CASE 1

OPTION CONTRACT
ADELFA PROPERTIES, INC vs. CA et al
G.R. No. 111238
January 25, 1995

REGALADO, J:


FACTS:
Private respondents, Rosario Jimenez-Cataneda and Salud Jimenez, and their brothers Jose and
Dominador were the registered CO-OWNERS of a parcel of land in Las Pinas. Jose and Dominador sold
their share consisting of one-half of said parcel of land (eastern portion) to ADELFA, herein petition.
Thereafter, Adelfa expressed interest in buying the western portion of the property from private
respondents. Consequently, an Exclusive Option to Purchase was executed between Adelfa and private
respondents and an option money of Php 50,000 was given to the latter which shall be credited as partial
payment upon the consummation of the sale and the balance in the sum of Php 2,806,150 to be paid on or
before November 30, 1989. In case of default by Adelfa, petitioners may cancel such option and refund
50% of the option money upon the sale of the property to a third party. A new owners copy of the
certificate of title was issued through Atty. Bernardo, Adelfas counsel, as the copy with respondent Salud
was lost but was kept by Atty. Bernardo.
Before petitioner could make payments, it received summons as a case was filed before RTC
Makati against Jose and Dominador and Adelfa because of a complaint in a civil case by the nephews and
nieces of private respondents herein. As a consequence, petitioner, through a letter, informed the private
respondents that it would hold payment of the full purchase price and suggested that they settle the case
with their said nephews and nieces. Salud did not heed the suggestion and informed Atty. Bernardo that
they are cancelling the transaction. Atty Bernardo made offers but they were all rejected.
RTC Makati dismissed the civil case. Subsequently, the subject parcel of land was sold to another.
Atty Bernardo wrote private respondents informing them that in view of the dismissal of the case, Adelfa
is willing to pay the purchase price, and requested that the corresponding deed of Absolute Sale be
executed.
Private respondents sent a letter to Adelfa enclosing therein a check representing the refund of half the
option money paid under the exclusive option to purchase, and requested Adelfa to return the owners
duplicate copy of Salud. Adelfa failed to surrender the certificate of title, hence the private respondents
filed a civil case before the RTC Pasay, for annulment of contract with damages. The trial court directed
the cancellation of the exclusive option to purchase. On appeal, respondent CA affirmed in toto the
decision of the RTC hence this petition.
ISSUES:
1. Was the agreement between Adelfa and Private respondents strictly an option contract?
2. May private respondents unilaterally and prematurely terminate the option period, if indeed it is a
option contract, as the option period has not lapsed yet?
HELD:
1. NO. The agreement between the parties is a CONTRACT TO SELL, and not an option contract or a
contract of sale.

The test in determining whether a contract is a contract of sale or purchase or a mere option
is whether or not the agreement could be specifically enforced. There is no doubt that the
obligation of petitioner to pay the purchase price is specific, definite and certain, and consequently
binding and enforceable. Had private respondents chosen to enforce the contract, they could have
specifically compelled petitioner to pay the balance. This is distinctly made manifest in the contract itself
as an integral stipulation, compliance with which could legally and definitely be demanded from
petitioner as a consequence.
While there is jurisprudence to the effect that a contract which provides that the initial payment shall be
totally forfeited in case of default in payment is to be considered as an option contract, still the Court is
not inclined to conform with the findings of respondent court and the court a quo that the contract
executed between the parties is an option contract, for the reason that the parties were already
contemplating the payment of the balance of the purchase price, and were not merely quoting an agreed
value for the property. The term balance, connotes a remainder or something remaining from the
original total sum already agreed upon.

In other words, the alleged option money was actually earnest money which was intended to form part
of the purchase price.
In addition, private respondents failed to show that the payment of the balance of the purchase price was
only a condition precedent to the acceptance of the offer or to the exercise of the right to buy. On the
contrary, it has been sufficiently established that such payment was but an element of the performance of
petitioners obligation under the contract to sell.
2. YES. The private respondents may no longer be compelled to sell and deliver the subject property to
petitioner for two reasons: 1) petitioners failure to duly effect the consignation of the purchase price after
the disturbance had ceased and 2) the fact that the contract to sell had been validly rescinded by private
respondents.
Judicial action for rescission of a contract is not necessary where the contract provides for automatic
rescission in case of breach,

as in the contract involved in the present controversy.






















CASE 2

OFFER TO SELL
ATKINS KROLL & CO. VS. CU HIAN TEK
January 14, 1958

Bengzon, J:

FACTS:
On September 13, 1951, petitioner Atkins Kroll & Co. sent a letter to respondent B. Cu Hian Tek offering
the following: 1) 400 cartons of Luneta brand Sardines in Tomato Sauce 48 / 15-oz. Ovals at $8.25 per
carton; 2) 300 cartons of Luneta brand Sardines Natural 48/15 oz. talls at $6.25 per carton; and 3) 300
cartons of Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 per carton, with all of the
offers subject to reply by September 23, 1951. Hian Tek unconditionally accepted the said offer through a
letter delivered on September 21, 1951, but Atkins failed to deliver the commodities due to the shortage of
catch of sardines by the packers in California.

For its failure to deliver 1000 cartons of sardines to respondent, Atkins was sued, and after trial, CFI
Manila granted the action for damages, which on appeal the CA affirmed sad decision but reduced the
damages representing unrealized profits.

Atkins defends that there was no such contract of sale but only an option to buy, which was not
enforceable for lack of consideration because it is provided under the 2nd paragraph of Article 1479 of the
New Civil Code that "an accepted unilatateral promise to buy or to sell a determinate thing for a price
certain is binding upon the promisor if the promise is supported by a consideration distinct from the
price. Petitioner also insisted that the offer was a mere offer of option, because the "firm offer" was a
continuing offer to sell until September 23.

ISSUE: Was the petitioner correct in arguing that there is no contract of sale but a mere option to buy?

HELD: NO. The Court held that there was a contract of sale between the parties.
Petitioners argument assumed that only a unilateral promise arose when the respondent accepted the
offer, which is incorrect because the acceptance of an offer to sell a determinate thing for a price certain
creates a bilateral contract to sell and to buy. The offeree, upon acceptance, ipso facto assumes the
obligations of a purchaser. On the other hand, the offerror would be liable for damages if he fails to deliver
the thing he had offered for sale.

Even supposing that the letter granted an option which is not binding for lack of consideration, the
authorities hold that if the option is given without a consideration, it is a mere offer of a contract of sale,
which is not binding until accepted. If however, acceptance is made before withdrawal, it constitutes a
binding contract of sale, even though the option was not supported by a sufficient consideration.















CASE 3

OPTION TO BUY; ACCEPTANCE OF OFFER TO BUY OR TO SELL
Sanchez vs Rigos
L-25494
June 14, 1972

CONCEPCION, C J:

FACTS:
On April 3, 1961, plaintiff-appellee Nicolas Sanchez and defendant-appellant Severina Rigos executed an
instrument entitled Option to Purchase, whereby Rigos agreed, promised and committed to sell to
Sanchez at the sum P1,510.00 a parcel of land situated in San Jose, Nueva Ecija, within two (2) years from
said date with the understanding that said option shall be deemed terminated and elapsed, if Sanchez
shall fail to exercise his right to buy the property within the stipulated period. Inasmuch as several
tenders of payment of the sum of PI,510.00, made by Sanchez within said period, were rejected by Rigos,
on March 12, 1963, the former deposited said amount with the CFI of Nueva Ecija and commenced
against the latter the present action, for specific performance and damages.
After the filing of defendants answeradmitting some allegations of the complaint, denying other
allegations thereof, and alleging, as special defense, that the contract between the parties is a unilateral
promise to sell, and the same being unsupported by any valuable consideration, by force of the New Civil
Code, is null and voidon February 11, 1964, both parties, assisted by their respective counsel, jointly
moved for a judgment on the pleadings. Accordingly, on February 28, 1964, the lower court rendered
judgment for Sanchez, ordering Rigos to accept the sum judicially consigned by him and to execute, in his
favor, the requisite deed of conveyance. Rigos was, likewise, sentenced to pay P200.00, as attorneys fees,
and other costs, hence, the appeal.
ISSUE: Is there a contract to buy and sell between Sanchez and Rigos?

HELD:
NO. The instrument executed is not a contract to buy and sell. It merely granted Sanchez an option to buy,
as indicated by its own title (Option to Purchase). The option did not impose upon Sanchez the obligation
to purchase Rigos property. Rigos "agreed, promised and committed" herself to sell the land to Sanchez
for P1,510.00, but there is nothing in the contract to indicate that her aforementioned agreement, promise
and undertaking is supported by a consideration "distinct from the price" stipulated for the sale of the
land. The lower court relied upon Article 1354 of the Civil Code when it presumed the existence of said
consideration, but the said Article only applies to contracts in general. In the case at bar, Article 1479 is
controlling because its second paragraph refers to "sales" in particular, and, more specifically, to "an
accepted unilateral promise to buy or to sell.
Also, 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. In this light, the Court reiterates the doctrine laid down in the ATKINS KROLL & CO. VS. CU
HIAN TEK.
CASE 4

RIGHT OF FIRST REFUSAL; NOT AN OPTION OR AN OFFER; REMEDY IN CASE OF
BREACH
ANG YU ASUNCION V. CA
G.R. No. 109125,
December 2, 1994

FACTS:
Petitioners Ang Yu Asuncion et. al. are lessees of residential and commercial spaces owned by the
Unjiengs and have occupied said spaces since 1935 and have been paying rentals. On several occasions
before Oct. 9, 1986, the Unjiengs informed Petitioners Ang Yu Asuncion that the premises were being sold
and that petitioners were being given priority to acquire the same (Right of First Refusal). The defendant
offered the price of Php 6 million, while the plaintiffs made a counter-offer of Php 5 million. Thereafter,
the plaintiffs were asked to put their offer in writing, and they acceded. They had not yet agreed on the
terms and conditions. Petitioners wrote to the Unjiengs twice, asking them to specify the terms and
conditions for the sale but received no reply. Later, the petitioners found out that the property was already
about to be sold, thus they instituted this case for Specific Performance [of the right of first refusal].
Unjiengs denied the material allegations of the complaint and interposed a special defense of lack of
course of action.
The trial court held that the Unjiengs offer to sell was never accepted by the Petitioners 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. 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. The
case was dismissed. The Court of Appeals affirmed the decision of the Trial Court.

In 1990, the subject property was sold to De Buen Realty, herein Private Respondent, for Php 15 million.
The title to the property was transferred to the name of De Buen, and De Buen demanded that the
Petitioners vacate the premises. For this reason, 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 favour of the petitioners and nullified the sale to De Buen Realty. However, the CA reversed its
decision when upon appeal by respondents.

ISSUES:
1. Is a contract of sale perfected by the grant of right of first refusal?
2. Does a breach of a right of first refusal entitle the petitioners to a writ of execution?

HELD:
1. NO. 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, or an option under second paragraph of Art. 1479, or an offer under Art. 1319.
In a right of first refusal, while the object might be made determinate (here, only the object is
determinate), the exercise of the right, however, would be dependent not only on the grantors
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.

2. NO. Even on the premise that such right of the first refusal has been decreed under a final
judgment, like here, its breach cannot justify correspondingly a writ of execution under a
judgment that merely recognizes its existence. If the 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 as there is no contractual relationship between the
parties, but an action for damages.
















CASE 5
RIGHT OF FIRST REFUSAL
Riviera Filipina, Inc. v. CA
GR. No. 117355
April 5, 2005

DE LEON, J.:

FACTS:
Pursuant to a lease contract that the LESSEE shall have the right of first refusal should the LESSOR
decide to sell the property during the term of the lease, respondent Reyes, the owner of a parcel of land
subject of Real Estate Mortgage, offered to sell the subject property to Riviera, its lessee, through its
President Vicente C. Angeles, for P5,000.00 per square meter. However, Angeles bargained for
P3,500.00 per square meter. Angeles then communicated with Reyes Rivieras offer to purchase the
subject property for P4,000.00 per square meter, but Reyes did not accept the offer, saying that
P6,000.00 per square meter is the new price since the value of the property in the area had appreciated.
In a letter, Riviera was served notice to exercise the right of first refusal in the sale of said property
and was given a period to purchase the same under the terms and conditions stated, and failing which it
shall be deemed to have thereby waived such pre-emptive right and Reyes shall thereafter be absolutely
free to sell the subject property to interested buyers. Riviera subsequently increased its offer to P5,000.00
per square meter but Reyes did not accede to said price as it was still lower than his quoted price. It was
thus expressed by Reyes party that Riviera has lost its right of first refusal in sale of said property. No
protest was heard from Riviera.
Meanwhile, the President of Cypress, expressed interest in buying the said property and bargained
for P5,300.00 per square meter. After due consideration, Reyes accepted the same. Sometime in
February 1989, Cypress and its partner in the venture, Cornhill Trading Corporation, were able to pay
Reyes, with which Reyes paid to the Prudential Bank to redeem the subject property. A Deed of Absolute
Sale covering the subject property was executed by Reyes in favor of Cypress and Cornhill for the
consideration of P5,395,400.00. Thereafter, Riviera sought from Reyes, Cypress and Cornhill a resale of
the subject property to it claiming that its right of first refusal under the lease contract was violated. A suit
was filed to compel Reyes, Cypress, Cornhill and Urban Development Bank to transfer the disputed title
to the land in favor of Riviera upon its payment of the price paid by Cypress and Cornhill.
The trial court dismissed the complaint of Riviera as well as the counterclaims and cross-claims of
the other parties. It ruled that the defendants therein did not violate Rivieras right of first refusal which
was affirmed by the CA.

ISSUE: Was Rivieras right of first refusal totally disregarded or violated by Reyes by the latters sale of
the subject property to Cypress and Cornhill?

HELD:
NO. There was no violation of Rivieras right of first refusal.

The prevailing doctrine is that a right of first refusal means identity of terms and conditions to be offered
to the lessee and all other prospective buyers and a contract of sale entered into in violation of a right of
first refusal of another, while valid, is rescissible.

An examination of the attendant particulars of the case does not persuade the Court to uphold Rivieras
view. As clearly shown by the records and transcripts of the case, the actions of the parties to the contract
of lease, Reyes and Riviera, shaped their understanding and interpretation of the lease provision right of
first refusal to mean simply that should the lessor Reyes decide to sell the leased property during the
term of the lease, such sale should first be offered to the lessee Riviera. And that is what exactly ensued
between Reyes and Riviera, a series of negotiations on the price per square meter of the subject property
with neither party, especially Riviera, unwilling to budge from his offer, as evidenced by the exchange of
letters between the two contenders.