Equatorial Realty Development, Inc. & Carmelo & Bauermann, Inc., v.
Mayfair Theater, Inc
The contractual stipulation provides for a right of first refusal in favor of Mayfair. It is not an option clause or an option
contract. It is a contract of a right of first refusal. An option as a contract is a contract by virtue of which A, in consideration
of the payment of a certain sum to B, acquires the privilege of buying from, or selling to B, certain securities or properties
within a limited time at a specified price. The deed of option or the option clause in a contract, in order to be valid and
enforceable, must, among other things, indicate the definite price at which the person granting the option, is willing
to sell.
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. This contract is legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil
Code, viz: ”xxx An accepted unilateral 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. (1451a). xxx”
The option, however, 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.
A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an offer. Public advertisements or
solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. These relations, until
a contract is perfected, are not considered binding commitments. Thus, at any time prior to the perfection of the contract,
either negotiating party may stop the negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective
immediately after its manifestation, such as by its mailing and not necessarily when the offeree learns of the withdrawal.
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.
(2) If the period has a separate consideration, a contract of "option" 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 opinion. . .
The stipulation in question grants the right of first refusal to Mayfair and is not an option contract. As such, the
requirement of a separate consideration for the option, has no applicability in the instant case. An option is a contract
granting a privilege to buy or sell within an agreed time and at a determined price. It is a separate and distinct
contract from that which the parties may enter into upon the consummation of the option. It must be supported by
consideration. In the instant case, the right of first refusal is an integral part of the contracts of lease. The
consideration is built into the reciprocal obligations of the parties.
