Daniel Vazquez vs Ayala

Corporation
443 SCRA 239 – Civil Law – Law on Sales – Warranty – Option Contract
Daniel Vasquez owns Conduit Development, Inc. In 1981, Vasquez enters into a
Memorandum of Agreement (MOA) with Ayala Corporation wherein Ayala bought Conduit
from Vasquez. Ayala committed to develop Conduit’s lands including 4 parcels of land
adjacent to Vasquez’ retained land. Be it noted that these parcels of land were in the
3rd phase of Ayala’s development plan. Paragraph 5.15 of the MOA provides:
5.15. The BUYER (AYALA) agrees to give the SELLERS (Vasquez) a first option to
purchase four developed lots next to the “Retained Area” at the prevailing market price at
the time of the purchase.”
In 1990, Ayala was able to develop the said lots. (This was after some slump, and some
litigation between Conduit’s former contractor (GP construction) and GP’s subcontractor
(Lancer Builders).) Ayala then offered to sell the 4 parcels of land to Vasquez at P6.5k/sq.
m. which was the market price in 1990. Vasquez refused the offer. Vasquez contended that
the purchase price should be P460/sq. m. which was the market price in 1981 (time of
purchase). Ayala then lowered the purchase price to P5k/sq. m. but Vasquez refused again.
Instead he made a counter offer to buy the lots at P2k/sq. m. This time, Ayala refused.
ISSUE: Whether or not Paragraph 5.15 of the MOA is an option contract or right of first
refusal.
HELD: No. The said paragraph is a mere right of first refusal. Although the paragraph has a
definite object, i.e., the sale of the 4 lots, the period within which they will be offered for sale
to Vasquez and, necessarily, the price for which the subject lots will be sold are not
specified. The phrase “at the prevailing market price at the time of the purchase” connotes
that there is no definite period within which Ayala is bound to reserve the subject lots for
Vasquez to exercise his privilege to purchase. Neither is there a fixed or determinable price
at which the subject lots will be offered for sale. The price is considered certain if it may be
determined with reference to another thing certain or if the determination thereof is left to
the judgment of a specified person or persons.
Further, paragraph 5.15 was inserted into the MOA to give Vasquez the first crack to buy
the subject lots at the price which Ayala would be willing to accept when it offers the subject
lots for sale. It is not supported by an independent consideration.