Lease

 Lease of things are covered by civil law

 Lease of service such as a contract for a piece of work, will fall under the civil law not
labor law

The civil code expressly recognizes 2 kinds of lease:

1. Lease of things
2. Lease of service
3. Lease of rights - not expressly recognized

Lease of things

Nature of contracts:
1. Purpose: enjoyment or use of a thing.
2. Essentially onerous, there has to be a price certain which is the rental.
3. Consensual Contract
4. Essentially Bilateral contract, both parties are obliged to give to another, and to pay the price

Lease of service

Nature of Contract:
1. Essential onerous – there has to be a price certain
2. Consensual
3. There should be no principal and agent relationship, otherwise, the contract is a contract of
agency
4. Principal
5. Bilateral

But the unique characteristic here sa Lease of thing goes into this question:
Ans: As a rule, NO. The SC held in several cases, that this contract is not a purely personal
contract. Thus, as a rule, the contract will not be extinguished by the death of one of the parties
but subject to the stipulation of the parties. In one case, there is a stipulation in the contract of
lease is untransmissible, so in effect, be death of one the parties, the contract of lease is
extinguished.

Distinguish from other contracts

Lease of thing Commodatum

Essentially onerous Essentially Gratuitous
Not purely personal Purely personal

Lease of Service/Piece of work Contract of Agency

No right of representation There is right of representation
Employer only has control in the RESULT of Principal can instruct the agents how, where
the work, METHOD is with the contractor manner of fulfillment of obligation

Essential Requisites

Are there people prohibited from entering this contract? Yes. Under Art. 1646, made applicable
Art. 1490 and 1491, applicable to lease. In other words, if the spouses under 1491, as a rule, are
prohibited from selling from each other then they are also prohibited from leasing to each other.
exceptions: (1) executed a marriage settlement of complete separation of property regime.

Guardian cannot lease property of the ward to himself – these contracts are not merely voidable,
they are void.

Object of contract

Ans: C

Ordinarily, in lease of things, the object must be non-consumable but by express provision, a
consumable may become an object of a contract of lease such as for accessory/exhibition.
 Formalities

There is no law which requires a form for it to be VALID; but this is a contract which may be
covered by the Statute of Frauds. Ito ang favorite.

Ans: Yes. Under the doctrine of part performance if there already a partial fulfillment of the
obligation of the contract, then the contract is taken out of the operation of the statute of frauds.
Favorite ito!

Ans: Simon can invoke 1403 in relation to 1357 for the contract to be in the form prescribed by
law, dahil hindi na siya unenforceable under the statute of frauds because of the doctrine of part
performance – paying rental for more than a year – the contract was taken out of the operation of
statute of frauds.
The issuer here is the same in this case.

In this case, the spouses requested for change in the plans and specifications, mga 21 na changes
pero verbal lahat through the architect, and during the construction, nagdedemand na si Ulanday
for additional compensation for the additional work kung mga changes. The spouse however,
recognizes only 2 out of the 21 changes. Yung 19 chnages, and defense ng spouses is that the
agreement is not in writing, and that the additional compensation was not put into writing, and
therefore, naka recover ba ang Ulanday as to those claims not in writing? Hindi, which has a
basis under Art. 1724.

Contractor who relies on verbal agreements may not be able to recover for additional changed in
plans and specifications.
Ang lease contract is without a lease term, valid ba ang lease contract? Yes, because the law
provides for such term depending on whether it is rural or urban area.

In the first lease, since it was for 4 years and involve as lease over an immovable and pertains to
an act under 1878, then the agent should have a special power of attorney and under the facts he
was only given a general power of attorney, hence since armed only by GPA, the contract is
unenforceable as against the principal.

As to the 2nd lease, ang lease contract is without a lease term, valid ba ang lease contract? Yes,
because the law provides for such term depending on whether it is rural or urban area.

The agent represented the principal did not fix the period of the lease but only fixed the monthly
rental of 3k, therefore under 1687, this will be construed as a month to month lease. Since only
month to month, involve merely acts of administration therefore not require SPA therefore the
second lease will be valid and binding upon the principal.

Para sa Rural:
Para sa Urban:

Rights and Obligations of the Parties (Bulk of Questions in the Bar)

Improvements

If the lessee made certain improvements on the leased premises, upon the expiration of the
contract, what are the rights of the parties in relation to the improvements?
 Sa Bar usually walang scenario na improvements made in bad faith siguro dahil madali
ang sagot diyan, ang sagot diyan, ang meron right lang diyan si ang lessor, the lessee will
never be entitled for reimbursement kahit iappropriate pa yan ng lessor ang improvement
and the lessee will never have the right to remove the improvements kasi the
improvements were made in bad faith. In other words, pinagbabawalan siya, ginawa pa
din niya
 Sa Bar exams puro improvements made in good faith, either allowed talaga siya sa
contract, or habang ginagawa ung improvements alam naman ng lessor, hindi nag object
ung lessor, kaya the improvements were made in good faith. So ano ang magiging rights
ng parties upon termination in? It depends upon the option taken by the lessor.
I. The Lessor has the option to appropriate the improvements but if he would
do so, the lessee would have the right to be reimburse. Magkano ang
reimbursement? It depends on nature of the improvement whether it is a
necessary or useful improvement or merely for ornamentation. Pero sa bar
puro useful, so pag useful, magkano? Half of the value of the
improvement at the time of the expiration of the contract of lease.
Whereas, if it is ornamental, ang babayran ng lessor ay the entire value of
the improvement at the time of the expiration of the lease.
II. Pero pag ayaw iappropriate ni lessor ang improvements, he can ask the
lessee, to vacate the premises and remove the improvement. But can the
lessee remove the improvement if it will cause damages to the thing lease?
It depends on the nature of the improvement. (limited right of removal ang
tawag sa below-mentioed)
i. If useful and necessary expenses – he can remove, even it
will cause damage to the thing lease provided no
unnecessary damage is caused.
ii. Ornamentation – the lessee cannot remove the
improvement if it would cause damage to the thing lease.
Apply the principles above:

Ans:
A. (ang common ng mali dito ng mga sumasagot ang akala nila ang tanong whether Boboy is
entitled to be reimburse, hindi ito ang tanong. Ang tanong is whether boboy is a builder in good
faith and therefore, entitled to be reimbursement)

No. (See Art. 448) Boboy is not a builder in good faith because as a mere lessee he is not merely
claiming mere ownership at the time the improvements were made kaya ay no. (Hindi ko nagets
ung explanation, basta no ang sagot)

Pero dapat good faith kasi alam ni Anselmo ung improvements eh

B. Dito, under the facts, ang option dito ni lessor is not to appropriate the property kaya ang
lessee dito has the right to remove the improvements even it will cause damage to the thing lease
kasi ang improvements ay useful improvements, so long as no necessary damage is caused.
Thus, NO.in fact, under the facts, he left the building in its original state.
Paano pag nagcollapse ang building, who may be held liable? Sagutan ang barqs

Ans:

A. Unang isipin is what was the cause of the collapse, mamaya wala naman kasalana mga ito
pero dito meron naman, ang cause is faulty in the construction, therefore ang liable dito ay si
builder si B, but can A be held liable as the architect in this building? Yes because A agreed to
supervise the construction, and by express provision in the civil code, when the architect agrees
to supervise the work of the contractor, and meron problema ang construction he will be held
solidarily liable with contractor.

B. This is an obligation to do, so can the O demand the reconstruction? Yes The owner can
demand reconstruction, because the work was poorly done. But if contractor (A and B) refuses to
construct, he cannot compel because it would violate the right against involuntary servitude so O
may ask another contractor to build the building at the cost of A and B plus damages.

Reduction of rent and extension of the period of the lease

Is it possible that during the period of the lease, the lessee would have the right to demand for
the reduction of the rent? Yes, meron lang mga requisites.

If the lessee could not exercise his rights, like the right to use, can he demand for the
extension of time of the period of the lease?
 Pag fortuitous like World War – He cannot demand for the extension of the period of
the lease because that is something that would be agreed upon by the parties

In relation sa requisites ng reduction of rents:

Because ang nakalagay sa batas ang lost ay due to extraordinary, fortuitous event for there to be
a reduction of rent. Hindi ordinary. Pag floods, dapat unusual floods.
Ans: No. because in the first place, the lessor did not fail to comply with his obligation to
maintan the lessee in the peaceful and adquate enjoyment because the tresspass here is a
tresspass in fact. Pag tresspass in fact like lawless elements, armed men, hindi cover ng
obligation yan ni lessor, hindi katulad ng tresspass in law for which the lessor can be held liable.
And even if the ground that he only receive ½, this is not an extraordinary event required by law
for him to be enttiled for the reduction of rent.

Right of First Refusal

 This not a statutorily provided but it is in the SC decisions.

 This has to be stipulated in the contracy of lease

Ang tanong dito ay: If lessee has Right of first refusal and the right was violated because it was
sold without his knowledge – what is the effect? Can the lessee rescind the sale? Can he compel
the lessor to sell to him the leased premises?

In Asuncion vs. CA case, the SC held that if there is a violation of first refusal, recission is not
remedy.. Qusai-delictual action is the remedy.

In Equatorial Realty case: majority ruled that recission is remedy of the lessee in relation to the
contract of sale, if the buyer is a buyer in bad faith and thereafter, the lessor can be compelled.

Sir agrees with J. Vitug (dissenting opinion) that action for damages is proper; not action to
compel because there was no perfected contract of the sale.

Apply the rule here:

Ans:

A: Dux argument is Totally untenable; the mother is a 3rd party.

Yes, recission can prosper, but only if Iris can prove that the mother is a buyer in Bad Faith kasi
Good faith is presumed.

B: No,

Ang tanong lang is kung meron siya right of first refusal.

Ang sagot wala, rather she has the option to buy in their agreement ROFR can only be
invoked if the lessor decides to sell, meron ka right to match the price being offered by the
third persons.

Pero ang option to buy nagkasundo na kayo sa price, terms, etc. its just you have a certain
period if bibilhin mo

Here, clearly this is not a ROFR, this is an option to buy.

 But clearly if tinanong ka if she can exercise an option to buy? Wala na rin. Kasi 1 year lang
eh. Eh nung sinulatan siya ng March, long after expiration ng 1yr saka pa binenta. Therefore
the lessee no long has option to purchase.

Rights and Obligations of the lessee: Sublease/assignment of lease

Sublease/Assignment of Lease

Memorize:
1649 – assignment of the lease: the law did not grant the lessee the right to assign the lease, but
lessor may give him the consent

1650 – sublease: Under the law the lessee has the right to sublease, ang batas ang nagbibigay ng
right PERO pwede siya iprohibit ng lessor from subleasing the property

So ang tanong:

Yes, as long as that in the contract of lease, the lessee was not prohibited from subleasing the
property whether in part.

Is rescission the remedy of the lessor because there was a breach?

No, because the building owner cannot rescind the contract because there was no violation of the
contract. The contract only prohibits the lessee from assigning the lease, here she only subleased
so under 1650, if not prohibited, the lessee can sublease.
Ans: No, because in the contract there appears no provision prohibiting the lease from subleasing
the property therefore under 1650, the lessor has the right to sublease in whole or in part.

Rights and Obligations of third persons

2 rules will only be mentioned

1st: If the leased premises were sold by the lessor to the buyer, would the buyer be bound by the
contract of lease? Is buyer required to respect the lease contract?

2nd: In a contract of piece of work, a contractor may also oblige himself to supply not only labor
but also materials, so ang mga materials bibilhin ng mga contractor from the supplier, pero paano
pag hindi makabayad si contractor, may the supplier run after the employer – the owner of the
edifice?

Scenario as to the 1st scenario:

Yes, but only under 3 circumstances, otherwise he is not bound to respect the lease contracts:
(1) If it was so stipulated in the contract of lease, that he is bound to respect the lease
contract;
(2) If no stipulation, if the contract of lease is Registered – may notice sa buyer and to
anyone in the world.
(3) Buyer has actual knowledge of the lease contract
Scenario as to the 2nd:

Scenario here:
X = the owner; Y = Contractor (supply labor and materials)

Bumili ng materials si Y kay Z ng materials pero hindi siya nakabayad, so can Z hold X liable
for the unpaid materials used in the construction?

Ans:
PARANG HINDI because there is no privity of contract, and Y is not ang agent of X, therefore,
Z has no cause of action. Noong wala pang Civil Code wala cause of action si Z

Pero sa Civil Code meron ng tawag na material men’s lien. Sa ung mga may ari ng materials ay
meron ng cause of action doon sa may ari kung saan ginamit ung materials under 1729. Ang
principle behind this is the principle of unjust enrichment. Thus, if complete na yung building,
tapos nabayaran na ni X si Y ng 4M out of the 5M, so ang hindi lang na babayad ni X ay 1M,
pero ang unpaid balance ni Y kay Z ay 2M, how much Z can validly demand from X? under the
facts ang pwede na lang mademand ni Z ay 1M, under the principle of unjust enrichment kas
inga si Y bayad na siya ng 4M.

Ang madalas na tinatanong ni sir sa finals ay si Z nagdemand kay X for the materials, but at the
time demand si X, wala ng babayaran kay Y. Generally, dito, si X cannot be held liable to Z but
there are 3 instances na pwede pa din maging liable si X kay Z:
1. X paid Y when his obligation to Y was not yet due and demandable (1729)
2. Y renounced his claim against X but it must be gratuitous (1729)
3. No performance bond executed to answer for the claim of workers and suppliers under the
special law. So if wala performance bond, ang solidarily liable ay ang contactor, developer,
owner to the suppliers and workers.

Termination of Lease

In the NCC, one ground to extinguish, is when the thing leases is totally destroyed due to a
fortuitous event.

But ang hindi pa tinanong ay partial loss or partial destruction, would that result in the
extinguishment? By operation of law dalawa lang ang rights dito ni lessee:
(1) Demand for reduction of rent
(2) Rescind the contract – damage destruction must be substantial

Favorite Article sa Bar Exam. Article 1670 (Implied Lease)

Requisites:
1. Period of lease has already expired
2. Despite expiration, lessee continued to be in possession and enjoys for 15 days with
acquiescence of the lessor
3. There is no notice for the termination of the contract coming from the lessor, or the lessee
If the 3 requisites are present, there is a tacita reconduccion or implied new lease.
What would be the terms and conditions of the implied new lease? Would it be exactly the same
terms and conditions? HINDI. There would be one aspect of the contract which is deemed
renewed, which is the period of the lease.

Ang tanong, what will be the period in the implied new lease? It depends, if rural or urban land is
invovled (1682 and 1687)

If this land is located in Caloocan (urban), then it will depend on the matter of the payment of
rentals. If monthly ung payment, then the renewal of the lease is month-to-month basis, so at the
end of the month, one of the parties can actually terminate the contract.
Aside from the period of the lease, does it mean that in all contract of lease, where there is a an
implied new lease, all the other terms and conditions of the contract will be renewed? If you read
the last sentence of Art. 1670, parang yes ang sagot. PERO HINDI. The Supreme Court said in
several cases that in an Implied New Lease, only those germane to a contract of lease are
deemed renewed.

Example
The action will not prosper.

When the lessee invoked his option to buy, the period given to him has already elapsed. But
nonetheless, Nestor can say that there was an implied new lease, because despite expiration, the
option to buy is also renewed – but he can argue that the terms are deemed renewed with option
to purchase. Tama ba to? No. Action will not prosper. The Supreme Court ruled in several cases
that in an Implied New Lease, only those germane to a contract of lease are deemed renewed.
An option to buy is not germane to the contract of lease.