FACTS:
Respondent State Investment Houses Inc. has a parcel of land in Cebu City
3weeks before the expiration of the contract, petitioner made a request to the respondent for the extension of the lease contact so he can have an ample time to raise enough funds to avail of the option of sale.
Respondent denied the request and a month after the expiration of the contract, petitioner made known his intention to buy the property.
Respondent reiterated the provisions in the contract and asked the petitioner to leave the property, which will now be offered to the general public for a higher price.
ISSUE:
WON can still exercise his option of sale even after the time to do such has already lapsed.
HELD:
The contract must be interpreted together with the intention of the parties. The letter of the plaintiff to the respondent requesting for an extension is sufficient proof of his intent to avail of the option of sale.
In contractual relations, the law allows the parties reasonable leeway on the terms of their agreement, which is the law between them. When petitioner made his intention to buy known to the buyer one month after the expiration of contract is within a reasonable time- frame.
Petitioner may buy the property but not anymore to the price stated in the contract. As such, respondent may increase the price of the land but only to a reasonable and fair market value.
An option is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide, whether or not to enter into a principal contract. 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. It is a separate agreement distinct from the contract which the parties may enter into upon the consummation of the option.
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