the amount indicated thereon.
Section 119 of the NIL, however, states that a negotiable instrument like a
check may be discharged by any other act which will discharge a simple
contract for the payment of money
- A check therefore is subject to prescription of actions upon a written contract.
- Barring any extrajudicial or judicial demand that may toll the 10-year
prescription period and any evidence which may indicate any other time when
the obligation to pay is due, the cause of action based on a check is reckoned
from the date indicated on the check.
- If the check is undated, however, as in the present petition, the
cause of action is reckoned from the date of the issuance of the
check. This is so because regardless of the omission of the date indicated on
the check, Section 17 of the Negotiable Instruments Law instructs that an
undated check is presumed dated as of the time of its issuance.
- While the space for the date on a check may also be filled, it must, however,
be filled up strictly in accordance with the authority given and within
a reasonable time. Assuming that Yu had authority to insert the dates in
the checks, the fact that he did so after a lapse of more than 10 years from
their issuance certainly cannot qualify as changes made within a reasonable
time.
- Given the foregoing, the cause of action on the checks has become
stale, hence, time-barred. No written extrajudicial or judicial demand was
shown to have been made within 10 years which could have tolled the period.
Prescription has indeed set in.
The delivery of the check produces the effect of payment when through the
fault of the creditor they have been impaired
- It is a settled rule that the creditor's possession of the evidence of debt is
proof that the debt has not been discharged by payment. It is likewise an
established tenet that a negotiable instrument is only a substitute for money
and not money, and the delivery of such an instrument does not, by itself,
operate as payment.
- However, payment is deemed effected and the obligation for which the
check was given as conditional payment is treated discharged, if a period of
10 years or more has elapsed from the date indicated on the check
until the date of encashment or presentment for payment. The failure
to encash the checks within a reasonable time after issue, or more than 10
years in this instance, not only results in the checks becoming stale but
also in the obligation to pay being deemed fulfilled by operation of
law.
- Art. 1249 of the Civil Code specifically provides that checks should be
presented for payment within a reasonable period after their issuance
- The acceptance of a check implies an undertaking of due diligence
in presenting it for payment, and if he from whom it is received
sustains loss by want of such diligence, it will be held to operate as
actual payment of the debt or obligation for which it was given.
- Similarly in this case, we find that the delivery of the checks, despite the
subsequent failure to encash them within a period of 10 years or more, had
the effect of payment. Petitioner is considered discharged from his obligation
to pay and can no longer be pronounced civilly liable for the amounts
indicated thereon.
Others:
The following essential elements must be present in order to be liable under BP 22:
(1) the person accused of violating the law makes, draws or issues any check for
account or for value;
(2) he has knowledge at the time he issued the check that he does not have sufficient
funds in or credit with the drawee bank for the payment of the check when presented
for payment; and,
(3) the drawee bank dishonors the check because of insufficiency of funds, or it would
have dishonored the check for the same reason if the issuer did not order the bank to
stop payment for no valid reason.
The law presumes that the issuer knew of the insufficiency of his funds if the check is
dishonored within 90 days from the date of the check. This presumption is overcome
only if the issuer pays or makes arrangements for payment of the full amount of the
check within five banking days after receiving a notice of its dishonor. Further, there
must be proof that that the issuer was notified of the fact of dishonor, and proof that
the issuer had received such notice of dishonor.
The Insular Life Assurance Company Ltd. v. Asset Builders Corporation
Topic:
Recitation Version
Facts:
1. In November, 1992, the Insular Life Assurance Company, Limited,
invited construction companies to participate in the bidding of proposed
Insular Life building in Lucena City.
2. "Asset Builders Corporation, [respondent], with four (4) other bidders
submitted their respective bid proposals secured by bid bonds, valid for
sixty (60) days.
a. Under its 'Proposal Form'[respondent] shall bound and obliged
itself to enter into a 'Contract' with the petitioner within
ten (10) days from notice of the award, with good and
sufficient securities for the faithful compliance thereof.
3. "On November 9, 1993, the respective proposals of the bidders were opened
a. Adrian Wilson International Associate[s], Inc. (AWIA for brevity),
the designated 'Project Manager reported that ABC’s
P12,962,845.54 bid was the lowest among the bidders.
b. Petitioner concurred with the recommendation of Engineer Espiritu,
the 'Project Coordinator, who recommended that ABS and the
other 2 bidders, 'Q.K. Calderon [Construction] Co., Inc.' and
'Specified Contractors', be subjected to post-qualification
proceedings, inspection, and evaluation
4. Torrijos and Flores from petitioner's Real Property Department'
recommended the award of the general construction of the
Proposed Lucena Building, in favor of ABC since they have extensive
experience, competent and financially capable of contracting the work
5. A conference was held and petitioner asked the respondent to increase its
bid from P12,961,845.54 to P13,000,000.00 to accommodate the wage
increase.
6. Eventually, Flores signed a 'Notice to Proceed' and Torrijos informed
AIWA that they had had awarded the general construction contract to ABS.
In turn, Sajorda from AIWA informed ABS that pursuant to the
award, there will be a pre-construction conference. (BUT NO COPY OF
NOTICE OF AWARD SENT TO ABS)
7. The 'Pre-Construction Conference' ensued and it was clarified that the
Contract is for P13,000,000.00, to be completed within 210 calendar days;
day one to be 5 days after receipt of NTP by the Contractor. Actual site
mobilization to be first week of April 1994, per Mr. J.G. Quizon. Issuance of
building and other permits being worked out by the Contractor.
 8. a Ground Breaking ceremony was held at the project site, "However, the
[respondent] did not affix its conformity to any 'Notice of Award',
much less commence its construction of the project. Neither did it
execute any 'Construction Agreement'.
9. Subsequently, the [respondent] wrote the [petitioner] a letter informing the
[petitioner] that the [respondent would] not be able to undertake the project
anymore[,] because the prerequisite paper work and attendant processing
could not be fast-trac[k]ed and that, since the previous two (2) weeks, prices
had escalated, which rendered its bidunattractive.
10. "The [petitioner] alleged iits complain[t t]hat the
a. [respondent] was duly notified by AWIA of the award, in its
favor, by the [petitioner], of the project[,] but the [respondent]
unjustly and arbitrarily withdrew from the project and refused
to execute the 'Construction Contract' with the [petitioner,] which
impelled the latter to engage the services of another
contractor for the project at the price of P14,500,000.00
11. "By way of riposte, the [respondent] sent a letter to the [petitioner] averring
that:
a. (a) it never received any written 'Notice of Award'
b. (b) since its bid offer had a lifetime of sixty (60) days from
November 9, 1993 or until January 8, 1993 (sic) [,] its offer was
automatically withdrawn after said date, since the [petitioner]
had not requested the [respondent] for the extension of the
lifetime thereof.
12. The RTC ruled in favor of ABS
13. The CA affirmed the lower court's Decision. According to the appellate
court's ruling, the failure of petitioner to prove that it gave respondent
a written notice of the former's unqualified acceptance of the latter's
bid, as required in the Instruction to Bidders, did not give birth to consent.
The appellate court explained that when the exact terms desired were
not in the offer, any modification or variation therefrom would annul
that offer. Furthermore, estoppel did not apply because of petitioner's own
carelessness or want of diligence.
Issue: Whether there is a contract
Ruling: No
Rationale:
Stages of Contract – they did not go past the negotiation stage
Equally important are the three distinct stages of a contract — its "preparation or
negotiation, its perfection, and finally, its consummation." Negotiation begins when the
prospective contracting parties manifest their interest in the contract and ends at the
moment of their agreement. The perfection or birth of the contract occurs when they
agree upon the essential elements thereof. The last stage is its consummation, wherein
they "fulfill or perform the terms agreed upon in the contract, culminating in the
extinguishment thereof."
In the case at bar, the parties did not get past the negotiation stage. The events
that transpired between them were indeed initiated by a formal offer, but this
policitación was merely an imperfect promise that could not be considered a binding
commitment. At any time, either of the prospective contracting parties may stop the
negotiation and withdraw the offer.
No Notice of Award, No Contract
It is elementary that, being consensual, a contract is perfected by mere
consent. From the moment of a meeting of the offer and the acceptance upon the
object and the cause that would constitute the contract, consent arises. However, "the
offer must be certain" and "the acceptance seasonable and absolute; if
qualified, the acceptance would merely constitute a counteroffer."
In the present case, there was only an offer and a counteroffer that did not sum
up to any final arrangement containing the elements of a contract. Clearly, no meeting
of minds was established. First, only after the bid bond had lapsed were post-
qualification proceedings, inspections, and credit investigations conducted. Second, the
inter-office memoranda issued by petitioner, as well as other memoranda between it
and its own project manager, were simply documents to which respondent was
not privy. Third, petitioner proposed a counteroffer to adjust respondent's bid to
accommodate the wage increase of December 3, 1993.
The written Notice of Award, which constituted the acceptance of the proposal, was a
sine qua non to the perfection of the contract. The misplacement of such vital document
was inexcusable. Without it, there was no contract. Moreover, the March 14, 1994
Notice to Proceed clearly stated that its issuance would depend upon the execution of
the construction agreement.
In effect, the rule on the concurrence of the offer and its acceptance did not apply,
because other matters or details — in addition to the subject matter and the
consideration — would still be stipulated and agreed upon by the parties. While there
was an initial offer made, there was no acceptance; but when there allegedly
came an acceptance that could have had a binding effect, the offer was
already lacking. The offer and its acceptance "did not meet to give birth to a
contract."
Moreover, the Civil Code provides that no contract shall arise unless its acceptance is
communicated to the offeror. That is, the mere determination to accept the proposal of
a bidder does not constitute a contract; that decision must be communicated to the
bidder. Although consent may be either express or implied, the Instruction to Bidders
prepared by petitioner itself expressly required (1) a formal acceptance and (2) a period
within which such acceptance was to be made known to respondent. The effect of
giving the Notice of Award to the latter would have been the perfection of
the contract. No such acceptance was communicated to respondent;
therefore, no consent was given. Without that express manifestation, as
required by the terms of its proposal, there was no contract. The due execution
of documents representing a contract is one thing, but its perfection is another.
There was no Consideration, so there can be a withdrawal of offer
Subsistence of an Offer Even Without a Bid Bond
The proposal of respondent was merely validated by its bid bond, which was considered
by petitioner. The expiration of the bond on January 8, 1994, Sdid not mean that the
bid also lapsed on the same date. The bond, which was an accessory, merely
guaranteed the performance of the principal obligation and could not exist without the
latter. The former was given for the benefit of petitioner, which could legally waive it.
The bid continued without a bond, but still no formal acceptance was made. Again, on
that basis, no contract was perfected.

There is no issue as regards the subject of the contract or the cause of the obligation. No Estoppel
The controversy lies in the consent whether there was an acceptance by petitioner of
the offer made by respondent; and, if so, whether that acceptance was communicated
to the latter, thereby perfecting the contract. The period given to the former within As aptly held by the appellate court, respondent's acts subsequent to the expiration of
which to accept the offer was not itself founded upon or supported by any the bid bond did not constitute a waiver of Section 9 of the Instruction to Bidders.
consideration. Therefore, under the law, respondent still had the freedom and the
right to withdraw the offer by communicating such withdrawal to petitioner before the
latter's acceptance of the offer; or, if the offer has been accepted, before the acceptance
came to be known by respondent.

Petitioner avers that an acceptance was made, but this allegation has not
been proven. Respondent had no knowledge of such acceptance when it
communicated its withdrawal to the former. Notably, this right to withdraw was not
exercised whimsically or arbitrarily by respondent. It did send a formal letter on April 5,
1994, expressing and explaining its withdrawal. As of that date, the decision to award
the contract had not been made according to the terms of the Instruction to Bidders.

Subsequent acts between the parties did not even serve as a confirmation of
that decision

Besides, the subsequent acts between the parties did not even serve as a confirmation
of that decision. The existence of a second proposal — petitioner's request for an
adjustment of the bid to accommodate the wage increase — in fact belies the
perfection of any contract arising from the first. To the Court's mind, there
was indeed no acceptance of the offer made by respondent. Such failure to
comply with a condition imposed for the perfection of a contract resulted in
failure of the contract.

Others