Philippine National Oil

Company & PNOC DOCKYARD

AND ENGINEERING
CORPORATION v.Keppel
Philippines Holdings
G.R. No. 202050, July 25 2016
FACTS
 Almost 40 years ago,
respondent Keppel Philippines
Holdings, Inc. entered into a lease
agreement with Luzon Stevedoring
Corporation (Lusteveco) covering a 11
hectare land.

The lease was for a period

of 25 years.
 At the end of the 25
year contract Keppel was given
the absolute option to buy the
land.
Lusteveco warranted not to sell
the land or assign its rights to
the land for the duration of of
the lease UNLESS with the
prior written consent of Keppel
 When PNOC acquired
the same land from
Lusteveco, Keppel did not
object so long as the
assignment be annotated on
PNOC's title.
 A year before the
expiration of the lease, Keppel
informed PNOC that at least
60% of their shares are now
owned by Filipinos and they are
now ready to exercise their
option to purchase. PNOC did not
favorably respond.
ISSUES
First, the constitutionality of
the Agreement

Second, validity of the option

contract
RULING OF THE
COURT
 On the first issue, the
court AFFIRMS the
constitutionality of the
contract.
 Compared to a previous
ruling Lui She, in the case at
bar, there is a
commercial/industrial purpose
behind the agreement and
Lusteveco was not completely
denied on its ownership rights
during the course of the lease.
 On the validity of the
option contract, the court
ruled that the absence of a
seperate consideration
does not invalidate the
offer to buy.
 An option unsupported
by a separate consideration
stands as an unaccepted
offer to buy (or sell)
which, when properly
accepted ripens into a
contract to sell.
 As early as 1994, Keppel
expressed their desire to
exercise its option to buy the
land.

The offer having been duly

accepted, a contract to sell the
land ensued which Keppel can
rightfully demand PNOC to comply
with.