the option is registered, a third party will have the same obligations as the person who gave the option on it. One cannot register the option if the period within which it can be exercised is greater than four years (art. 14 of Reglamento Hipotecario).

As a general rule, all option contracts need to specify a term explicitly. If they do not, the court will set a term.21 The party granting the option cannot be obligated indefinitely.

In itself, a change in the market price does not matter. Courts will follow the principle of pacta sunt servanda (see Case 8). Nevertheless, if Realty wants to buy the land not to develop it but to resell it, it is likely that the Tribunal Supremo would not enforce the contract on the theory that the original purpose of the transaction is no longer being achieved (teoria de la base del negocio). The leading case is its decision of 30 June 1948. The defendant had agreed to an option contract which would allow the plaintiffs to buy a piece of land which would provide their property with access to a public street. The plaintiffs sold their property but still wanted the defendant to sell his piece of land to them. The Court held that since the plaintiffs no longer owned their piece of land, the purpose of the contract no longer existed. Therefore the contract was not enforceable by the plaintiffs.22

portugal

In Cases 13(a), 13(b), and 13(c), the promise would be binding only if it were made in a written document signed by the promisor. The abrupt rise in the market price is not relevant.

This is a contract made by a unilateral promise because one of the parties promises to sell but the other does not promise to buy. According to art. 411 of the Civil Code, such a contract may be binding even if the promisor does not receive any money in return for his promise. But here the promise is to sell land, and that requires a public deed (art. 875), which means that the promise has to be made in a document subscribed to by the promisor in the presence of a notary (art. 410(2)). If such a document is issued, the promise is binding. Otherwise it is void.

An abrupt rise in the market price is relevant only if it is considered a change in circumstances. As noted in discussing Case 8, however, the change would have to be so great that the enforcement of the promise

21TS, 17 Nov. 1966 (term read into option for 300,000 kilos of olive oil which did not expressly set one), cited in Puig Brutau, Fundamentos de derecho civil, vol. III-3, 504.

22Díez Picazo, Fundamentos de derecho, vol. II, 887.

288 the enforceabilit y of promises

would be against good faith. A normal variation in the price of the land is therefore irrelevant. It does not make any difference what Realty intends to do with the land. The new owner always has the right to decide what to do with his property, and the previous owner is not entitled to say a word about it. The mere expectations of one of the parties are not relevant.

italy

Simon’s promise would be considered binding in Cases 13(a), 13(b), and 13(c). It does not matter if there was an abrupt rise in the market price, and Realty wants to buy the land, not for a building, but for immediate resale.

In all three situations, the parties have entered into a gratuitous option contract which is governed by art. 1331 of the Civil Code23 and by the case law which holds that such agreements are enforceable.24

Many scholars agree that they are.25 Others say that an option must be paid for.26 Otherwise, the option would amount to an offer which is irrevocable for a fixed time and which is governed by art. 1329 of the Civil Code.27 Such an offer cannot be revoked provided that the intention to make the offer irrevocable is expressly stated. According to the case law,28 setting a time limit for the validity of an offer (art. 1326 of the Civil

23Article 1331 of the Civil Code: ‘Option: When the parties agree that one of them is to remain bound by his declaration and that the other has the power to accept or not, the declaration of the first is considered an irrevocable offer within the meaning of article 1329. If no time limit has been fixed for the acceptance, it can be established by the court.’

24See Cass civ., 6 May 1981, no. 1944, in Giust. civ. I (1981), 2272, with case-note by E. Perego, ‘Trattative, proposta irrevocabile e patto d’opzione’.

25E. Gabrielli, ‘Opzione’, Enc. giur. Treccani (1990), 1–9; E. Gabrielli, Il rapporto giuridico preparatorio (1974); E. Perego, I vincoli preliminari e il contratto (1974); Ravazzoni, La formazione del contratto, I (1966).

26R. Sacco, ‘Il Contratto’, in Vassalli, Tratt. di dir. civ. 6:2 (1975), 221, 710 ff.; A. Chianale, ‘Opzione’, Digesto 13 (1995), 140.

27Article 1329 of the Civil Code: ‘Irrevocable offer: If the offeror has bound himself to keep the offer open for a certain time, the revocation is without effect. In the case contemplated in the preceding paragraph, the death or supervening incapacity of the offeror does not deprive the offer of effect, unless the nature of the transaction or other circumstances preclude such effect.’

On the relationship between irrevocable offer and option see, e.g., G. Gorla, ‘Note sulla distinzione fra opzione e proposta irrevocabile’, Riv. dir. civ. (1962), 213; P. Menti, ‘Il dualismo tra proposta ferma per patto e contratto di opzione’, Riv. trim. dir. proc. civ. (1984), 681; A. Jannuzzi, ‘Proposta irrevocabile e patti d’opzione’, Foro it. I (1949), 179; E. Cesarò, Il contratto e l’opzione (1969); S. Gulotta, ‘Proposta irrevocabile e opzione gratuita’, Riv. dir. com. II (1988), 154.

28See Cass. civ., 11 Jan. 1990, no. 41, in Corr. giur. (1990), 842.

Code)29 is not considered to be the same as setting a period during which the offer will be irrevocable (art. 1329 of the Civil Code).

According to the case law, however, the effects of options and irrevocable offers are much the same.30 For example, both must specify all the elements of the final contract.31 Otherwise, we have a mere negotiation.

In the present case, if Simon stated that his offer was to be irrevocable and not only valid for the time period indicated, the promise is binding whether it was regarded as a gratuitous option or an irrevocable offer. If Simon did not state that it was irrevocable, then, if we take the view of those scholars who consider gratuitous options to be void, Simon could revoke his offer as long as Realty has not yet accepted it.

Case 13(b) raises the problem of how long a revocable offer or gratuitous option can be valid before it is accepted or exercised. In the present case, two years are a long time but the justification may be that Realty had to perform a complex geological survey on the land, and Simon wanted to give Realty an incentive to do so. If the time limit is manifestly excessive given the nature of the transaction – for example, if it were fifty years in a case like this one – the judge would probably consider the offer to be revocable or would reduce the time limit to one that would normally be appropriate.

Case 13(c) is peculiar because, in contrast to Cases 13(a) and 13(b), a court would probably conclude that Realty did not have an absolute right to refuse to conclude the final contract. Realty might be required to act in good faith in exercising its right to declare itself dissatisfied. The general principle of good faith obliges the party who has discretion to take the other party’s interest into account. Realty would probably have to explain its grounds for dissatisfaction even if the express terms of the contract leave the matter to its sole and absolute judgment.32 This kind of judicial control over the behaviour of the party with discretion would probably be

29Article 1326 of the Civil Code: ‘Formation of contract: A contract is formed at the moment when he who made the offer has knowledge of the acceptance of the other party. The acceptance must reach the offeror within the time set by him or within that ordinarily necessary according to the nature of the transaction or usage. The offeror can treat late acceptance as effective, provided that he immediately so informs the other party. When the offeror requires a specific form of acceptance, the acceptance is ineffective if given in a different form. An acceptance that does not conform to the offer is equivalent to another offer.’

30On this point, see F. Messineo, ‘Contratto’, Enc. dir. IX (1961), 902.

31See Cass. civ., 29 Oct. 1993, no. 10777, in Corr. giur. (1993), 1401. See also G. Tamburrino, I vincoli unilaterali nella formazione progressiva del contratto, 2nd edn. (1991); P. Meoli, ‘Termine di irrevocabilità ed efficacia della proposta irrevocabile’, Rass. dir. civ. (1994), 129.

32Cass. civ., sez. I, 20 April 1994, no. 3775 (Comune di Fiuggi c. Ente Fiuggi s.p.a.), in Giur. it. I (1995), 852.