CHAPTER I-NATURE AND FORM OF THE CONTRACTAD cannot be enforced: that holds

true even if the unilateral promise is already accepted by the optionee. The
consideration is "the why of the contracts, the essential may vary. This definition
illustrates that the consideration contemplated to support reason which moves the
contracting parties to enter into the contract." exchanged for the option. However,
by the very nature of an option an option contract need not be monetary Actual
cash need not be contract, as defined in Article 1479. the same is an onerous
contract for which the consideration must be something of value, although its kind
Option to Purchase, as well as the pleadings submitted by the parties, and We have
painstakingly examined the Contract of Lease with maliunde to prove the existence
of consideration for the option contract, their testimonies in open court, for any
direct evidence or evidence but we have found none. The only consideration agreed
upon by the parties in the said Contract is the supposed purchase price for the
subiect property in the amount not exceeding P1.5 Million, which could not be
deemed to be the same consideration for the option contract since the valid. it must
be supported by a consideration separate and distinct law and jurisprudence
explicitly dictate that for the option contract to be from the price. In Bible Baptist
Church v. Court of Appeals, we stressed that an option contract needs to be
supported by a separate consideration. The consideration need not be monetary but
could consist of other things or undertakings. However, if the consideration is not
monetary, these must be nature of the option contract. Furthermore, when a
consideration for an option contract is not monetary, said consideration must be
clearly specified as such in the option contract or clause. In the present case, it is
indubitable that no consideration was given by X to H. and W for the option
contract. The absence of monetary or any material consideration keeps this Court
from enforcing the rights of the parties under said option contract.43 Note: There is
no question that under Article 1479 of the new Civil Code "an option to sell," or "a
promise to buy or to sell," as used in said article, to be valid must be "supported by
a consideration distinct from the price." This is clearly inferred from the context of
said article that a unilateral promise to buy or to sell, even if accepted, is only
binding if supported by consideration. In other words, "an accepted unilateral
promise can only have a binding effect if supported by a consideration, which
means that the option can still be withdrawn, even if accepted, if the same is not
supported by any consideration.
CHAPTER I-NATURE AND FORM OF THE CONTRACTAR the lease contract, X exercised
his option to purchase the subject prop Before the expiration of the three-year lease
period provided by communicating verbally and in writing to W his willingness to
pay manifestation. In a letter to X. H and W demanded that he pay his rental arrea
and vacate the subject property since it would be needed by Hand themselves.
Complaint for Specific Performance against H and W. X's cause of acti Without
heeding the demand of H and W X instituted is founded on the Contract of Lease
with Option to Purchase vesting hi with the right to acquire ownership of the subject
property after payi the agreed amount of consideration. Is there an option contract?
Answer: An option is also sometimes called an "unaccepted offer" and sanctioned
by Article 1479 of the Civil Code: Art. 1479. A promise to buy and sell a determinate
thing for a price certa is reciprocally demandable. An accepted unilateral promise to
buy or to sell a determinate thing for price certain is binding upon the promissor if
the promise is supported by consideration distinct from the price. The second
paragraph of Article 1479 provides for the definitio and consequent rights and
obligations under an option contract. For a option contract to be valid and
enforceable against the promissor, then must be a separate and distinct
consideration that supports it. In the landmark case of Southwestern Sugar and
Molasse Company v. Atlantic Gulf and Pacific Co., we declared that for an option
contract to bind the promissor, it must be supported by consideration: There is no
question that under Article 1479 of the new Civi Code "an option to sell," or "a
promise to buy or to sell," as used in said article, to be valid must be "supported by
a consideration from the price." This is clearly inferred from the context of that a
unilateral promise to buy or to sell, even if accepted, is only bindin if supported by a
consideration. In other words, "an accepted unilatera promise" can only have a
binding effect if supported by a consideration which means that the option can still
be withdrawn, even if accepted, the same is not supported by any consideration.
Here it is not dispute that the option is without consideration. It can therefore be
withdraw notwithstanding the acceptance made of it by appellee. The doctrine
requiring the payment of consideration in an option contract enunciated in
Southwestern Sugar is resonated in subsequen cases and remains controlling to this
day. Without consideration that separate and distinct from the purchase price, an
option contrad
CHAPTER I-NATURE AND FORM OF THE CONTRACT option The rule so early
established in this jurisdiction is that the deed of option or the option clause in a
contract, in order to be valid and enforceable, must, among other things, indicate
theordfinite price at which the person granting the option, is willing to sell.40 What
is right of first refusal? On the other hand, in Ang Yu Asuncion v. Court of Appeals,20
an elucidation on the "right of first refusal" was made thus: 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. In aforequoted, or possibly of an offer under Article 1319 of the same Code.
An option or an offer would require, among other things, a clear certainty on both
the object a right of first refusal, while the object might be made determinate, the
grantor's eventual intention to enter into a binding juridical relation with exercise of
the right, however, would be dependent not only on tith another but also on terms,
including the price, that obviously are yet to be later firmed up. Prior thereto, it can
abest 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. 41 dostco 112 OPTION CONTRACT VS. RIGHT OF FIRST REFUSAL From the
foregoing, it is thus clear that an option contract is entirel different and distinct from
a right of first refusal in that in the former, th option granted to the offeree is for a
fixed period and at a determined prie Lacking these two essential requisites, what is
involved is only a right of fi refusal.42 Problem: H and W leased a house and lot to
X. X used the subject prop as his residence and place of business. H and W and X
allegedly en into a Contract of Lease with Option to Purchase involving the su
property. The contract purportedly afforded X, before the expirat the three-year
lease period, the option to purchase the subject pr for a price not exceeding P1.5
Million.

CHAPTERI - NATURE AND FORM OF THE CONTRACT there is no defect in the owner
sellers title per se, but the latter, of course, may be sued for damages by the
intending buyer. Applying Article 1544 of the Cl Code, such second buyer of the
property who may have had act or constructive knowledge of such defect in the
sellers' title, or at leap was charged with the obligation discover such defect, cannot
be registrant in good faith. Such second buyer cannot defeat the fire buyers title. In
case a title is issued property subject of the sale,38 may seek reconveyance of the
to the second buver, the first buye What is option contract? In Beaumont v. Prieto,
the nature of an option contract is explaine thus: In his Law Dictionary, edition of
1897, Bouvier defines an optiona a contract, in the following language: 'A contract
by virtue of which A, in consideration of the payment of 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. (Story v Salamon, 71 N. Y., 420.)' From Vol. 6, page
5001, of the work "Words and Phrases," citing the case of Ide vs. Leiser (24 Pac.,
695; 10 Mont., 5; 24 Am. St. Rep., 17) the following quotation has been taken: 'An
agreement in writing to give a person the 'option' to purchase lands within a given
time at a named price is neither a sale nor an agreemen to sell. It is simply a
contract by which the owner of property agrees with another person that he shall
have the right to buy his property at a fixed price within a certain time. He does not
sell his land; he does not then agree to sell it; but he does sell something; that is,
the right or privilege to buy at the election or option of the other party. The second
party gets in praesenti not lands, nor an agreement that he shall have lands, but he
does get something of value; that is, the right to call for and receive lands if he
elects The owner parts with his right to sell his lands, except to the second party for
a limited period. The second party receives this right, or rather, from his point of
view, he receives the right to elect to buy. But the two definitions above cited refer
to the contract of option or, what amounts to the same thing, to the case where
there was cause of consideration for the obligation xxx.39
CHAPTER 1-NATURE AND FORM OF THE CONTRACT AD thing for a price certain is
binding upon the promissor if the promise is An accepted unilateral promise to buy
or to sell a determinate supported by a consideration distinct from the price. What
is contract to sell? A contract to sell may thus be defined as a bilateral contract
whereby the prospective seller, while expressly reserving the ownership of the
subject property despite delivery thereof to the prospective buyer, binds himself to
sell the said property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price. considered as a
conditional contract of sale where the seller may likewise A contract to sell as
defined hereinabove, may not even be reserve title to the property subject of the
sale until the fulfillment of a suspensive condition, because in a conditional contract
of sale, the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the suspensive
condition is not fulfilled. the perfection of the contract of sale is completely abated.
However, if the suspensive condition is fulfilled, the contract of sale the property
subject of the sale to the buyer, ownership thereto automatically is thereby
perfected, such that if there had already been previous delivery of transfers to the
buyer by operation of law without any further act having to be performed by the
seller. In a contract to sell, upon the fulfillment of the suspensive condition which is
the full payment of the purchase price, ownership will not automatically transfer to
the buyer although the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective buyer by entering into a
contract of absolute sale. 37 Contract to sell vs. Conditional contract of sale
Contract to sell In a contract to sell, there being no previous sale of the property, a
third person buying such property despite the fulfillment of the suspensive condition
such as the full payment of the purchase price, for instance, cannot be deemed a
buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance
of the property. There is no double sale in such case. Title to the property will
transfer to the buyer after registration because Conditional contract of sale In a
conditional contract of sale, however, upon the fulfillment of the suspensive
condition, the sale becomes absolute and this will definitely affect the sellers' title
thereto. In fact, if there had been previous delivery of the subject property, the
sellers' ownership or title to the property automatically transferred to the buyer
such that, the seller will ne longer have any title to transfer to any third person

CHAPTER 1-NATURE AND FORM OF THE CONTRACTAR delivery. Moreover, the

execution itself of the contract of sale is construch Consequently, X could no longer
sell the subject properties after having sold them to R. "In a contract of sale, the
vendor lo contract ix resolved or rescinded x x x." The records do not show that
ownership over the property and cannot recover it until and unless revocation of the
special power of attorney he executed. "In the sale asked for a rescission of the
contract. What he adduced was a bel immovable property, even though it may have
been stipulated that up failure to pay the price at the time agreed upon the
rescission of th contract shall of right take place, the vendee may pay, even after
expiration of the period, as long as no demand for rescission of the contro has been
made upon him either judicially or by a notarial act. "33 Two aspects of delivery The
term "delivery" or tradition has two aspects: 1.The de jure delivery or the execution
of deeds of conveyance; and 2. The delivery of the material possession. 34 Art.
1478. The parties may stipulate that ownership in the thing shal not pass to the
purchaser until he has fully paid the price. Under the Civil Code, unless the contract
contains a stipulation that ownership of the thing sold shall not pass to the
purchaser until has fully paid the price, ownership of the thing sold shall be
transferred the vendee upon the actual or constructive delivery thereof. In other
word payment of the purchase price is not essential to the transfer of ownership
long as the property sold has been delivered. Such delivery (traditio) operate to
divest the vendor of title to the property which may not be regained recovered until
and unless the contract is resolved or rescinded accordance with law, 35 Article
1478 of the civil code does not require that such stipulation be expressly made.
Consequently, an implied stipulation to the effect is considered valid and, therefore,
binding and enforceable between the parties. It should be noted that under the law
and jurisprudence, a contro which contains this kind of stipulation is considered a
contract to sell. 36 Art. 1479. A promise to buy and sell a determinate thing for a
pric certain is reciprocally demandable.
CHAPTER 1-NATURE AND FORM OF THE CONTRACT Problem: (consisting of 10 lots)
of X and the heirs of L that said vendors executed In her complaint. Raverred that
she bought the hereditary shares a contract of sale dated April 10.1990 in her favor:
that X and the heirs of L received a down payment or earnest money in the amount
of P102.169.86 and P450,000, respectively; that it was agreed in the contract of
sale that the vendors would secure certificates of title purchase price would be paid
to each heir upon presentation of their covering their respective hereditary shares:
that the balance of the individual certificates of title: that X refused to receive the
other half of the down payment which is P100.000: that X refused and still refuses
to deliver to R the certificates of title covering his share on the two lots: that with
respect to the heirs of L. they also refused and still refuse to perform the delivery of
the two certificates of title covering their share in the disputed lots: that R was and
is ready and willing to pay X and the heirs of Lupon presentation of their individual
certificates of title, free from Starve whatever lien and encumbrance. As to C. in
spite of her knowledge that the disputed lots have already been sold by X to R, it is
alleged that a simulated deed of sale involving said lots was effected by X in her
favor and that the simulated deed of sale by X to Chas raised doubts and clouds
over R's title. X and the heirs of 1. argue that the contract is a contract to sell.
Veltutienot a contract of sale. The real character of the contract is not the title
given, but the intention of the parties. They intended to reserve ownership of the
property to X and the heirs of L pending full payment of in the purchase price.
Further. R failed to faithfully fulfill her part of the due diligence in ascertaining
ownership of the properties sold to her. Is the contract of sale between X and the
heirs of L and R valid? Answer: Indeed, they have entered into a contract of sale.
Not only has the title to the subject properties passed to R upon delivery of the
thing sold, but there is also no stipulation in the contract that states the ownership
is to be reserved in or "retained by the vendor until full payment of the price." In
fact, earnest money has been given by R. "It shall be considered as part of the price
and as proof of the perfection of the contract. It constitutes an advance payment to
"be deducted from the total price. "Article 1477 of the same Code also states that
"the ownership of the thing sold shall be transferred to the vendee upon actual or
constructive delivery thereof." In the present case, there is actual delivery as
manifested by acts simultaneous with and subsequent to the contract of sale when
R not only took possession of the subject properties. but also allowed their use as
parking terminal for jeepneys and buses
CHAPTER I-NATURE AND FORM OF THE CONTRACT MA Sale by auction is perfected
perfection by the fall of the hammer, or in other customary manner, A sale by
auction is perfected when the auctioneer announces BEFORE the fall of the hammer
1. Any bidder may retract his bid; and 2. The auctioneer may withdraw the goods
from the sale unless the aucti has been announced to be without reserve. Art. 1477.
The ownership of the thing sold shall be transferred to vendee upon the actual or
constructive delivery thereof. upon the constructive or actual delivery thereof, as
provided for in Arti In a contract of sale, the title to the property passes to the vend
1477 of the New Civil Code. The vendor loses ownership over the propen and
cannot recover it until and unless the contract is rescinded by a notar deed or by
judicial action as provided for in Article 1592 of the New Ch Code. A contract of sale
is absolute, absent any stipulation therein reservin title over the property to the
vendee until full payment of the purchase pri nor giving the vendor the right to
unilaterally rescind the contract in case non-payment. In a contract of sale, the non-
payment of the price is resolutory condition which extinguishes the transaction that,
for a tim existed, and discharges the obligations created thereunder.31 In a contract
of sale, until and unless the contract is resolved rescinded in accordance with law,
the vendor cannot recover the thing se even if the vendee failed to pay in full the
initial payment for the propem The failure of the buyer to pay the purchase price
within the stipulate eriod does not by itself bar the transfer of ownership or
possession of th roperty sold, nor ipso facto rescind the contract. Such failure will
mere give the vendor the option to rescind the contract of sale judicially or b
notarial demand as provided for by Article 1592 of the New Civil Code: Art. 1592. In
the sale of immovable property, even though it may hai been stipulated that upon
failure to pay the price at the time agree upon the rescission of the contract shall of
right take place, the vendi may pay, even after the expiration of the period, as long
as no deman for rescission of the contract has been made upon him either judicial
or by a notarial act. After the demand, the court may not grant him new term. 32

CHAPTER 1-NATURE AND FORM OF THE CONTRACTAND X sale had been perfected at
the precise moment X Corp., as evinced by its act of sending Y Corp. the Purchase
Order, accepted the latter's proposal to sell the subject products in consideration of
the purchase price parties-ie, on the one hand. Y Corp. to deliver the said products
to of P646.464. From that point in time, the reciprocal obligations of the Corp., and,
on the other hand. X Corp. to pay the purchase price therefor within 30 days from
delivery already arose and consequently may be demanded. Article 1475 of the Civil
Code makes this clear: Art. 1475. The contract of sale is perfected at the moment
there is a meeting of minds upon the thing which is the object of the contract and
upon the price. From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the form of contracts.
29 abihd Note: In general, a perfected contract of sale cannot be challenged on the
ground of the seller's non-ownership of the thing sold at the time of the perfection
of the contract. Further, even after the contract of sale has been perfected between
the parties, its consummation by delivery is yet another matter. It is through
tradition or delivery that the buyer acquires the real right of ownership over the
thing sold. 30 Art. 1476 . In the case of a sale by auction: (1) Where goods are put
up for sale by auction in lots, each lot is the (2) A sale by auction is perfected when
the auctioneer announces its subject of a separate of sale. perfection by the fall of
the hammer, or in other customary manner. Until such announcement is made, any
bidder may retract his bid; and the auctioneer may withdraw the goods from the
sale unless the auction has been announced to be without reserve. (3) A right to bid
may be reserved expressly by or on behalf of the seller, unless otherwise provided
by law or by stipulation. (4) Where notice has not been given that a sale by auction
is subject to a right to bid on behalf of the seller, it shall not be lawful for the seller
to bid himself or to employ or induce any person to bid at such sale on his behalf or
for the auctioneer, to employ or induce any person to bid at such sale on behalf of
the seller or knowingly to take any bid from the seller or any person employed by
him. Any sale contravening this rule may be treated as fraudulent by the buyer.

CHAPTER I-NATURE AND FORM OF THE CONTRACTAN upon the price. Art. 1475. The
contract of sale is perfected at the moment there meeting of minds upon the thing
which is the object of the contract From that moment, the parties may reciprocally
den performance, subject to the provisions of the law governing the for contracts.
Take note that sale is a consensual contract; thus, it is perfect mere consent
meaning the moment there is a meeting of the minds Problem: X Corp. is a
domestic corporation engaged in the trading distribution of consumer goods in
wholesale and retail bases, whe Corp, is one engaged in the supply of computer
hardware and equipm Y Corp. sent a letter-proposal for the delivery and sale subject
products to be installed at various offices of X Corp. On October 29, 2001. X Согр.
accepted Y's proposal. accordingly issued a Purchase Order for the subject products
amous to P646,464. Thereafter, Y Corp. delivered the said products to XG The fine
print of the invoice states, inter alia, that "title to sold prope is reserved in Y Corp.
until full compliance of the terms and condition parties above and payment of the
price". After delivery, the subject were then installed and configured in X Corp.'s
premises. Y Con demands against X Corp. to pay the purchase price, however,
remai unheeded. Instead of paying the purchase price, X Corp. sent Y Cons letter,
stating that it "has been returning the subject products to YG thru its sales
representative who has agreed to pull out the said prodo but had failed to do so up
to now." Should X Corp. pay Y Corp. the purchase price for the sub products?
Answer: The very essence of a contract of sale is the transfer ownership in
exchange for a price paid or promised. This may gleaned from Article 1458 of the
Civil Code which defines a contrat sale as follows: Art. 1458. By the contract of sale,
one of the contracting pan obligates himself to transfer the ownership and to delive
determinate thing, and the other to pay therefor a price certai money or its
equivalent. A contract of sale may be absolute or conditional. In this case, the
parties have agreed to a contract of sale and to a contract to sell. Bearing in mind
its consensual nature, a contract