OPTION CONTRACT
Pertinent cases:
• Ang Yu vs. CA (en banc)
• PNOC vs. Keppel
• Sanchez vs. Rigos
• Vasquez vs. CA
• Carceller vs. CA
Must have all three (3) requisites for Subject Matter
and four (4) requisites for Price
In an option contract, the first thing to look at is
whether or not there is a separate
consideration.
(1) No separate consideration
• Withdraw before acceptance or if an
acceptance has been made, before the
offeror knows of such fact by
communicating withdrawal to offeree
• Liability only attaches when withdrawn
arbitrarily
o Damages – Art. 19 CC
Exericse of option can result to either a contract
to sell or contract of sale DEPENDING on the
wording of the contract
• PNOC vs. Keppel: An option unsupported
by a separate consideration stands as an
unaccepted offer to buy (or to sell) which,
when properly accepted, ripens into a
contract to sell.
(2) With separate consideration
• Withdrawal during option period -> breach
of contract
• Remedies in case of breach
o Damages, because of a breach of
contract (Ang Yu vs. CA)
o Specific Performance – if an
obligation to give (Carceller vs.
CA)
§ Inspect the wording of
the contract. If it is an
obligation to do, there can
be no specific
performance.
RIGHT OF FIRST REFUSAL
Pertinent cases:
• Equatorial Realty vs. Mayfair
• Ang Yu vs. CA
• Rosencor vs. Inquing
In a right of first refusal, the first thing to look at is
whether or not it is a part of a contract.
(1) Part of a contract
• Remedies in case of breach:
o Rescission of the sale between
the grantor and the third-party
buyer (results to restitution)
o Specific performance against the
owner (to sell it to you under the
same terms), only if it is an
obligation to give
o (Technically, there would be
damages in either case – Art.
1191)
Exception: No rescission when the third-party was
in good faith (Rosencor vs. Inquing)
• Only damages against the grantor of the
right of first refusal
(2) Not part of a contract
• If there is a separate consideration
o Treat it as if it is part of a contract;
see (1) (Note: Atty. Gulapa said
this is only an 8/10 answer)
o “I give that you may do”
• If there is no separate consideration
o Remedy in case of breach:
§ Damages – Art. 19 CC
(Ang Yu vs. CA)
* According to Atty. Gulapa