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Binding Option Contracts Ruling

- Sanchez and Rigos executed an option contract for Sanchez to purchase land from Rigos within two years, but the contract lacked separate consideration. - Sanchez repeatedly tendered payment within the two years but Rigos refused. - The RTC ruled in Sanchez's favor but Rigos appealed, arguing the option was not binding without separate consideration per a previous case. - The Supreme Court abandoned the previous ruling, holding that acceptance of an option before withdrawal creates an obligation to buy/sell even without separate consideration. Article 1479 on unilateral contracts must be read with Article 1324 on option contracts.

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Dennis Castro
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100 views2 pages

Binding Option Contracts Ruling

- Sanchez and Rigos executed an option contract for Sanchez to purchase land from Rigos within two years, but the contract lacked separate consideration. - Sanchez repeatedly tendered payment within the two years but Rigos refused. - The RTC ruled in Sanchez's favor but Rigos appealed, arguing the option was not binding without separate consideration per a previous case. - The Supreme Court abandoned the previous ruling, holding that acceptance of an option before withdrawal creates an obligation to buy/sell even without separate consideration. Article 1479 on unilateral contracts must be read with Article 1324 on option contracts.

Uploaded by

Dennis Castro
Copyright
© © All Rights Reserved
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Sanchez v.

Rigos
G.R. No. L-25494; June 14, 1972
Ponente: Concepcion, C.J.

Facts:
In 1961, Rigos and Sanchez executed a document titled ‘Option to Purchase’ whereby Rigos
bound herself to sell a parcel of land to Sanchez for 1.5k pesos within two years from the
execution of the contract. This option contract had no distinct consideration.
Sanchez made several tenders of the purchase price to Rigos, but Rigos ignored them.
Sanchez consigned the payment in court less than 2 months before the expiration of the period
to exercise his right.
In other words, Sanchez accepted the option before Rigos could withdraw the offer.
The RTC ruled in favor of Sanchez, ordering Rigos to accept the payment of the price.
On appeal, Rigos claims that she could validly withdraw the option given to Sanchez, even if
Sanchez has opted to exercise his right, since the contract was not supported by a separate
and distinct consideration (ruling in Southwestern Sugar v Atlantic Gulf).

Issue:
Whether or not Rigos is bound by Sanchez’ acceptance even though the option is not supported
by a separate consideration.

Held:
Ruling in Southwestern abandoned; acceptance of option before withdrawal creates a binding
obligation to buy and sell even if not supported by consideration
Even if the "offer of option" is not supported by any consideration, the option became binding on
the promissor when the promisee gave notice to it of its acceptance, and that having accepted it
within the period of option, the offer can no longer be withdrawn and in any event such
withdrawal is ineffective.
Article 1479 must be read in relation to Article 1324
ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or 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.
ART. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may
be withdrawn any time before acceptance by communicating such withdrawal, except when the
option is founded upon consideration as something paid or promised.
In Southwestern, the Court said while 1324 was applicable to contracts in general, Article 1479
specifically states that in unilateral contracts to sell, there is a need for the separate
consideration before the obligation to buy and sell arises.
However, this ruling was abandoned in the case of Atkins v Cua Hian Tek, where the Court
decided there was no distinction between the two articles. Both articles produced the same
effect: the promise is treated as an option which, although not binding as a contract in itself for
lack of a separate consideration, nevertheless generated a bilateral contract of purchase and
sale upon acceptance.
In other words, since there may be no valid contract without a cause or consideration, the
promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its
withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if
accepted, results in a perfected contract of sale.

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