G.R. No. 111238, 25 January 1995


Private respondent seeks to recover the owner’s copy from the petitioner failed to make good on their Exclusive Option to Purchase agreement. Petitioner counters that its failure to pay was justified as private respondent’s claim to the land was contested by their relatives. The trial court and the CA ruled that their failure to pay constituted a counter-offer amounting to rejecting the option. They further ruled that suspension of payments only applied to contracts of sale and those to sale and not to option contracts.


Was the agreement between the petitioner and the private respondent a Contract of Sale, a Contract to Sell, or an Option Contract?


It was a Contract to Sell.

The distinction between the two is important for in contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price.

There are two features which convince us that the parties never intended to transfer ownership to petitioner except upon the full payment of the purchase price.

Firstly, the exclusive option to purchase, although it provided for automatic rescission of the contract and partial forfeiture of the amount already paid in case of default, does not mention that petitioner is obliged to return possession or ownership of the property as a consequence of non-payment. In effect, there was an implied agreement that ownership shall not pass to the purchaser until he had fully paid the price. Article 1478 of the civil code does not require that such a stipulation be expressly made. Consequently, an implied stipulation to that effect is considered valid and, therefore, binding and enforceable between the parties. It should be noted that under the law and jurisprudence, a contract which contains this kind of stipulation is considered a contract to sell.

Secondly, it has not been shown there was delivery of the property, actual or constructive, made to herein petitioner. The exclusive option to purchase is not contained in a public instrument the execution of which would have been considered equivalent to delivery.

An option, as used in the law on 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.

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 accepting the offer and buying the property on certain terms

The distinction between an “option” and a contract of sale is that an option is an unaccepted offer. It states the terms and conditions on which the owner is willing to sell the land, if the holder elects to accept them within the time limited. If the holder does so elect, he must give notice to the other party, and the accepted offer thereupon becomes a valid and binding contract. If an acceptance is not made within the time fixed, the owner is no longer bound by his offer, and the option is at an end. A contract of sale, on the other hand, fixes definitely the relative rights and obligations of both parties at the time of its execution. The offer and the acceptance are concurrent, since the minds of the contracting parties meet in the terms of the agreement.

The records also show that private respondents accepted the offer of petitioner to buy their property under the terms of their contract. At the time petitioner made its offer, private respondents suggested that their transfer certificate of title be first reconstituted, to which petitioner agreed.

We do not subscribe to private respondents’ submission, which was upheld by both the trial court and respondent court of appeals, that the offer of petitioner to deduct P500,000.00, (later reduced to P300,000.00) from the purchase price for the settlement of the civil case was tantamount to a counter-offer. It must be stressed that there already existed a perfected contract between the parties at the time the alleged counter-offer was made. Thus, any new offer by a party becomes binding only when it is accepted by the other. In the case of private respondents, they actually refused to concur in said offer of petitioner, by reason of which the original terms of the contract continued to be enforceable.

At any rate, the same cannot be considered a counter-offer for the simple reason that petitioner’s sole purpose was to settle the civil case in order that it could already comply with its obligation. In fact, it was even indicative of a desire by petitioner to immediately comply therewith, except that it was being prevented from doing so because of the filing of the civil case which, it believed in good faith, rendered compliance improbable at that time.

Hence, with the instrument being a contract to sell, the petitioner was justified suspending payment of the balance of the purchase price by reason of the aforesaid vindicatory action filed against it.

*Case digest by Roger Angielo V. Atenta, JD-IV, Andres Bonifacio College, SY 2019-2020