G.R. No. 109125, 2 December 1994

FACTS:

A complaint for Specific Performance was filed by plaintiffs against Bobby Cu Unjieng and Jose Tan. They were tenants or lessees of residential and commercial spaces owned by defendants in Binondo. Defendants informed the plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same.

During negotiations, Cu Unjieng offered a price of P6- million while plaintiffs made a counter of offer of P5-million. Plaintiff thereafter asked the defendants to put their offer in writing to which the defendants acceded. In reply to defendants’ letter, plaintiffs wrote, asking that they specify the terms and conditions of the offer to sell. When the plaintiffs did not receive any reply, they sent another letter with the same request. Since defendants failed to specify the terms and conditions of the offer to sell and because of information received that the defendants were about to sell the property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them. The court dismissed the complaint on the ground that the parties did not agree upon the terms and conditions of the proposed sale; hence, there was no contact of sale at all.

ISSUE:

Whether the agreement of the parties constitutes an option contract.

RULING:

No. An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of option.

Article 1479 of the Civil Code states, viz:

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.

The option is not the contract of sale itself. The optionee has the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings. 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, the offeror is still free and 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. The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of the Civil Code which ordains that “every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.”

(2) If the period has a separate consideration, a contract of “option” is deemed perfected, and it would be a breach of that contract to withdraw the offer during the agreed period. The option, however, is an independent contract by itself, and it is to be distinguished from the projected main agreement (subject matter of the option) which is obviously yet to be concluded. 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 performance on the proposed contract (“object” of the option) since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option. In these cases, care should be taken of the real nature of the consideration given, for if, in fact, it has been intended to be part of the consideration for the main contract with a right of withdrawal on the part of the optionee, the main contract could be deemed perfected; a similar instance would be an “earnest money” in a contract of sale that can evidence its perfection (Art. 1482, Civil Code).

*Case digest by Teonilo M. Bagalanon Jr., JD – 4, Andres Bonifacio College, SY 2019 – 2020