PARTIES

BARTER

Petitioner: Gregorio Fule

(banker, jeweller)
FULE V. CA
Respondent: Dr. Ninevetch
Cruz
 PETITIONER: Delpher
Trades and Delphin
DELPHER TRADES
CORP V. IAC Pacheco
RESPONDENT: Hydro Pipes

LEASE
 PETITIONER:
FILIINVEST Filinvest credit corp
CREDIT CORP V. RESPONDENT:
CA Jose Sy Bang and
Iluminada Tan (SPOUSES)

DACION EN PAGO
 PETITIONER:
Ignacio Arroyo, Lourdes
PNB V. PINEDA Arroyo (Spouses)
RESPONDENT:
PNB
 PETITIONER:
PH Lawin Bus
PHIL LAWIN BUS
V. CA
RESPONDENT:
Advance Capital Corp

CHATTEL MORTGAGE
OPTION CONTRACT
 PETITIONER: Antonio De
La Cavada
DE LA CAVADA V.
DIAZ RESPONDENT: Antonio
Diaz (grant an option to de
la cavada)
TUAZON V DEL PETITIONER:
ROSARIO Roberto Tuazon
Option contract,
RESPONDENT:
not a contract of Lourdes Del Rosario-Suarez
a right of first
refusal (Lourdes)

RIGHT OF FIRST
REFUSAL
 PETITIONER:
Juan Reyes (Lessor)
RIVERA FILIPINA RESPONDENT:
INC V CA
Riviera Filipina Inc, VP
Angeles
PUP V. GOLDEN
HORIZON
REALITY

NDC AND GHRC

has 2 contracts of
lease

2nd - has an
option contract

President Aquino
- issued
Memoranda 214:
PETITIONER: PUP
transferred NDC
compound to the
RESPONDENT: GOLDEN
national gov HORIZON REALTY CORP
order of
converyance
would result in
the automatic
cancellation of
NDC's total
obligation in
favor of the
National Gov in
the amount of
P57M
option contract

President Aquino
- issued
Memoranda 214:
PETITIONER: PUP
transferred NDC
compound to the
national gov RESPONDENT: GOLDEN
HORIZON REALTY CORP
order of
converyance
would result in
the automatic
cancellation of
NDC's total
obligation in
favor of the
National Gov in
the amount of
P57M

CONTRACT TO PETITIONER:
SELL RESPONDENT:
VALENZUELA V
KALAYAAN DEV
CORP

VISAYAN
SAWMILL V CA
 FACTS

Gregorio Fule, banker and jeweller, acquired a 10ha property (TANAY PROPERTY) used
to owned by one Fr. Antonio Jacobe. It was mortgaged to RURAL BANK OF ALAMINOS -
mortgage was later foreclosed and the property offered for public auctiion upon
default
Petitioner Fule, as corp sec of the bank, asked to look for a buyer who might be
interested in the Tanay property. Then they found Dr. Ninevetch Cruz. It so happened
that at the time, petitioner had shown interest in buying a pair of emerald-cut diamond
earrings owned by Dr. cruz which he had seen when his mother examined and
appraised them as genuine. Dr. Cruz, however, decline petitioner's offer to buy the
jewelry for P100k
Negotiations for BARTER of the jewelry and the tanay property ensued. Upon checking
on the Tanay prop – Dr. Cruz found out that NO SALE OR BARTER WAS FEASIBLE
BECAUSE THE ONE-YEAR PERIOD FOR REDEMPTION OF THE SAID PROP HAD NOT YET
EXPIRED
Petitioner executed a deed of redemption on behalf of Fr. Jacobe in the amount of
P15k and on even date, Fr. Jacobe sold the prop to petitioner for 75k

Deed was notarized ahead of the deed of redemption

Petitioner met with Atty. Belarmino to prepare documents

Petitoner and respondent met at the bank. Dr Cruz, as soon as the cashier returned
from his haircut, opemed the safety box containing the earrings. Dr. Cruz asked, 'Okay
na ba iyan?'

At 8pm in the same day, in Atty. Belarmino's residence, petitoner alleged that the
jewelry given to him was FAKE. Then they went to one MCARIO DIMAYUGA, a jeweler
to have the earrings tested. He declared them COUNTERFEIT
Delphin Pacheco and his sister owned a lot in Valenzuela and Bulacan
co-owner leased to Construction Components Internatiional Inc (first offer the same to
the lessee under same conditions)

Construction Components International assigned its rights to Hydro Pipes PH

both contract of lease and the assignment of lease was annotated at the back of the
title
Deed of exchange: executed between lessors Delfin and pelagia pacheco, and
defendant Delpher Trades Corp. The former conveyed to the latter theleased property

Hydro pipes filed an AMENDED COMPLAINT FOR RECONVEYANCE

GROUND: First option to buy not given to Hydro Pipes.
CFI ruled in favor of Hydro Pipes

Eduardo Neria (CPA) testified that Hyrdro Pipes is a family corp; organized by the
Pacheco siblings together with their spouses. No par value shares in exchange of the
property. Estate planning.
Private respondents, Jose Sy Bang and Iluminada Tan, were engaged in the sale of
gravel produced from crushed rocks. Engaged the services of Mr. Mercurio, the
properieter of Gemini Motors, to look for a rock crusher. Mr. Mercurio referred them
to Rizal Consolidated Corp

Oscar Sy Bang (brother) inspected the machine annd was satisfied with it. However, the
machine was priced at P500k. So the petitioner spouses applied for financial aid from
Filinvest Credit Corp.

Filinvest agreed on the ff. grounds: that the machinery is purchase with petitoner's
name, leased to private respondents (with option to buy upon termination of the lease
contract), and that the private respondents secure a real estate mortgage in favor of
the petitoner as security for the amount advanced

Respondents sent a complaint: That the machinery can only process 5 tons per hr (20-
40 tons was agreed upon). They demanded that the petitioner should follow through
with the stipulations in the contract
As a consequence of the non payment by the priivate respondents of the rentals on the
rock crusher despite the repeated WRITTEN DEMANDS, the petitoner extrajudicially
foreclosed the real estate mortgage
[LOAN FROM PETITIONER BANK TO SUBSCRIBE CAPITAL STOCK]
In 1963, Ignacio Arroyo, married to Lourdes Tuason Arroyo (the Arroyo Spouses),
obtained a loan of P580,000.00 from petitioner bank to purchase 60% of the
subscribed capital stock, and thereby acquire the controlling interest of private
respondent Tayabas Cement Company, Inc. (TCC).
[SECURITY FOR LOAN - LAVSTA PROP]
As security for said loan, the spouses Arroyo executed a real estate mortgage over a
parcel of land covered by Transfer Certificate of Title No. 55323 of the Register of
Deeds of Quezon City known as the La Vista property.

[TCC FILED WITH PNB AN 8 YEAR DEFERRED LETTER OF CREDIT IN FAVOR OF TOYO
MENKA TO COVER THE IMPORTATION OF A CEMENT PLANT MACHINERY AND
EQUIPMENT]
Thereafter, TCC filed with petitioner bank an application and agreement for the
establishment of an eight (8) year deferred letter of credit (L/C) for $7,000,000.00 in
favor of Toyo Menka Kaisha, Ltd. of Tokyo, Japan, to cover the importation of a
cement plant machinery and equipment.
[IMPORTED CEMENT PLANT MACHINERY AND EQUIPMENT WERE RELEASED TO TCC
UNDER A TRUST RECEIPT AGREEMENT]
The imported cement plant machinery and equipment arrived from Japan and were
released to TCC under a trust receipt agreement.

Subsequently, Toyo Menka Kaisha, Ltd. made the corresponding drawings against the
L/C as scheduled.

[LCC FAILED TO REMIT AND/PAY THE CORRESPONDING AMOUNT]

TCC, however, failed to remit and/or pay the corresponding amount covered by the
drawings.
Thus, on May 19, 1968, pursuant to the trust receipt agreement, In the meantime, the
personal accounts of the spouses Arroyo, which included another loan of P160,000.00
secured by a real estate mortgage over parcels of agricultural land known as Hacienda
Bacon located in Isabela, Negros Occidental, had likewise become due.

The spouses Arroyo having failed to satisfy their obligations with PNB, the latter
decided to foreclose the real estate mortgages executed by the spouses Arroyo in its
favor.
Advance Capital Corporation, a licensed lending investor, extended a loan to petitioner
Philippine Lawin Bus Company of P8,000,000.00 payable within 1 year.

To guarantee payment of the loan, Lawin executed in favor of Advance the following
documents:
(1) A Deed of Chattel Mortgage wherein 9 units of buses were constituted as
collaterals
(2) A joint and several UNDERTAKING of defendant Master Tours and Travel
Corporation, signed by Isidro Tan and Marciano
(3) A joint and several UNDERTAKING, executed and signed by Esteban, Isidro,
Marciano and Henry, all surnamed Tan.

Out of the P8,000,000.00 loan, P1,800,000.00 was paid. Thus, Lawin was able to avail
an additional loan of P2,000,000.00 for one (1) month.

LAWIN failed to pay the promissory note and the same was renewed.

But LAWIN failed to pay the two promissory notes so that it was granted a loan re-
structuring for two (2) months. Despite the restructuring, LAWIN failed to pay.

Respondent foreclosed the mortgaged buses and as the sole bidder thereof, the
amount of P2,000,000.00 was accepted by the deputy sheriff conducting the sale and
credited to the account of LAWIN.

Thereafter, identical demand letters were sent to petitioners to pay their obligation.
Despite repeated demands, petitioners failed to pay their indebtedness which totaled
of P16,484,992.42.

Thus, the suit for sum of money, wherein the respondent prays that defendants
solidarily pay plaintiff.
Parties entered into a “contract of option” which involves a hacienda at Pitogo
consisting of 100 and odd hectares, owned by respondent ANTONIO DIAZ

The said contract stipulated how the price of the property will be paid; for which the
petitioner herein may pay him either:
1.) the sum of thirty thousand pesos (P30,000), Philippine currency, in cash, or
2.) within the period of six (6) years, beginning with the date of the purchase, the sum
of forty thousand pesos (P40,000), Philippine currency, at six per cent interest per
annum.

After the execution of the contract, defendant filed a petition with the Court of Land
Registration in order to obtain the registration of a part of the hacienda, which was
granted.
Later, and pretending to comply with the terms of said contract, the defendant offered
to transfer to the plaintiff one of said parcels only, which was a part of said "hacienda."
The plaintiff refused to accept said certificate for a part only of said "hacienda" upon
the ground:
(a) that it was only a part of the "Hacienda de Pitogo," and
(b) under the contract (Exhibits A and B) he was entitled to a transfer to him all said
"hacienda."

The theory of the defendant is that the contract of sale of said "Hacienda de Pitogo"
included only 100 hectares, more or less, of said "hacienda," and that by offering to
convey to the plaintiff a portion of said "hacienda" composed of "100 hectares, more or
less," he thereby complied with the terms of the contract.
Petitioner ROBERT TUAZON and respondent LOURDES DEL ROSARIO-SUAREZ entered
into a Contract of Lease, wherein petitioner, Tuazon, will occupy the parcel of land
owned by respondent, Del Rosario-Suarez, for a period of three years.

During the effectivity of the lease, respondent sent a letter to the petitioner offering to
sell the parcel of land. She pegged the price at P37,541,000.00 and gave him two years
from January 2, 1995 to decide on the said offer.

On June 19, 1997, four months after the expiration of the Contract of Lease,
respondent sold the land to Catalina Suarez-De Leon, et al.
The new owners notified the petitioner to vacate the premises on the grounds of non-
payment of rentals and expiration of the Contract of Lease.
Petitioner claims: that respondent violated his right to buy subject property under the
principle of right of first refusal by not giving him notice and the opportunity to buy the
property.

Respondent contended: that the principle of right of first refusal is unavailing in this
case. It is a contract of option which was not perfected due to the failure of acceptance
on the part of the respondent.
Renewable contract of lease between Riviera and Reyes. Subject property was 1k sqm
parcel of land located along EDSA, QC.

Real estate mortgage - prudential bank. Extrajudically foreclosed said land

Par. 11 of lease contract - right of first refusal to lessee Riviera thru its President
Vicente Angeles
4k - orginal price
3k - bargain

6k - appreciated value
5k - Riviera

5300 - Traballo (Cypress) and Cornhill - 5.4M

Thereafter, Riviera sought from Reyes, Cypress and Cornhill a resale of the subject
property to it claiming that its right of first refusal under the lease contract was
violated. After several unsuccessful attempts,27 Riviera filed the suit to compel Reyes,
Cypress, Cornhill and Urban Development Bank to transfer the disputed title to the land
in favor of Riviera upon its payment of the price paid by Cypress and Cornhill.
National Development Company (NDC) had in its disposal a 10 hectare property,
commonly called as NDC Compound, located along Pureza St., Sta. Mesa, Manila.

September 7, 1977: (1) NDC entered into a Contract of Lease with Golden Horizon
Realty Corporation (GHRC) over a portion of the NDC Compound for a period of ten
years, renewable for another ten years with mutual consent of the parties.

May 4, 1978: (2)a second Contract of Lease was executed between NDC and GHRC. In
addition, GHRC as lessee was granted the “option to purchase the area leased", the
price to be negotiated and determined at the time the option to purchase is exercised.”

Sometime after September 1988, GHRC discovered that NDC had decided to secretly
dispose the property to a third party.

In the meantime, then President Corazon C. Aquino issued Memorandum Order No.
214 dated January 6, 1989, ordering the transfer of the whole NDC Compound to the
National Government, which in turn would convey the said property in favor of PUP
at acquisition cost.

The order of conveyance of the 10.31-hectare property would automatically result in

the cancellation of NDC’s total obligation in favor of the National Government in the
amount of P57,193,201.64.

PUP demanded that GHRC vacate the premises, insisting that the latter’s lease contract
had already expired. Its demand letter unheeded by GHRC, PUP filed an ejectment
case.

GHRC argued that Memorandum Order No. 214 is a nullity.

RTC rendered its decision upholding the right of first refusal granted to GHRC under its
lease contract with NDC and ordering PUP to reconvey the said portion of the property
in favor of GHRC. CA affirmed the RTC ruling.
Kalayaan Development & Industrial Corporation discovered that Spouses Jose and Gloria
Valenzuela had occupied and built a house on a parcel of land it owned, and demanded that
they vacate said property. Upon negotiation, however, petitioners and Kalayaan entered a
Contract to Sell wherein the petitioners would purchase 236 square meters of the subject
property for P1,416,000 in twelve equal monthly installments. The contract further stated that
upon failure to pay any of said installments, petitioners would be liable for liquidated penalty
at 3% a month compounded monthly until fully paid. Kalayaan would also execute the deed of
absolute sale only upon full payment.
Petitioners were only able to pay monthly installments amounting to a total of P208, 000.00.
They then requested Kalayaan to issue a deed of sale for 118 square meters of the lot where
their house stood, arguing that since they had paid half the purchase price, or a total of
P708,000.00 representing 118 square meters of the property. Kalayaan, on the other hand,
sent two demand letters asking petitioners to pay their outstanding obligation including agreed
penalties.
Gloria Valenzuela’s sister, Juliet Giron, assumed the remaining balance for the 118 square
meters of the subject property at P10,000.00 per month to Kalayaan, which the latter accepted
for and in behalf of Gloria. Thereafter, Kalayaan demanded that petitioners pay their
outstanding obligation, but were unheeded. Kalyaan then filed a Complaint fot the Rescission
of Contract and Damages against petitioners. The RTC of Caloocan rendered a Decision in favor
of Kalayaan, rescinding the contract between the parties and ordering petitioners to vacate the
premises.
Petitioners sought recourse from the CA. They aver that the CA failed to see that the original
contract between petitioners and Kalayaan was altered, changed, modified and restricted as a
consequence of the change in the person of the principal debtor (Sps. Valenzuela to Juliet).
When Kalayaan agreed to a monthly amortization of P10,000.00 per month the original
contract was changed, and that the same recognized Juliet’s capacity to pay and her
designation as the new debtor. Nevertheless, the CA affirmed the RTC ruling.

"There is a sale involving scrap iron

The condition was that a letter of credit for 250T will be secured in favor of the seller
buyer went to the seller's premises and started digging and gathering the scrap irons
Visayan (seller) stopped the gathering because there was no letter or credit yet.
According to buyer, they already secured one and the transmittal was merely delayed.
Thereafter, seller received notive regarding the letter of credit. At this point, selller
refused to comply. It rescinded the arrangement.
TC and CA: the agreement was a contract of sale. They opined that there was an
implied delivery when the buyer collected the scraps of iron. Although rescission could
be done under 1911, it would not hold in the case because the breach was slight and
not substantial."
 ISSUES

1. WON there was a contract

of barter
2 WON the contract can be
voided in accordance with law
so as to compel the paries to
restore to each other the
things that have been the
subkect of the contract with
their fruits, and the price with
interest
WON the DEED OF EXCHANGE
of property between the
Pachecos and the Delpher
Trades can be considered a
contract of sale
WON the petitioner is liable
for the rock crusher's faiilure
to produce with its described
capacity
 WON TCC's liability was
extinguished by the
repossession of PNB the
machinery and equipmeny
WoN there was dacion en
pago between the parties
upon the surrender or
transfer of the mortgaged
buses to the respondent.
WON Diaz is obliged to sell to
Dela Cavada the entire
hacienda and not only a part
of it.
WON a lessee loses his right
to buy the property upon
failure to accept an offer or to
purchase on time within the
period stipulated.
WON the option to purchase
the portion leased to GHRC
was violated by the sale of the
NDC Compound in favor of
PUP pursuant to
Memorandum Order No. 214 -
YES.
w/n seller has a right to
rescind the agreement
 RULING

1. YES. The manifest intention of the parties: consideration for the property is not cash but the emerald

2.NO. There is fraud when, through the insidious words or machinations of one of the contracting parties, the
other is induced to enter into a contract which, without them, he would not have agreed to.

The records, however, are bare of any evidence manifesting that private respondents employed such insidious
words or machinations to entice petitioner into entering the contract of barter.

Neither is there any evidence showing that Dr. Cruz induced petitioner to sell his Tanay property or that she
cajoled him to take the earrings in exchange for said property.
No. there was no transfer of actual ownership of interests of the Pachecos to a third party. Changed their
ownership from one form to another
Unfortunately, even with the foregoing findings, we however fail to find any reason to hold the petitioner liable
for the rock crusher's failure to produce in accordance with its described capacity. According to the petitioner, it
was the private respondents who chose, inspected, and tested the subject machinery. It was only after they had
inspected and tested the machine, and found it to their satisfaction, that the private respondents sought financial
aid from the petitioner. These allegations of the petitioner had never been rebutted by the private respondents.
In fact, they were even admitted by the private respondents in the contract they signed

This is where the waiver of warranties is of paramount importance. Common sense dictates that a buyer inspects
a product before purchasing it (under the principle of caveat emptor or "buyer beware") and does not return it
for defects discovered later on, particularly if the return of the product is not covered by or stipulated in a
contract or warranty.

REAL INTENTION OF THE PARTIES SHOULD PREVAIL: Intent of the parties to the subject contract is for the so-
called rentals to be the installment payments

According to the petitioner, it was the private respondents who chose, inspected, and tested the subject
machinery. It was only after they had inspected and tested the machine, and found it to their satisfaction, that
the private respondents sought financial aid from the petitioner. These allegations of the petitioner had never
been rebutted by the private respondents

Under the aforequoted provision, the seller of movables in installments, in case the buyer fails to pay two or
more installments may elect to pursue either of the following remedies:
(1) exact fulfillment by the purchaser of the obligation;
(2) cancel the sale; or
(3) foreclose the mortgage on the purchased property if one was constituted thereon.
PNB’s possession of the subject machinery and equipment being precisely as a form of security for the advances
given to private respondent under the Letter of Credit, said possession by itself cannot be considered payment of
the loan secured thereby; payment would legally result only after PNB has foreclosed on said securities and sold
the same, and applied the proceeds thereof to private respondents’ loan obligation.—We rule for the petitioner
PNB.

It must be remembered that PNB took possession of the imported cement plant machinery and equipment
pursuant to the trust receipt agreement executed by and between PNB and TCC giving the former the unqualified
right to the possession and disposal of all property shipped under the Letter of Credit until such time as all the
liabilities and obligations under said Letter had been discharged. In the case of Vintola vs. Insular Bank of Asia and
America wherein.The foregoing submission overlooks the nature and mercantile usage of the transaction
involved. A letter of credit-trust receipt arrangement is endowed with its own distinctive features and
characteristics. Under that set-up, a bank extends a loan covered by the Letter of Credit, with the trust receipt as
a security for the loan.

In other words, the transaction involves a loan feature represented by the letter of credit, and a security feature
which is in the covering trust receipt. Where there is no such transfer of ownership in favor of the creditor,
there is no dation in payment either can said repossession amount to dacion en pago. Dation in payment takes
place when property is alienated to the creditor in satisfaction of a debt in money and the same is governed by
sales. Dation in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor
as an accepted equivalent of the performance of the obligation. As aforesaid, the repossession of the
machinery and equipment in question was merely to secure the payment of TCC’s loan obligation and not for
the purpose of transferring ownership thereof to PNB in satisfaction of said loan. Thus, no dacion en pago was
ever accomplished.
No, the Court affirms with CA that there was no dacion en pago that took place between the parties.
Article 1245 of the Civil Code provides that the law on sales shall govern an agreement of dacion en pago.
A contract of sale is perfected at the moment there is a meeting of the minds of the parties thereto upon the
thing which is the object of the contract and upon the price.

In this case, there was no meeting of the minds between the parties on whether the loan of the petitioners
would be extinguished by dacion en pago.

The receipts show that the two buses were delivered to respondent in order that it would take custody for the
purpose of selling the same. Such an agreement negates transfer of absolute ownership over the property to
respondent, as in a sale.

Thus, the Court REVERSES and SETS ASIDE the appealed decision.
A promise made by one party, if made in accordance with the forms required by the law, may be a good
consideration (causa) for a promise made by another party. (Art. 1274, Civil Code.) In other words, the
consideration (causa) need not pass from one to the other at the time the contract is entered into.

The said contract (Exhibits A and B) was not, in fact, an "optional contract" as that phrase is generally used.
Reading the said contract from its four corners it is clearly as absolute promise to sell a definite parcel of land
for a fixed price upon definite conditions.

The defendant promised to convey to the plaintiff the land in question as soon as the same was registered under
the Torrens system, and the plaintiff promised to pay to the defendant the sum of P70,000, under the conditions
named, upon the happening of that event. The contract was not, in fact, what is generally known as a "contract
of option."

An optional contract is a privilege existing in one person, for which he had paid a consideration, which gives
him the right to buy, for example, certain merchandise of certain specified property, from another person, if he
chooses, at any time within the agreed period, at a fixed price. The contract of option is a separate and distinct
contract from the contract which the parties may enter into upon the consummation of the option.
A contract of option is a contract by virtue of the terms of which the parties thereto promise and obligate
themselves to enter into contract at a future time, upon the happening of certain events, or the fulfillment of
certain conditions.
Yes. The case indeed involves an option contract and not a contract of a right of first refusal.

What is involved here is a separate and distinct offer made by Lourdes through a letter dated January 2, 1995
wherein she is selling the leased property to Roberto for a definite price and which gave the latter a definite
period for acceptance. Roberto was not given a right of first refusal. The letter-offer of Lourdes did not form part
of the Lease Contract because it was made more than six months after the commencement of the lease. It is an
option contract, the rules applicable are found in Articles 1324 and 1479 of the Civil Code which provides:
Art. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at
any time before acceptance by communicating such withdrawal, except when the option is founded upon a
consideration, as something paid or promised.
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 to sell a determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration distinct from the price.
It is clear from the provision of Article 1324 that there is a great difference between the effect of an option which
is without a consideration from one which is founded upon a consideration. If the option is without any
consideration, the offeror may withdraw his offer by communicating such withdrawal to the offeree at any time
before acceptance; if it is founded upon a consideration, the offeror cannot withdraw his offer before the lapse
of the period agreed upon.
a lease with a proviso granting the lessee the right of first priority "all things and conditions being equal" meant
that there should be identity of the terms and conditions to be offered to the lessee and all other prospective
buyers, with the lessee to enjoy the right of first priority
a lease with a proviso granting the lessee the right of first priority "all things and conditions being equal" meant
that there should be identity of the terms and conditions to be offered to the lessee and all other prospective
buyers, with the lessee to enjoy the right of first priority
"right of first refusal" to mean simply that should the lessor Reyes decide to sell the leased property during the
term of the lease, such sale should first be offered to the lessee Riviera.

the prevailing doctrine is that a right of first refusal means identity of terms and conditions to be offered to the
lessee and all other prospective buyers and a contract of sale entered into in violation of a right of first refusal of
another person, while valid, is rescissible.
The contract between NDC and GHRC contained an option to purchase in favor to the lessee
The second lease contract contained the following provision:
III. It is mutually agreed by the parties that this Contract of Lease shall be in full force and effect for a period of
ten (10) years counted from the effectivity of the payment of rental as provided under sub-paragraph (b) of
Article I, with option to renew for another ten (10) years with the mutual consent of both parties. In no case
should the rentals be increased by more than 100% of the original amount fixed.
Lessee shall also have the option to purchase the area leased, the price to be negotiated and determined at the
time the option to purchase is exercised.
Option Contract vs. Right of First Refusal
An option is a contract by which the owner of the property agrees with another person that the latter shall have
the right to buy the former’s property at a fixed price within a certain time. It is a condition offered or contract
by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed
price within a certain time, or under, or in compliance with certain terms and conditions; or which gives to the
owner of the property the right to sell or demand a sale. It binds the party, who has given the option, not to
enter into the principal contract with any other person during the period designated, and, within that period,
to enter into such contract with the one to whom the option was granted, if the latter should decide to use the
option.

Upon the other hand, a right of first refusal is a contractual grant, not of the sale of a property, but of the first
priority to buy the property in the event the owner sells the same. As distinguished from an option contract, in a
right of first refusal, while the object might be made determinate, the exercise of the right of first refusal would
be dependent not only on the owner’s eventual intention to enter into a binding juridical relation with another
but also on terms, including the price, that are yet to be firmed up.
The contract between the parties involve a right of first refusal
As the option to purchase clause in the second lease contract has no definite period within which the leased
premises will be offered for sale to respondent lessee and the price is made subject to negotiation and
determined only at the time the option to buy is exercised, it is obviously a mere right of refusal, usually inserted
in lease contracts to give the lessee the first crack to buy the property in case the lessor decides to sell the same.

When a lease contract contains a right of first refusal, the lessor has the legal duty to the lessee not to sell the
leased property to anyone at any price until after the lessor has made an offer to sell the property to the lessee
and the lessee has failed to accept it. Only after the lessee has failed to exercise his right of first priority could the
lessor sell the property to other buyers under the same terms and conditions offered to the lessee, or under
terms and conditions more favorable to the lessor.
Respondent GHRC thus timely exercised its option to purchase on August 12, 1988 and NDC violated the right of
first refusal
However, considering that NDC had been negotiating through the National Government for the sale of the
property in favor of PUP as early as July 15, 1988 without first offering to sell it to respondent and even when
respondent communicated its desire to exercise the option to purchase granted to it under the lease contract,
it is clear that NDC violated respondent’s right of first refusal. Under the premises, the matter of the right of
refusal not having been carried over to the impliedly renewed month-to-month lease after the expiration of the
second lease contract on October 21, 1988 becomes irrelevant since at the time of the negotiations of the sale to
a third party, petitioner PUP, respondent’s right of first refusal was still subsisting.

Indeed, basic is the rule that a party to a contract cannot unilaterally withdraw a right of first refusal that stands
upon valuable consideration
We have categorically ruled that it is not correct to say that there is no consideration for the grant of the right of
first refusal if such grant is embodied in the same contract of lease. Since the stipulation forms part of the entire
lease contract, the consideration for the lease includes the consideration for the grant of the right of first refusal.
In entering into the contract, the lessee is in effect stating that it consents to lease the premises and to pay the
price agreed upon provided the lessor also consents that, should it sell the leased property, then, the lessee shall
be given the right to match the offered purchase price and to buy the property at that price.

The true value of the land at the time of the sale to PUP was P1,500
GHRC, which did not offer any amount to petitioner NDC, and neither disputed the P1,500.00 per square meter
actual value of NDC’s property at that time it was sold to PUP at P554.74 per square meter, as duly considered by
Ruling
this is a contract to sell. Permission to collect the iron scraps cannot be construed as delivery
failure of buyers to comply with the issuance of the LoC is simply an event that prevented the obligation of seller
to acquire binding force. There were also other conditions that were not complied with (please see p390)
Although 1191 does not apply, the corporation may rescind the contract on the basis of art. 1597
Dissent
From the time the seller gave access to the buyer to enter the premises, he has placed the goods in the
possession of the buyer
Such action transfers ownership. The opening of a letter of credit is not one of the requisites for the perfection of
the sale.
That payment was not yet effected is immaterial because the nonpayment of the price is merely a resolutory
condition which extinguishes the transaction.
This is a contract of sale. Visayan was not justified in rescinding the agreement."