"I chose to go to law school because I thought that someday, somehow I'd make a difference." -A.

October 4, 2016

Santos vs. Rigos

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 optino 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 Altantic Gulf).



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

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, theoption 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notice to it of its acceptance, and that having accepted it within the period of option, the offer can no longer be withdrawn and in any event such withdrawal is ineffective.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 When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn any time before acceptance by communicating such withdrawal, except when the option is founded upon consideration as something paid or promised.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.

Citation:
  • G.R. No. L-25494 
  • June 14, 1972
  • NICOLAS SANCHEZ, plaintiff-appellee,  vs. SEVERINA RIGOS, defendant-appellant.

0 comments:

Post a Comment

The Law Chic Bar Exam FREE Downloads Notes Materials
Copyright © 2014 kite | All Rights Reserved. Design By Templateclue - Published By Gooyaabi Templates