SBU Sales and Lease| Mario Trinchera Jr.

|2018- 2019|

Lease 1. Consent
2. Object
3. Cause

Art. 1462 Art. 1643

Contract of Lease Rule: The essence of lease is the transmission of the temporary
:an agreement whereby one person binds himself to grant enjoyment or use by the lessee of a thing for a certsain periodf in
temporarily the enjoyment or use of a thing, or to render some work consideration for the payment of rent.
or service another who undertakes to pay rent, compensation or
price therefor. Rule: Provisions of the CC on lease of lands applies to leases of
personalty as well.
Rule: Lease is only a personal right; it is a real right only by
exception. Exception: Provisions which by their nature can only apply to
immovables.
Example:
Lease of real estate. Rule: Object of lease must be within the commerce of man.

Note: In the absence of registration, purchaser may terminate the Rule: Lessor need not be the owner of the thing leased, as long as
lease. he can transmit its enjoyment or use to the lessee, since pwnersdhip
is not the one being transferred.
Exceptions:
Note:
1. Contrary Stipulation
2. Knowledge of purchaser Usufructuary may lease the thing enjoyed, subject to Art.572.

Rule: Lease contract is not essentially personal in character; it Easement cannot be leased independently of the estate to which it
survives the death of the parties and continue to bind the heirs. belongs ( Art. 617).

Correlate with Art. 1311
Exception: If the contract states otherwise.
“Death of a party does not excuse non- performance of a contract;
rights and obligations thereunder passes to the successors or
representatives of the deceased.” (Sui Man Hui Chan vs CA)
The same principle applies to the option to renew a lease.
Kinds of Lease According to Subject- Matter
1. Lease of Things
:whether real or personal, involves an obligation on the
part of the lessor to deliver the thing which is the object
thereof and the correlative right of the lessee to the
peaceful and adequate enjoyment for a price certain.
2. Lease of Work
:contract for a piece of work; involves an obligationon
the part of the independent contractor (lessor) to execute
a piece of work for the employee (lessee) in
consideration of a certain price.
3. Lease of Service
: involes an obligation on the part of the housekeeper,
laborer or employee, or common carrier to do or perform
a service for the head of a family, master, employer, or
passenger or shipper of goods, respectively, in
consideration for a compensation.
Characteristics (CBO- CNP)
Consensual
Bilateral
Onerous
Commutative
Nominate
Principal
Rule: Even the lessee himself may lease the property to another
(sublease).
Consideration
Lessor: “Rent” in money or equivalent, such as products, fruits, or
other useful things or some other prestation or labor which the lessee
binds himself to undertake.
Note: What is given by the lessee must have value.
Lessee: Enjoyment of the thing leased.
Price Certain
: means that the price of the lease has been determined by the parties
or at least capable of determination.
A “price certain” exists when the same can be ascertained according
to the usage and customs of the place.
Rule: Amount must not be so nominal or so insignificant as to
indicate a gratuitous contract.
Rule: Lessor has the right to fix the amount of the rent, and upon
expiration, to demand an increase thereof. Lessee may or may not
consent.
Rule: Courts cannot fix a different rental, even when there is an
increase in realty taxes.
Period
Rule: Period may be definite or indefinite, as long as it is temporary
and not perpetual.
Rule: When period is definite or fixed, maximum period is 99 years.
Rationale: It is unsound economic policy to allow ownership and
enjoyment to be separated for a very long time.

Elements:

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Rule: In case period is fixed for more than 99 years, lease should be Duration
considered expired after end of said term. Where there is an implied
new lease (Art. 1670), the lease will be for an indefinite period. Temporary Permanent (except if subject
to Resolutory Condition)
Rule: If a term is fixed but is indefinite, but from the circumstances Price
it can be inferred that a period was intended, courts may fix the
Price of subject matter is Usually fixed in the contract
period.
usually not mentioned.
Rule: If no term is fixed, Art. 1682 applies for lease of rural lands
Rule: In case of doubt, intent of the parties prevail.
and Art. 1687 for leasse of urban lands.
Rule: A lease of personalty with option to buy is an installment sale
Note: A verbal contract of lease “for as long as the lessees are doing
and not a lease.
business and as long as they can pay just rent” has been held to be
a lease from month to month under Art. 1687 and not one of
The Rent corresponds to the price paid in installments.
indefinite necessity.
Contract of Loan
Rule: A lease of things during the lifetime of one of the parties is
: A contract where one of the parties delivers to another, either
for an indefinite period.
something not consumable so that the latter may use the same for a
certain time and return it, in which case the contract is calles
Rule: The continuance and fulfillment of a lease of a house cannot
commodatum; or money or other consumable thing, upon the
be made to depend solely upon the uncontrolled choice of the lessee
condition that the same amount of the same kind and quality shall
whether or not the lessee would pay rental, thus depriving lessor of
be paid, in which case, contract is simply a mutuum.
any say on the matter. (Art. 1308)

Estoppel
Lease vs Commodatum
Rule: A lessee is estopped from asserting title to the things leased
as againt the lessor, or to deny the lessor’s title, or to assert a better
title or right of possession not only in himself, but also in some third Lease Commodatum
person, including the State. Nature

Note: Estoppel applies even though the lessor had no title at the time Onerous Gratuitous
the relation of lease was created. Character
Rule: Relation of lessor and lesseee does not depend upon the Not essentially personal; may Purely personal; death of either
fromer’s title, but on the agreement between the parties, as long as be transmitted to heirs. bailor or bailee extinguishes
the lessee remains undisturbed in his possession. the contract.
Type of Contract
However:
Rule was relaxed to avoid unjust emrichment (Art. 22) and to Consensual Real contract, perfected only
prevenrt unduly burden to the lessee who would be compelled to pay upon delivery of the object.
rent twice: to the lessor, then to the owner of the tenement.

Presumption (Rules of Court) Lease vs Mutuum

: Tenant is not permitted to deny rthe title of his landlord at the time
of the commencement of the relation of landlord and tenant. Lease Mutuum
Ownership
Exception:
If the title asserted is one alleged to have benn acquired subsequent Owner does not loose Lender or creditor loses
to the landlord- tenant relation. ownership of the property ownership of the thing loaned
leased. which becomes the property of
Note: the borrower or debtor.
Judgment rendered in ejectment cases shall not bar an action
between the same parties respecting title to land and shall not be Relation
conclusive as to the facts found therein in a case between the same
parties upon a different cause of action involving possession of the Lessor- Lessee Relation Creditor- Debtor
same property. Subject Matter

In ejectment cases, issue is physical or material possession; any Real or Personal Property Money or Fungible things
pronouncement made by the trial court on question of ownership is Statute of Frauds
merely provisional.
Governed by SOF where thing Not governed by SOF
Lease vs Sale leased is real property for more
than one year.
Lease Sale Usury Law

What is Transferred Not governed by Usury Law Governed by Usury Law

Enjoyment or use Ownership

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Usufruct Object
: gives the right to enjoy the property of another with the obligation
of preserving its form and substance, unless the title constituting it Movable and Immovable If extrajudicial, only movable
or the law provides otherwise. things.
Nature
Onerous Gratuitous
Lease vs Usufruct
Type of Contract
Lease Usufruct Consensual Perfected only upon delivery
Nature of Right of the subject.

Real right only in case of Always a real right.

lease of real property where (Art. 567) Lease of Chattel vs Employment
the lease is registered.
Ownership Lease of Chattel Employment
Lessor may or may not be the Creator of the right must be Relationship
owner. the owner or one authorized
by him. (Art. 563) Lessor- Lessee Employer- Employee
Obligation Control over the Thing
Lessor has the active Owner has the passive duty Lessor losses control over the Employer retains control over
obligation to maintain the to allow the usufructuary to chattel leased. his property used by the
lessee in the enjoyment or enjoy or use the same. employee.
use of the property. (Art. 562) Supervision/ Control over Employee/ Lessee

Taxes Lessor has no control over Employer excercises control

Lessee generally pays no
taxes.
Repairs
Lessee has generally no
obligation to pay for repairs.
the lessee. over employee.
Usufructuary pays the annual Payment
charges and taxes on the
fruits. (Art. 596) Lessee pays rent to lessor. Employer pays wage or
salary to employee for its
services.
Usufructuary is obliged to
make the ordinary repairs Art. 1644
needed by the thing given in
usufruct. (Art. 592) Lease of Work or Service

Lessee cannot constitute a Usufructuary may lease the Lease of Work

usufruct on the property. thing in usufruct to another. : the object is the execution of a piece of work for an employer by
(Art. 581) an independent contractor.
Creation
Lease of Service
Only by contract. (As a rule) Law, Contract, Last will and : the object is the performance of some service or an employer by a
testament, Prescription househelper or laborer or for a passenger or owner of goods in case
Coverage fo common carriers.
Generally covers particular As a rule, covers all possible Rule: In both cases, the relation of principal and agency does not
uses limited by the contract. uses of the proeprty. exist.
Deposit Contract of Agency
: constituted from the moment a person receives a thing belonging : a contract whereby a person binds himself to render some service
to another, with the obligation of safely keeping it and returning or to do something in representation or on behalf of another, with
the same. consent or authority of the latter.
Note: If the safekeeping of the thing delivered is not the principal Lease of Work/ Service vs Contract of Agency
purpose of the cointract, there is no deposit, but some other
contract. Lease of W/S COA
Lease vs Deposit Basis
Employment Representation
Lease Deposit
Act
Purpose
Lessor performs a material Agent executes a juridical act
Enjoyment of the thing Safekeeping of the thing act for the benefit of his for and in behalf of his
leased. delivered. employer without principal.
Return of the Thing representation of the latter.
Lessor cannot demand the Depositor can demand the Compensation
thing leased before the return of the subject matter at Work or service must be for a Presumed to be for a
expiration of the contract. will. compensation compensation.

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Extinguishment In lease of service, the lessor Every partner as an agent of

ordinarily performs ministerial the partnership, exercises
Will of both parties is Will of one is sufficient.
duties. discretion.
necessary for the
extinguishment of the
relation.
Compensation in Lease of Work or Service
Persons Involved
Only the lessor and lessee. Principal, Agent, Third person Rule: When there is an agreement, lessee must be compelled to
with whom the agent has pay the agreed price.
contracted.
Risk of Loss Exception: If found to be iniquitous or unreasonable.
In lease of work, risk of loss Risk is borne by the principal,
Remedy: Court may fix a reasonable renumeration.
before delivery is borne by the since agent acts only in his
independent contractor, behalf.
Note: Where compensation is waived after service has been given,
especially in a lease of wirk
there is still a lease, although gratuitous.
for a fixed price.
Liability Rule: Agreement may however be implied.
In lease of work, independent The agent is not liable, unless
contractor is personally liable he expressly binds himself or “One who performs work or service in favor of another who
for his contracts with third exceeds the limits of his impliedly consents thereto and who benefits thereby is entitled to
persons. authority. compensation by virtue of an innominate contract (Art. 1307) of
As to Discretion facio ut des)”.
Lessor ordinarily performs Agent exercises discretionary “No one should be unjustly enriched by the work of another unless
ministerial duties. powers. the services are expressly stated to be gratuitous.”

Rule: If no rate has been fixed, the contract is nevertheless valid if

Contract of Partnership theamount can be ascertained in the light of the customs and usage
: a contract where two or more persons bind themselves to contribute of the place or by findings of fact on the basis of evidence submitted
money, property, or industry to a common fund, with the intention in case of disagreement.
of dividing the profits among themselves.
In other words, the court may fix the rate based on evidence.
Lease of W/S vs Partnership
Price Certain exists when the same can be ascertained according
Lease of W/S Partnership to the customs and usage.
Representation
Boundary System
None Every partner is an agent of the : a scheme by an owner/ operator engaged in transporting passengers
partnership for the purpose of as a common carrier to primarily govern, the compensation of the
its business. driver, that is, the latter’s daily earnings are remitted to the owner/
Purpose operator less the excess of the boundary which represents the
Lessor performs a material act Realization of Profits driver’s compensation.
for the benefit of the employer.
Relation Between Driver and Operator: employer- employee
Parties
relationship.
Only two persons are involved. A juridical personality
(partnership) separate and Basis: “Control Test”
distinct from that each of the
partner is formed. The operator has a say with regard on how the work is to be done by
Nature of Work/Acts the driver, the time of use, and the operator also has power to
suspend or terminate the driver from work.
Work or service is dependent Partners perform acts
upon the ends or purposes of conducive to their own The driver also performs activities which are necessary or desirable
the lessee. business purposes. on the usual business of the operator.
Compensation
Work or service must be for a Partners share in the profits or Art. 1645
compensation/ price. losses.
Extinguishment Rationale: Essence of lease of things is the enjoyment of property
with the obligation on the lessee to return the thing upon the
Will of both parties is Will of any partner is termination of the lease. Ownership is not transferred to the lessee.
necessary. sufficient.
Liability Thus, things which cannot be used without being consumed cannot
be the object of lease.
In lease of work, independent A partner is generally not.
contractor is personally liable
for his contracts with third
persons.
As to Discretion

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LEASE OF RURAL AND URBAN LANDS
“Rural” (Legal Def.)
: relating to or constituting tenement in land adopted and used for
agricultural or pastoral purposes.
It is one which, regardless of site, is principally used for the purpose
of obtaining producta from the soil as opposed to urban lands, which
are principally for the purpose of residence.
(Fabia vs IAC)
Rule: Persons disqualified to buy in accordance with Art, 1490 and
1491 are likewise disqualified to lease the thing therein mentioned.
Rationale: Similarity between contract of sale and lease.
Rule: Foreigners are prohibited by the Constitution.
Exception: Hereditary Succession
However: They can lease real property in the Philippines.
Rationale: Foreigner who buys land, becomes the owner of such
land; a lessee does not obtain more than possession of land. Thus,
there is no danger that a lessee be converted into an owner.
“Since the residence of aliens in the Philippines is temporary, they
may be granted temporary rights such as a lease contract which is
not forbidden by the Constitution.”
(Krivenko vs Register of Deeds)
Exception: Where lease contract amounts to virtual tansfer of
property.
“A contract whereby an aline is given not only a lease but an option
to buy a parcel of land by virtue of which the Filipino owner cannot
sell or otherwise dispose of her property, this to last for 50 years, is
a virtual trasnsfer of ownership and circumvents the constitutional
ban.”
Rule: Maximum allowable period for lease of private land to aliens
is 25 years, renewable for another 25 years upon mutual
agreement. (P.D. 471)
Lease to Foreign Investors (RA 6752)
Art. 1647
Rule: If a lease is to be recorded in the Registry of Property, the
persons mentioned in Art. 1647 cannot constitute the same without
proper authority (i.e. power of attorney).
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Rationale: If a lease is recorded, it creates a real right which binds
third persons. Registration of lease is therefore an act of strict
ownership.
Note: If the lease is not to be recorded, the lease is valid even
without a special power.
Rule: In the absence of special power, a lease for more than one
year executed by the persons mentioned in Art. 1647 is valid only
for one year but void as to the excess.
Art. 1648
Rule: A lease contract is valid and binding between the parties, their
privies, and their heirs ( Art. 1311).
Exception: Unless it be an oral lease for a loner period than one
year, in which case, it cannot be enforced by action for non-
compliance with the Statute of Frauds.
Rule: An innocent purchaser for value is not bound to respect the
lease and may terminate the same, unless registered in the ROP.
Note: Knowledge however is = Registration
Rationale for Art. 1648: Intended to protect the lessee who cannot
be ousted by the buyer if the lease is recorded.
Rule: Lease is a mere personal right.
Its inscription in the ROP to bind third persons does not alter or
modify the rights and obligations of the parties under the contract.
Where the instrument registered is invalid or legally defective,
registration will not cure its defect.
Rule: Art. 1648 applies only to lease of real property; personal
property cannot be registered.
Rule: Where a purchaser of land at the time of the purchase has full
knowledge of the fact that the land has been leased to a third person,
and is informed of the terms of the lease, or was aware of the
existence of the lease, he is bound to respect said lease, although it
is not entered upon the certificate of title.
Note: The lease in effect, became a part of the sale.
“The vendee acquires the right to evict the lessee and to recover
unpaid rentals after the vendee had notified the lessee that he had
bought the leased property asnd that the rentals should be paid to
him, and the lessee refused to complete with his demand.”
Art. 1649
Rule: In an assignment of lease, the personality of the lessee
(assignor) disappears.
The lessee makes an absolute trasnsfer of hisd lease, involving not
only his rights but also obligations as such lessee and thus,
dissociates himself from the original contract of lease.
There arises a new juridical relation between the lessor and assignee
who is converted into the new lessee.
There is in effect, a novation.
Rule: The lessee cannot assign the lease without the consent of the
lessor unless there is a stipulation granting him that right.
Rationale: To protect the lessor or owner of the leased property.
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Note: Assignment of lease without the consent of the lessor is a
ground for recission of the lease.
Rule: What is contemplated by Art. 1649 is a transfer whereby the
original lessee is released from his obligations under the contract. In
other words, there must be transfer of the contract itself, not merely
of the rights of the lessee.
Rule: Sublease arrangement not covered.
Assignment under Art. 1649 and sublease arrangement are different.
In a sublease, the lessee becomes in turn a lessor of the sublessee.
The sublessee then becomes liable to pay rentals to the original
lessee.
The juridical relation between lessor and lesee is not dissolved;
parties continue to be bound under the lease contract.
Art. 1650
Rule: Sublease is allowed in the absence of express prohibition.
Rule: Violation of the prohibition entitles the lessor to
1. Rescission + Damages
2. Damges (Allowint the contract to remain in force).
Rule: If prohibtion is merely implied, sublease is allowed.
Rule: In sublease, lessee remains a party to the contract; personality
of lessee does not disappear.
There are two leases and two distinct juridical relations:
1. Lessor and lessee
2. Lessee and sublessee
Rule: Sublesee has no direct cause of action against the lessor and
vice versa. The sublessor is the one directly liable to the sublessee
whose damages are included in whatever damages the former may
recover from the lessor.
Rule: Sublease of the property cannot affect the efficacy of the
contract of lease which subsist with all its legal consequences.
Rule: Judgment for eviction against the lessee affects the sublessee.
Rationale: The right of the sublessee is hinged or is dericed form
the lessee.
Remedy of Sublessee: Damages against the lessee, if he is at fault.
(Art. 1170)
Sublet
: means to maske a sublease, accompanied by a surrender of the
possession of the possession and control of the premises, or at least
a part thereof.
Rule: Accepting boarders is not equivalent to subleasing.
Art. 1651
Rule: Sublessee can only be directly liable to sublessor (lessee).
Exception: Lessor may bring an action against sublessee if he does
not use and preserve the thing leased in acdordance with the
agreement between the lessor and lessee or with the nature of the
property.
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Art. 1652
Rule: The lessor may demand from the sublessee payment of the
rents which the sublessor failed to pay the lessor.
Rationale: To prevent a situation where the lessee collects the rents
from sublessee but does not pay his rents to lessor.
Amount of the Rent Recoverable
Rule: Liability of the sblessee is limited to the amount of rent due
from him to the sublessor under the terms of the sublease at the time
of the extrajudicial demand by the lessor.
Future rents cannot be recovered.
Note: Liability of sublessee is only subsidiary; he is liable to the
lessor only for rents the lessee dailed to pay the lessor.
Rule: There must he a judgment cancelling the lessee’s principal
lease contract or ousting the lessee from the premises before the
sublessee becomes subsidiarily liable.
(Wheeler’s Club International vs Bonifacio Jr.)
Rule: Payments of rent in advance by the sublessee shall be deemed
not to have been made, so far as the lessor’s claim is concerned.
Exception: Unless said payments were effected in virtue of the
customs of the place.
The sublessee continues to be subsidiarily liable to the lessor for any
rent unpaid by lessee.
Rationale: Precaution to avoid collusion between lessor and lessee.
With the insolvency of the sublessee and the supposed advanced
payment by the sublessee, the rights of the lessor might be rendered
nugatory.
Art. 1653
Rule: Warranties in sales applies to lease.
The lessor likewise warrants: (REFF)
1. He has right to lease the thing;
2. Lessee shall enjoy the legal and peaceful possession of
the thing;
3. The thing is fit for the use for which it is intended;
4. The thing is free from any hidden fault and defect.
In case of eviction of the lessee, and the return of the rents paid is
required, a reduction shall be made taking into account the period
during which the lessee enjoyed the thing.
The lessee has also the right to ask for the proportionate reduction
of the rents agreed upon where the area or number of the object of
the lease is less than that stated in the contract.
Rule: Liability for warranty is not equivalent to liability for
damages.
“The lessor’s obligation to warrant the thing leased, whether or not
he knew of the existence therein of the defects that rendered it
unsuitable for the use for which the lessee intended it, is distinct
from liability for damages, which only attaches when he knew about
such defects and failed to reveal them to the lessee or concealed
them, in which case fraud and bad faith may be presumed on his
part.”
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RIGHTS AND OBLIGATIONS OF THE LESSOR AND
LESSEE
Oligations of the lessor:
1. To deliver the thing which is the object of the contract
in such a condition as to render it fit for the use intended.
2. To male necessary repiars unless there is stipulation to
the contrary.
3. To maintain the lessee in peaceful possession for the
entire duration of the contract.
4. He cannot alter the form of the thing leased. (Art. 1661)
Rule: Failure of the lessor to fulfill any of these obligation will
render him liable for damages.
Rule: Delivery may either be actual or constructive.
At the time of delivery, the thing must be in a condition fit for the
use intended.
Note: When a lessee cannot occupy a building because it is
occuppied by another person, his cause of action is against the
lessor.
Rule: The law speaks of necessary repairs.
Rule: If the lessor fails to perform such duty, lessee may either
suspend payment of the rent or avail of other remedies provided by
law.
However: Lessee may agree to do the repairs and relieve the lessor
the duty, as where the lessee is to pay only a very moderate if not,
nominal rent.
“Repairs”
: Implies putting back of something in which it was originally.
It is different from “improvement” which means adding something
new.
Obligation to make repairs is also different from reconstruction in
case of total loss. Lessor is not obliged to reconstruct.
Rule: Lessee must notify the lessor for the repairs. Lessor cannot be
liable if he was not notified.
Rationale: Lessee possesses the property.
Note: While the lessor is not liable for damages due to fortuitious
event, he must make the repairs after he has been advised by the
lessee of the necessity within the shortest time possible.
Rule: The lessor is liable if he fails to maintain the peaceful and
adequate possession of the lessee for the entire duration of the
contract.
Note: What the law contemplates in a “legal tresspass” and not
merely “physical tresspass”.
Rule: Lessor is not liable for lessee’s eviction caused by
condemnation proceedings.
The remedy of the lessee is against the government for just
compensation.
Rationale: Expropriation is involuntary.
Right of First Refusal in Lease Contract
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Rule: Where a lease contract contains a right of first refusal, the
lessor is under the legal duty to the lessee not to sell to anybody at
any price until after he has made an offer to sell to the latter at a
certain price and lessee failed to accept it.
A right of first refusal is inseparable from the lease contract;
consideration of the lease is also the consideration of the right of
first refusal.
Rule: Sale made in violation of right of first refusasl is valid, it may
however be rescinded or be the subject of an action for specific
performance.
Art. 1655
Total Destruction
Rule: Lease is extinguished because the object of the lease was
destroyed totally.
Partial Destruction
Rule: Lessee is given the option to choose between proportionate
reduction of rent and rescission of lease.
Oncde the choice had been communicated, lessee cannor change it.
Note: If reduction is chosen, the same shall be retroactive to the date
partial destruction occurred.
If rescission, there must be substantial breach.
Art. 1656
(Codal)
Art. 1657
Obligations of the Lessee:
1. Pay the price of the lease according to the terms
stipulated;
2. Use the thing leased as a diligent father of the family;
3. Pay the expenses for the deed of lease;
4. Notify the lessor of every usurpation of untoward act by
any third person and of necessity of urgent repairs.
Rule: Obligation of the lessee to pasy the rent agreed upon arises
only when the thing leased has been delivered to the lessee for the
purposes stipulated in the contract.
Rule: Only the lessor has the right to fix the rents; courts cannot fix
it.
Rule: Lessor, aside from the right to terminate the lease upon
expiration of the term can aslo increase the rent in case of renewal.
The lessee has the option either to accept the new rate or vacate the
premises; otherwise he will be considered a possessor in bad faith.
Rule: The proper rate for back rentals is 6% per annum computed
from the time of demand.
Back rentals in this case are equivalent to as loan or forbearance of
money.
Rule: Place of payment is governed by same rules rgarding
obligations in general (Art. 1251).
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Rule: Lessee must exercise the diligence of a good father of family. Rule: Upon non- payment of rent by the lessee, the lessor may elect
to treat the contract as rescinded and thereby determine the right of
He must devotre the thing: the lessee to continue in possession; and his right to recover
possession may be enforced in an action for unlawful detainer.
1. To the use stipulated;
2. If there was no stipulation, according to nature of the
thing; It is not necessary that an independent action for rescission of the
3. Customs of the place. lease should first be instituted, unlike resolution of reciprocal
obligations in Art. 1191.
Note: Use of the thing for illegal purpose entitles the lessor to
terminate the contract. Rule: If lessee pays but lessor refuse to accept, the remedy of the
former is consignation.
Rule: When a thing by its nature is susceptible of various uses, the
lessee may use it for any of the purpose for which it may be suitable. Rule: Rescission under Art. 1659 is deifferent from automatic
rescission if the lessee failed to make the required deposit for
Art. 1658 rentals.

2 Grounds For Suspension of Payment: In making the deposit, the lessee prevents the automatic cancellation
of the lease but does not preclude the lessor from suing for rescission
1. Failure to make necessary repairs by the lessor. of the lease for the lessee’s failure to pay the stipulated rentals.
2. Failure to maintain the lessee in peaceful and adequate
possession.

Rule: In case of repairs, lessee may suspend payment from the time
demand is made upon the lessor and the latter fails to perform his
obligation.

Rule: In case of eviction, lessess is re3leased from obligation to pay

rents from the time he is unlawfully dispossessed.

Note: Disturbance must be made by an intruder with color of title

(legal trespass); otherwise, the cause of action of the lessee is against
the intruder and not against the lessor.

Rule: If the cause for suspending payment has ceased to exist, the
lessee has no liability to pay rents for the intervening period,
unless lessor can prove that suspension was not legally justifiable.

Art. 1659

Rule: Upon failure of either party to fulfill their obligations,

aggreived or innocent parties may elect to demand rescission or
fulfillment with damages in either case.

Difference With Art. 1191:

Courts are not granted additional time for performance, unlike in

1191.

Damages (Art. 1170)

Rule: The amount of damages recoverable by the lessor is the

difference between the rental actually obtained and that stipulated
in ther contract of lease.

Indemnity for damage does not include rents for the future where
the termination of the lease abrogated liability for future rents.

“Where the lessee fails to pay on time the rents, lessor has the right
to rescind the contract, recover the unpaid rents and eject the
lessee”.

General Rule: Obligee’s remedies upon breach of obligation is

judicial in nature.

Exception: In certain exceptional cases, the law recognizes the

availability of extrajudicial remedies, which exist in addition to the
judicial remedies given in Art. 1191 and 1659.

Caveat Lector: Read at your own risk. Source: De Leon| Sales and Lease| 2014
AGDV