Atty.

Uribe Lecture Notes: Lease Page 1 of 5

You have to focus on a few provisions on lease. Aside from the definition of lease under 16431, 16442 and 17303, you may have to consider the
following provisions on formalities 16474 and 17245 in relation to 14036 (statute of frauds) and 18787 (agency to lease). 16498 and 16509 are definitely
favorite articles. These pertain to assignment and sublease. 167010 is a very important provision (implied new lease). And under the rights and
obligations of the lessor and the lessee 167311, 167812, 168013 and 172314. As to the period of the lease, if the parties failed to fix the period, 168215 and
168716 are the applicable provisions. Finally this provision may appear, 172917, pertaining to the rights of third persons like the right of the supplier of
the materials as against the owner of the building.

Kind of lease

The first thing to consider is to determine the kind of lease. Authors would classify the kinds of lease into three:

(a) Lease of things;

(b) Lease of work or service; and
(c) Lease of right.

1
Art. 1643. In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain, and for a period which may be
definite or indefinite. However, no lease for more than ninety-nine years shall be valid.
2
Art. 1644. In the lease of work or service, one of the parties binds himself to execute a piece of work or to render to the other some service for a price certain, but the
relation of principal and agent does not exist between them.
3
Art. 1730. If it is agreed that the work shall be accomplished to the satisfaction of the proprietor, it is understood that in case of disagreement the question shall be
subject to expert judgment.
If the work is subject to the approval of a third person, his decision shall be final, except in case of fraud or manifest error.
4
Art. 1647. If a lease is to be recorded in the Registry of Property, the following persons cannot constitute the same without proper authority: the husband with respect
to the wife's paraphernal real estate, the father or guardian as to the property of the minor or ward, and the manager without special power.
5
Art. 1725. The owner may withdraw at will from the construction of the work, although it may have been commenced, indemnifying the contractor for all the latter's
expenses, work, and the usefulness which the owner may obtain therefrom, and damages.
6
Art. 1403. The following contracts are unenforceable, unless they are ratified:
xxx
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter made shall be unenforceable by action,
unless the same, or some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be
received without the writing, or a secondary evidence of its contents:
xxx
(e) An agreement of the leasing for a longer period than one year, or for the sale of real property or of an interest therein;
7
xxx
Art. 1878. Special powers of attorney are necessary in the following cases:
xxx
(8) To lease any real property to another person for more than one year;
xxx
8
Art. 1649. The lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary.
9
Art. 1650. When in the contract of lease of things there is no express prohibition, the lessee may sublet the thing leased, in whole or in part, without prejudice to his
responsibility for the performance of the contract toward the lessor.
10
Art. 1670. If at the end of the contract the lessee should continue enjoying the thing leased for fifteen days with the acquiescence of the lessor, and unless a notice to
the contrary by either party has previously been given, it is understood that there is an implied new lease, not for the period of the original contract, but for the time
established in Articles 1682 and 1687. The other terms of the original contract shall be revived.
11
Art. 1673. The lessor may judicially eject the lessee for any of the following causes:
(1) When the period agreed upon, or that which is fixed for the duration of leases under Articles 1682 and 1687, has expired;
(2) Lack of payment of the price stipulated;
(3) Violation of any of the conditions agreed upon in the contract;
(4) When the lessee devotes the thing leased to any use or service not stipulated which causes the deterioration thereof; or if he does not observe the requirement in No.
2 of Article 1657, as regards the use thereof.
The ejectment of tenants of agricultural lands is governed by special laws.
12
Art. 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance
of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to
reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more
impairment upon the property leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to
the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished.
13
Art. 1680. The lessee shall have no right to a reduction of the rent on account of the sterility of the land leased, or by reason of the loss of fruits due to ordinary
fortuitous events; but he shall have such right in case of the loss of more than one-half of the fruits through extraordinary and unforeseen fortuitous events, save always when
there is a specific stipulation to the contrary.
Extraordinary fortuitous events are understood to be: fire, war, pestilence, unusual flood, locusts, earthquake, or others which are uncommon, and which the contracting
parties could not have reasonably foreseen.
14
Art. 1723. The engineer or architect who drew up the plans and specifications for a building is liable for damages if within fifteen years from the completion of the
structure, the same should collapse by reason of a defect in those plans and specifications, or due to the defects in the ground. The contractor is likewise responsible for the
damages if the edifice falls, within the same period, on account of defects in the construction or the use of materials of inferior quality furnished by him, or due to any violation
of the terms of the contract. If the engineer or architect supervises the construction, he shall be solidarily liable with the contractor.
Acceptance of the building, after completion, does not imply waiver of any of the cause of action by reason of any defect mentioned in the preceding paragraph.
The action must be brought within ten years following the collapse of the building.
15
Art. 1682. The lease of a piece of rural land, when its duration has not been fixed, is understood to have been for all the time necessary for the gathering of the fruits
which the whole estate leased may yield in one year, or which it may yield once, although two or more years have to elapse for the purpose.
Atty. Uribe Lecture Notes: Lease Page 2 of 5
Actually under 164218, only lease of things and lease of work or service are mentioned.

Definitions

If a party to a contract binds himself to give another the enjoyment or use of a thing, does that make the contract a contract of lease of things?
No. The most important distinction between lease and commodatum is that in lease it must be for a price certain. Otherwise, if there is no valuable
consideration for the use or the enjoyment of the thing, it will be commodatum.

Another thing, if in an agreement, one of the parties binds himself to render service for a price certain, would that be a contract of lease of work
or service? Not necessarily because it may also be a contract of agency. When a person binds himself to render service to another person it may be a
contract of agency. Thus, under 164419, in order for that contract to be considered a lease of work or service, there must be no relation of principal or
agent existing between the parties.

You have to distinguish an agreement pertaining to a contract of lease of work or service (which may be a contract for a piece of work) from a
contract of agency. In the case of Fressel vs. Mariano Uy Chaco Sons & Co., Mariano, the owner, asked Merritt to construct an edifice. In their
agreement, Merritt was to supply not only the labor but also the materials. Merritt bought the materials from Fressel. The price of these materials having
been unpaid, Fressel demanded payment from Mariano. One of the grounds relied upon by Fressel was that Merritt was an agent of Mariano and
therefore for failure of the agent to pay the price of these materials Fressel claimed that Mariano could be held liable for this amount. The Supreme Court
held that this was not a contract of agency because from the terms and conditions of the contract it appears that the control of Mariano over Merritt does
not go into the manner or method of the performance of this obligation but only goes into the result of the product. Therefore it cannot be considered as
an agency contract. In agency, the control of the principal over the agent is so pervasive that the principal can control not only the result, but also the
method and the manner of the performance of the obligation. This was not present in this case and therefore Merritt was not an agent of Mariano.

With regard to the relationship between a taxi driver and his operator, does this involve a contract of lease? The Supreme Court ruled that this
involves a contract of lease. However, this is not a lease of things but a lease of work or service. This is specifically an employment contract. This is
because of the control of the operator over the taxi driver. He has this so much control as to when and until what time the taxi driver would operate the
vehicle.

Is the “lease” of safety deposit boxes a lease of things? The Supreme Court said no. The Supreme Court would consider this contract as a
special kind of deposit. This cannot be considered as a lease of things because the lessee has no control over the safety deposit box. In fact, he cannot
even enter the place where the safety deposit boxes are located outside banking hours.

Characteristics of lease

To distinguish lease from other legal relationships you have to consider the characteristics of the contract. A contract of lease is a consensual
contract. (Note: As to the perfection of the contract the best way to remember the classification of contracts is to know by heart what are the real
contracts and what are the formal contracts. There are just a few. There are only four real contracts: (1) pledge, (2) deposit, (3) mutuum and (4)
commodatum. As to formal contracts you have antichresis and donations. Aside from that it may be safe for you to consider all other contracts as
consensual. No particular form is required except for exceptional circumstances like sale of large cattle under the Cattle Registration Decree. Thus, as
a rule, lease is a consensual contract.) By a mere meeting of the minds as to the object and the cause or consideration of the contract, the contract is
perfected.

However, a contract of lease of things is essentially onerous. In the case of Republic vs. Bagtas, the Bureau of Animal Industry and Bagtas
entered into an agreement where three bulls were delivered by the Bureau to Bagtas for breeding purposes. A period of 1 year was agreed. After the lapse
of the period and despite demand by the Bureau for the return of the bulls, Bagtas failed to deliver the bulls. Thereafter he died and his estate was
required to return the bulls. Only two were finally returned. The third bull could not be returned because it died during a crossfire between the AFP and
the Hukbalahap. Claiming that the agreement between the Bureau and Bagtas was commodatum, it was argued that since there is no transfer of
ownership in commodatum, the risk of loss would still pertain to the Bureau. The Supreme Court held that this cannot be commodatum because there
was a stipulation for the payment of breeding fee. It is a lease of things because there was compensation to be paid for the use of these bulls.

However, lease of things is not essentially personal. Thus, upon the death of one of the parties, e.g. the lessee, the contract is not thereby
terminated. The heirs of the lessee may continue to occupy the premises by virtue of the lease as ruled by the Supreme Court in the case of Heirs of
Dimaculangan vs. IAC.

Of course, a contract of lease of things is a nominate, bilateral and principal contract.

Essential Requisites

As a contract, you have to go into the essential requisites of contracts in general which would also be applicable to lease.

16
Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if the rent agreed upon is annual; from month to month, if it is
monthly; from week to week, if the rent is weekly; and from day to day, if the rent is to be paid daily. However, even though a monthly rent is paid, and no period for the lease
has been set, the courts may fix a longer term for the lease after the lessee has occupied the premises for over one year. If the rent is weekly, the courts may likewise determine
a longer period after the lessee has been in possession for over six months. In case of daily rent, the courts may also fix a longer period after the lessee has stayed in the place
for over one month.
17
Art. 1729. Those who put their labor upon or furnish materials for a piece of work undertaken by the contractor have an action against the owner up to the amount
owing from the latter to the contractor at the time the claim is made. However, the following shall not prejudice the laborers, employees and furnishers of materials:
(1) Payments made by the owner to the contractor before they are due;
(2) Renunciation by the contractor of any amount due him from the owner.
This article is subject to the provisions of special laws.
18
Art. 1642. The contract of lease may be of things, or of work and service.
19
Art. 1644. In the lease of work or service, one of the parties binds himself to execute a piece of work or to render to the other some service for a price certain, but the
relation of principal and agent does not exist between them.
Atty. Uribe Lecture Notes: Lease Page 3 of 5
As to consent. As in sales, there are persons who are prohibited from entering into specific kinds of lease. These are those mentioned in 149020
and 149121. Therefore, a spouse may not lease the property of the other spouse, a guardian cannot lease the property of the ward, an agent cannot lease
the property of the principal which property he was supposed to administer, etc.

As to the object. In lease of things, may a consumable thing be the subject matter of a contract of lease? Normally, when a consumable thing is
used in accordance with its nature it is consumed. As a rule therefore, a consumable thing cannot be the subject matter of lease of things. But there is an
exception recognized by law. Under 1645, a consumable goods can be the subject matter of a contract of lease:

(a) When the they are merely to be exhibited; or

(b) When they are accessory to an industrial establishment.

As to the cause. In a contract of lease, the cause depends on the kind of lease:

(a) Lease of thing – the consideration for the lessor is the payment of rentals;
(b) Lease of work/service – it is the compensation to be paid by the other party; and
(c) Lease of rights – it is the payment of royalties.

Formalities

In formalities you have to distinguish between lease of service or work and lease of things. As far as lease of service is concerned, there is no
particular form prescribed by law for the validity of the lease. Not even for the enforceability as a rule. In the case of Donald Dee vs. CA, the brother of
Donald Dee had a problem in one of the casinos in Las Vegas. He asked Atty. Mutuc in his problem. The problem was settled and Atty. Mutuc demanded
for his attorney’s fees. One of the defenses raised by Dee was that there was no written contract between the parties and therefore Atty. Mutuc was not
entitled to attorney’s fees. The Supreme Court held that documentary formalism is not an essential element in an employment contract. In fact, the
contract may be express or implied. Thus, the absence of a written contract would not preclude the finding that there was a professional relationship
which merits attorney’s fees for professional services rendered.

However, in lease of things, a few provisions require a particular form for a lease to be at lease enforceable. 1403 under the statute of frauds
when the contract of lease is over an immovable and it is for more than a year, the contract of lease should be in writing for the lease to be an enforceable
contract. In 1878, if a person is authorized to lease the immovable property of another for more than one year, that agent should have a special power of
attorney.

The problem in lease would normally be a combinations of lease and agency. As can be seen in one bar examination question:

The principal appointed an agent, granting him general and unlimited management over the former’s properties withholding no power from
him and that the agent may execute acts as he may deem appropriate. With this power of attorney, the agent entered into two contracts of lease and the
1st pertains to a lease of a parcel of land in Caloocan for fours years and the rental is to be paid annually P60,000.00 per year. The 2 nd pertains to a lease
of a parcel of land in Quezon City but they did not agree on the period of lease rather they agreed that the rental shall be paid on a monthly basis at the
rate of P3,000.00 per month. These contracts were entered into while the principal was in a hospital. Rule on the validity and binding effect of each of
the above contracts upon the principal.

Note that the problem did not state whether the lease agreement was in writing. The UP Law Center would suggest an answer that since this
pertains to an act under Art 1878, as to 1 st lease, a special power of attorney is required. Since only a general power of attorney was granted the contact
will be unenforceable as against the principal.

As to the 2nd lease, under 1687, this is construed as a month-to-month lease. Thus, this will be merely an act of administration and therefore
will not require a special power of attorney. Therefore this contract will be valid and binding as against the principal.

Another bar examination question pertaining to the formalities in lease pertains to the repair of a private plane for certain sum of money.
However, additional work was requested by a person who has the authority of a duly recognized representative of the owner of the airplane. However,
the request was merely a verbal request. Now when the additional work was completed, the one who rendered the work demanded for additional
payment. The defense raised was under 1724, in order for a claim for an increase due to additional work, the agreement for the additional work must be
in writing.

The suggested answer of the UP Law Center would sustain the defense because of Art . 1724. Such change not being authorized in writing, this
was just a verbal request, then the claim may not proper. But Uribe would rather go for the alternative answer, the person who requested, though verbal,
was an authorized representative of the owner. And this is given already as a fact which need not be proven already. And therefore if you would sustain
the defense under Art. 1724, there would be unjust enrichment on the part of the owner of the plane. Art. 1724 would give the proprietor the right to raise
the defense that a testimony may not be admitted pertaining to a change in the plans because it was only a verbal change. But the moment the fact is
established already, you cannot invoke Art. 1724.

Rights and Obligations of the Lessor

20
Art. 1490. The husband and the wife cannot sell property to each other, except:
(1) When a separation of property was agreed upon in the marriage settlements; or
(2) When there has been a judicial separation or property.
21
Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another:
(1) The guardian, the property of the person or persons who may be under his guardianship;
(2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given;
(3) Executors and administrators, the property of the estate under administration;
(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government-owned or controlled corporation, or institution, the
administration of which has been intrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale;
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the
property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition
includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take
part by virtue of their profession.
(6) Any others specially disqualified by law.
Atty. Uribe Lecture Notes: Lease Page 4 of 5

First as to the necessary repairs to be done on the thing leased, this obligation is an obligation on the lessor. Under the law the lessor has the
obligation to make the necessary repairs. Thus, in the case of Gonzales vs. Mateo, in a contract of lease of a cockpit, but it was stipulated in the
contact that: “Ang lahat ng kailangan na gagawin sa bahay sabungan ay ipagagawa lahat ni Ginoong Ernersto Gonzales sa kanyang sariling gugol
na ang samahan ay walang sinasagot.” In other words, the lessee bound himself to do the necessary repairs. So when the cockpit collapsed who was
held liable? It was the lessee. Even if the lessor has the obligation under the law to make the necessary repairs, that is subject to the stipulation of the
parties. The parties may validly stipulate otherwise.

In another bar examination question, a lease contract was entered into by A and B over a parcel of land for a period of 15 years. It is on this
parcel of land that the lessee conducted his business. As his business progressed, he was able to construct a three-storey building which cost
P300,000.00. Upon the lapse of the 15 year lease period, without the parties having agreed upon the extension of the lease, the lesser demanded for the
lessor to vacate the premises. The lessee claimed that he will not vacate the premises until he is reimbursed of the cost of the building and he also
claimed that being a builder in good faith he therefore has the right to retain the thing until he is reimbursed. What are the rights and obligations of the
lessor and the lessee?

In the first place, was the lessee correct in claiming that he was a builder in good faith and therefore he has the right of retention? No. He
cannot be considered a builder good faith since he is only a lessee. He was not claiming ownership over the parcel of land when he constructed the
building. Therefore he had no right of retention. In fact, under the law, the lessor has the option of appropriating the improvement or requiring the lessee
to remove the improvement. But if the lessor decides to appropriate the improvement, he has to pay 50% of the expense incurred by the lessee because
this is a useful improvement. On the other hand, if the lessor chooses not to appropriate the improvement, the lessee may remove the improvement even
if that would cause damage to the land for as long as there is no unnecessary damage caused to the land of the lessor. The option is with the lessor not
with the lessee.

Another bar examination question involved a chapel which was constructed by the lessee. Would the same rule apply? The UP Law Center
considers the chapel as a useful improvement. Uribe agrees.

However, if the improvement is an ornamental improvement, the law provides that if the lessor would want to appropriate the improvement,
he has to pay for the value of the improvement not merely 50% but the value of that improvement.

Another bar examination question pertains to the construction of building where an architect was authorized and paid, aside from designing
the building, to supervise the work of the contractor. The building was completed then it was delivered to the owner. However, within 15 years, the
building collapsed due to faulty construction. What are the rights of the owner against the architect and the contractor? Could the owner demand for the
reconstruction of the building considering that the cost of constructing a new building has tripled from the delivery of the collapsed one?

To the first question, the rights of the owner under Art. 1723, the owner can hold the architect and the contractor solidarily liable because the
architect also supervised the construction of the building.

To the second question, under Art. 1167, in an obligation to do, when there are problems in the work done by the debtor, he can have that work
undone at the expense of the debtor. In fact, he can have another person do the work at the expense of the debtor. So from this, it is also suggested as an
answer that even if the cost of construction has tripled, the debtor can still be compelled to construct again the building or have the building constructed
again be another at the expense of the debtor.

Rights and obligations of the lessee

Two favorite articles are 1649 and 1650. Assignment of lease and sublease.

The questions in the bar may be as simple as: May the lessee sublease the property without the consent of the lessor? What are the respective
liabilities of the lessee and the sublessee?

Arts. 1649 and 1650 would tell us that a lessee may not assign his rights under the lease without the consent of the lessor. However, he may
sublease the premises in whole or in part even without the knowledge or consent of the lessor as long as he was not prohibited from subletting the
premises.

In one bar examination question, in a contract the lessee was prohibited from assigning the lease of one floor of the building, but what the
lessee did was to sublease. Would that sublease bind the lessor? Yes. The lessee was only prohibited from assigning the lease. He was not prohibited from
subletting the premises.

Ultimately, the problem here is if there is a contract entered into by the lessee with a third person involving his rights as a lessee, would that
contract be considered as an assignment of that lease or would that contract be treated merely as a sublease?

In the case of Manlapat vs. Salazar, the lessor entered into a contract with the lessee for a period of 20 years over a fishpond. During the
lease period, the lessee entered into an agreement with a third person without the consent of the lessor. Thereafter, the lessor questioned the validity of
this contract on the ground that the assignment of the lease was without his knowledge or consent and thus, the contract is void and he can recover the
fishpond from the sub-lessee. Is this contract an assignment of lease or a sublease?

If this is an assignment of lease, the lessor is correct that without his consent, this would be void and he can recover the fishpond from the
assignee. However, if this is merely a sublease, then even without the consent of the lessor, because the lessee was not prohibited from subletting the
fishpond, then that would be a valid and binding sublease even as against the lessor.

The Supreme Court held that whether a contract entered into by a lessee is an assignment of lease or merely a sublease would depend on
whether there was an absolute transfer or rights from the lessee to the third person such that he disassociates himself from the lease contract and his
personality disappears resulting now in two persons which are the lessor and the assignee and the assignee now is converted into the new lessee.
However, if the lessee retains a reversionary interest, no matter how small, in the contract of lease then that would be merely treated as an assignment of
lease.

Again, in an assignment of lease there has to be an absolute transfer of interest by the lessee of his rights and he would disassociate himself
from the contract. However, if there is a reversionary interest retained by the lessee, then it will be considered merely as a sublease.
Atty. Uribe Lecture Notes: Lease Page 5 of 5

In this contract, the SC therefore ruled that this is merely a sublease and therefore valid even without the consent of the lessor. First, the
contract would only last until May 31, 1967. If this agreement would end on May 31, 1967, upon the termination of the agreement, there would still be
one day on the lease agreement. And therefore this lessee would be reverted back to his rights. He still had until June 1, 1967. There are other
stipulations which led the SC to conclude that this was merely a sublease. On such stipulation was a prohibition made by the lessee upon the sublessee
from cutting the trees in that parcel of land without the consent of the lessee. So why should he prohibit X from cutting the tree if he would disassociate
himself from this lease contract. Also, there was stipulation for the payment of taxes.

Again, in the case of Fressel vs. Mariano Uy Chaco, the theory of Fressel that Merritt was merely an agent was not sustained by the SC. The SC
sustained the theory that the relationship of Merritt and Mariano was that of employer and employee in a contract for a piece of work. Thus, can Fressel
recover from the employer in a contract for a piece of work? There appears to be no privity of contract. Thus as a rule, there is no cause of action. The SC
dismissed the action but ultimately held in the penultimate paragraph that in absence of a materialmen’s lien, the action will not prosper.

Fressel was decided in 1916. If the action was filed today, may it prosper? Yes. Under the theory of unjust enrichment. In Art. 1729, a supplier
of materials may recover such amount owing to him by the contractor to the extent that the owner of the edifice is still indebted to the contractor. So for
example, if the supplier of materials is claiming P1,000,000.00 but the owner of the edifice is still indebted to the contractor for P5,000,000.00 and the
project has already been completed, the supplier of the materials may recover from the owner of the edifice himself instead of going after the contractor.
And this liability of the owner may not be excused by that fact that he has already paid the contractor if the payment was made in advance or that the
contractor waived his claim against the owner. Ultimately, even if the owner has fully paid the contractor and he paid the contractor when the obligation
was already due and demandable, he may still be held liable to the supplier of the materials if he did not demand for the delivery of a construction bond
which would answer for the claims of the laborers and suppliers of materials.

There is one other article in relation to a bar examination question pertaining to the lease of a fishpond. The agreement was for a period of 5
years. However, after the one year, the lessee demanded for (1) reduction of the rental and (2) extension of the lease for 1 year, because he was only able
to harvest ½ of what would normally be harvested in the fishpond due to unlawful elements in the area extorting money from those in the area. If you
will consider the relevant provision on this matter, the law actually provided that the reduction of the rental may only be demanded by the lessee if he
harvested less than ½ of what normally would be harvested in that property. So technically you may say that the lessee is not entitled to the reduction. At
any rate, assuming that the lessee harvested only less than ½, that will still not entitle him to the reduction of the rentals because under the law, this may
only be claimed if it was due to an extraordinary fortuitous event as opposed to an ordinary fortuitous event. Storms are mere ordinary fortuitous events.
Under that provision, what would be considered as extraordinary fortuitous events would be pestilence, unusual floods, etc. The presence merely of
unlawful elements in the area may not be considered as an extraordinary fortuitous event under the law and therefore may not be a basis for the
reduction of the rental.

As to the claim for the extension of the period, even assuming that it was a fortuitous event, in a contract of lease of a thing, the happening of a
fortuitous event will not give the lessee the right to have the lease contract extended. That would only result in the suspension of the lease during the
happening to the fortuitous event. War for example would only suspend the lease but it would not give the lessee the right to have the lease contract
extended. In other words, the lessee may not be compelled to pay the rentals during the period of the fortuitous event.

Termination of the lease

One bar examination question pertains to a building constructed by A but for the construction of the building B gave A P5,000,000.00 with
the agreement that B will be the lessee of the entire building for a period of 10 years paying P100,000.00 per month as rentals. On the 5 th year of the
lease agreement, the entire building was burned without the fault of anyone. Thereafter, A reconstructed the building. Just before the building could be
completed B notified A of his intention to continue with the lease. A refused. Was A justified in refusing the request of B? Yes. With the destruction of the
building, which was the object of the lease, due to a fortuitous event, the lease contract was terminated. Therefore it could no longer be continued.

Again, with regard to the case of Heirs of Dimaculangan vs. IAC, the question in the bar could be a simple as discuss the effect of the
death of the lessee in a lease of things? The death of the lessee does not terminate the contract. A contract of lease in not an essentially personal contract
as ruled by the Supreme Court and therefore it may continue until the expiration of the period of the lease. The heirs of the lessee therefore may continue
to occupy the premises until the expiration of the lease.

Implied new lease

The question here can be as simple as: under what circumstances would an implied new lease arise?

Under the law, the only requirements are:

(a) The lease has already expired;

(b) The lessee continues to be in possession of the property leased for at least 15 days from the time of the expiration of the lease; and
(c) There should be no notice to the contrary coming from the lessor and the lessee.

One bar examination question would pertain to a contract of lease entered into between A and B for a period of 3 years, January 1, 1981 to
January 1, 1984, paying rentals on a monthly basis. It was stipulated in the lease contract that the lessee has the option to buy the property at a certain
price within the period agreed upon. Despite the lapse of the 3-year period, the lessee did not exercise the option but he continued to be in possession of
the property and paying rentals on a monthly basis to the lessor and the lessor accepted the rentals. That situation continued until June, 1984. On June
1984, the lessee informed the lessor that the latter would now buy the property in accordance with their agreement giving the lessee the option to buy the
property. The lessor refused claiming that there was no such option. Was the lessor correct? Yes.

Was there an extension of the lease under the facts? Yes. There was an extension of the lease known as an implied new lease. All the three
requisites were present. There was implied new lease. However does it mean that with the implied new lease, all the terms and conditions of the original
lease agreement are impliedly renewed? No. Even only under the term, by express provision of the law, the term of the renewed lease will not be the
original term agreed upon but it will only be for a period depending on the manner of the payment of the rentals. If the payment of the rentals is on an
annual basis, the renewed lease would only last for another year and every year thereafter. However, if the payment of rentals is on a month-to-month
basis, the implied new lease will only last for 30 days. Also, with regard to the option, is it deemed renewed? Definitely not. The SC would tell us that in
an implied new lease only those terms and conditions which are germane to a contract of lease are deemed renewed. Those terms which are not germane,
like an option to buy, will not be considered renewed.