DOCTINE: BILATERAL PROMISE TO BUY AND SELL VS.

UNILATERAL PROMISE TO BUY OR

SELL (Art. 1479 and Art. 1372)

Bilateral Promise to Buy AND Sell

- One party promises to buy and the
other party promises to sell a
determinate thing at an agreed price
- Reciprocally demandable since this is
as good as a perfected contract of
sale. However, for enforceability this
must comply with the proper form
(Statute of Frauds)
- Requires no consideration distinct
from the selling price

Serra v. Court of Appeals (and RCBC)

Unilateral Promise to Buy OR Sell

- The promise to buy or to sell a
determinate thing at a certain price is
made by only one of the parties
- Effects:
A. If NOT accepted by the promissee
(policitacion) no legal effect
B. If accepted by the promissee
a) And is supported by a
consideration distinct from the
price, the promise is binding
upon the promissor and he
cant withraw within the option
period (Art. 1479)
b) And is NOT supported by a
consideration distinct from the
price, the promise is not
binding upon the promissor
and he can withdraw even
before the lapse of the option
period given to promissee (Art.
1372 on option contracts)

G.R. No. 103338, 4th January 1994

Nocon, J.:
FACTS:
Federico Serra (petitioner) is the owner of a 374 sqm parcel of land in Masbate, Masbate. Sometime in
1975, RCBC (respondent), in its desire to put up a branch in Masbate, negotiated with the petitioner for
the purchase of the property. However, the property was still unregistered and so a contract of LEASE
WITH OPTION TO BUY was instead entered into by the parties on May 20, 1975.
Under the terms of the contract, RCBC can lease the property for 25 years with the option to purchase
within a period of 10 years from the date of signing at a price not greater than P210/sqm while Serra
undertakes to register said parcel of land under the Torrens System. If after 10 years, in case the land
had already been registered, RCBC fails to exercise its option to purchase, the buildings and
improvements put up by RCBC will become the property of Serra upon the expiration of the 25-year
lease period. On the other hand, if after 10 years Serra failed to register the land, RCBC will have the
right to be paid for the market value of said buildings and improvements.
Petitioner complied with his obligation to register the land and pursued the branch manager of the
bank to effect the sale. However, RCBC only decided to exercise its option to buy on September 4,
1984 (so late but still within 10 years). Much to RCBCs surprise, Serra replied that he is no longer
interested to sell the property.
Hence, a complaint for specific performance and damages was filed by RCBC on March 14, 1985. Serra
contended in his defense 1) that the option was not supported by any consideration distinct from the
price and hence not binding upon him 2) that the stipulated price of not greater than P210/sqm is
not certain or definite.
The trial court initially ruled in favor of Serra but upon reconsideration reversed its decision. Its
decision was affirmed by CA.
ISSUE:
1. WON the contract of LEASE WITH OPTION TO BUY valid
HELD:
YES. The contract lease with option to buy is valid, effective and enforceable, the price being certain
and that there was consideration distinct from the price to support the option given to lessee.
Article 1324 of the Civil Code provides that when an offeror has allowed the offeree a certain period to
accept, the offer maybe withdrawn at anytime before acceptance by communicating such
withdrawal, except when the option is founded upon consideration, as something paid or promised. On
the other hand, Article 1479 of the Code provides that an accepted unilateral promise to buy and
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.
In a unilateral promise to sell, where the debtor fails to withdraw the promise before the acceptance by
the creditor, the transaction becomes a bilateral contract to sell and to buy, because upon acceptance
by the creditor of the offer to sell by the debtor, there is already a meeting of the minds of the parties
as to the thing which is determinate and the price which is certain. In which case, the may then
reciprocally demand performance.
Jurisprudence has taught us that an optional contract is a privilege existing only in one party the
buyer. For a separate consideration paid, he is given the right to decide to purchase or not, a certain
merchandise or property, at any time within the agreed period, at a fixed price. This being his
prerogative, he may not be compelled to exercise the option to buy before the time expires.
In the present case, Serra cannot withdraw his offer because RCBCs acceptance of the promise is with
a consideration distinct from the selling price. Here, the consideration is even more onerous since it
entails transferring (without paying anything) of the building and/or improvements on the property to
petitioner, should respondent bank fail to exercise its option within the period stipulated. As to the
question of the certainty of the price, the court held that a price is considered certain if it is so with
reference to another thing certain or when the determination thereof is left to the judgment of a
specified person or persons. And generally, gross inadequacy of price does not affect a contract of
sale.