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A.

Using the contract that you have (Part I) and applying Philippine law, answer the following
questions:

1. How is consent manifested in the contract?


Consent is manifested in the contract through the signatures of the RICARDO R. KHO (Lessor) and
PHILIPPINE HEALTH INSURANCE CORPORATION represented herein by its Regional Vice-
President, ATTY. JERRY F. IBAY (Lessee) that shows the meeting of the offer that ATTY. JERRY F.
IBAY (Lessee) is to lease the property under RICARDO R. KHO (Lessor) and the acceptance upon
the conditions stated in the contract.

2. What is the object of the contract?


The object of the contract of lease is the ground floor with an area of Forty Square Meters (40 sq.
m.) of a three storey building located at Caneja Street comer Castin Street, Naval, Biliran owned by
RICARDO R. KHO (Lessor).

3. What is the cause/consideration?


ATTY. JERRY F. IBAY (Lessee) is to pay a monthly lease rate of TWELVE THOUSAND PESOS
(P12,000) inclusive of all government required fees and taxes and maintenance cost, to be paid on
or before the tenth (10'") day of the succeeding month upon presentation of a billing or notice for
payment to LESSOR. The withholding tax shall be paid by the LESSEE who shall provide the
LESSOR withholding tax certificate. This Contract of commences on April 1. 2012 and ends on
December 31. 2012.Lease

The property to be leased is located in ground floor with an area of Forty Square Meters (40 sq. m.)
of a three storey building located at Caneja Street comer Castin Street, Naval, Biliran owned by
RICARDO R. KHO (Lessor).

RICARDO R. KHO (Lessor) is to make available the area to be leased mentioned in the paragraph
before.

4. What are the obligations of the Lessor?


The obligations of the LESSOR is of the following:
1) To make the ground floor with an area of Forty Square Meters (40 sq. m.) of a three storey
building located at Caneja Street comer Castin Street, Naval, Biliran be made available for
lease to the LESSEE
2) The LESSOR shall see to it that the premises is in tenable condition. In the event certain
damage or destruction is caused by the occurrence of the natural events, immediate repair
or restoration shall be undertaken by the LESSOR ganting a moratorium or waive of rental
payment for the period of time needed for such repair or restoration.
3) The LESSOR warrants that the LESSEE shall have peaceful possession of leased premises
for the duration of term agreed upon except when the disturbance is caused by natural
calamities or acts outside LESSOR's control.
4) The LESSOR, except in alterations affected by the LESSEE, shall undertake, at his/its own
expense, all necessary repairs in order to keep the property suitable for the use to which it is
herein intended, including but not limited to, repairs involving water and electrical
connections, toilet and similar facilities and major and extraordinary repairs. In the event that
the leased premises cannot be utilized during the period of repair, the LESSOR grants a
moratorium or waiver of rental payment for such period.
5) INSPECTION OF PREMISES.The LESSOR or his/its representative, with the proper notice
to the LESSEE and at reasonable hour of any working day, shall be allowed entry to the
leased premises to conduct inspection for repairs or improvements. Subsequent access to
the leased premises shall be given to the authorized person/s who will undertake the repair
or improvements. The LESSEE may designate the time when such repair or improvement
will be undertaken in order to lessen inconvenience to the employees and clients, or to avoid
disruption of office work or activities.
6) REALTY TAX. The real state taxes and other payments imposed on the leased property
shall be for the exclusive account of the LESSOR.
7) TERMINATION. If termination ensues due to the destruction of the leased premises without
fault of the parties, the LESSOR shall return any of the advance rentals for the unexpired
portion of the term and the deposit. The LESSOR shall not be answerable or responsible for
any damage or injury to the properties or personalities of the LESSEE caused by the
destruction of the leased premises due to natural events or to any cause that is beyond the
LESSOR'S control.
Any party may terminate this Contract of Lease for any cause at any time before the
expiration of the term agreed upon by giving the other party a thirty (30) days written notice
of termination prior to the intended date without incurring liability as to damages, subject to
the terms and conditions set forth in the preceeding sub-paragraphs.
8) NON-WAIVER. The failure of the LESSOR or of the LESSEE to insist upon the strict
performance of any terms, conditions and covenants hereof shall not be deemed a
relinquishment or waiver of any subsequent breach of default of such terms and conditions
and covenants.
9) LITIGATION AND VENUE. In the event judicial relief against the guilty party is filed before
the regular courts, for the enforcement of thc terms and conditions in the contract, the guilty
party, in addition to any other damages that may be awarded by the court, agrees to pay ten
percent (10%) to the amount claimed but in no case less than tcn (10) thousand pcsos as
attorney's fees, aside from the costs of litigation and other expenses which the law entitles
the aggrieved party to recover. The parties agree that the venue of court action is in the
proper court of Tacloban City, Leyte.
10) DEPOSIT. The Security Deposit in the amount of TWELVE THOUSAND PESOS (P12,
000.00) shall be held and applied by the LESSOR to answer for any and all damages to the
Leased Property due to the fault and negligence of the LESSEE and as security for the due
observance and faithful performance by the LESSEE of each term, provision, covenant and
condition of this Contract. The Security Deposit shall be returned to the LESSEE, without
any interest thereon, within thirty (30) days after the LESSEE shall have completely and
satisfactorily vacated and delivered the Leased Property to the LESSOR, deducting
therefrom whatever amount/s the LESSEE may owe the LESSOR.
11) PARKING AND OTHER JOINT-USE AREAS. The LESSOR shall grant parking slots
reserved for the LESSEE for the term of this lease. Moreover, the LESSOR hereby grants
the LESSEE a non-exclusive privilege to use the parking areas and other portions of the
building dedicated to common use. The right to use said spaces by the LESSEE, its
employees and clients or customers is not an integral part of the premises and it may be
restricted or regulated by the LESSOR at its own discretion. Such use shall be subject to the
restrictions and regulations and such other conditions as may be promulgated from time to
time by the LESSOR.
The first obligation incumbent upon the lessor is to deliver the premises in tenable condition. In
the case damage or destruction is caused by the occurrence of the natural events, immediate
repair or restoration shall be undertaken by the LESSOR granting a moratorium or waive of
rental payment for the period of time needed for such repair or restoration. The lessor warrants
that the LESSEE shall have peaceful possession of premises for the duration of term agreed
upon except when the disturbance is caused by natural calamities or acts outside LESSOR's
control. For improvements passed by LESSEE, where portions or parts of the improvement
affect portions or parts of the structure, LESSOR will require necessary correction of the
submitted plans.

Finally, at the end of the lease, the lessor must return the deposit of TWELVE THOUSAND PESOS
(P12, 000.00) without any interest thereon, within thirty (30) days after the LESSEE shall have
completely and satisfactorily vacated and delivered the Leased Property to the LESSOR, deducting
therefrom whatever amount/s the LESSEE may owe the LESSOR.

In the case of violation by one of the parties of any of the terms and conditions set forth herein
results as a right or basis for the termination of this contract. If termination ensues due to the
destruction of the leased premises without fault of the parties, the LESSOR shall return any of the
advance rentals for the unexpired portion of the term and the deposit. The LESSOR shall not be
answerable or responsible for any damage caused by natural events or to any cause that is beyond
the LESSOR'S control. Any party may terminate the contract for any cause at any time before the
expiration of the term agreed upon by giving the other party a written notice of termination for thirty
(30) days prior to the intended date

5. What are the obligations of the Lessee?


The withholding tax shall be paid by the LESSEE who shall provide the LESSOR withholding tax
certificate.
1. LESSEE must not bring and store articles that are fire hazards, or will unduly cause the
occurrence of fire or explosions, such as explosives of any kind or type, pyrotechnic articles,
gasoline or flammable fluids, among others. When this condition is violated and results in
damage or destruction to the leased premises, the LESSEE shall be held responsible for
claims from all damages and any action against it for ordinance violation.
2. The LESSEE agrees to hold the LESSOR free and harmless from any and all claims,
responsibilities, or liabilities arising in connection with any injury or death within or about the
building while the same is in its possession and/or control except when the injury or death is
caused by the LESSOR'S or his/its representative's fault or negligence.
3. DEPOSIT. LESSEE must pay a security Deposit in the amount of TWELVE THOUSAND
PESOS (P12, 000.00) to the LESSOR. The security deposit shall be returned to LESSEE,
without any interest thereon, within thirty (30) days after the LESSEE shall have completely
and satisfactorily vacated and delivered the Leased Property to the LESSOR, deducting
therefrom whatever amount/s the LESSEE may owe the LESSOR.
4. FAILURE TO PAY MONTHLY RENTAL. The LESSEE must not be arrears in payment of rent
for a period of at least 2 months and must notify the LESSOR if property is closed for
business or unused for the same period because the latter may consider the premises
abandoned and the lease terminated without prior notice.
5. USE OF THE PREMISES. The leased area shall be used by the LESSEE for the purpose it
was intended (official place of business of the LESSEE's Naval Satellite Office), shall
maintain the same clean and sanitary and subject it to the uniformly applicable building rules
and regulations which the LESSOR may subsequently provide to all LESSEE's and/or
occupants with the objective of safeguarding this persons and personalities, the common
safety and welfare, and more importantly, fostering a desirable relationship among and
between the LESSEE's occupants and the building administrations.
6. IMPROVEMENTS. The LESSEE shall submit to the LESSOR the plans for its proposed
improvements within the subject area for review and approval. The LESSOR may require
any amendments thereof where correct tapping of electric service and other utilities is
considered necessary. The LESSEE may avail of the building electrician and handyman for
the purpose, with basic charges shouldered by it. Where portions or parts of the
improvement affect portions or parts of the structure, the LESSOR will require necessary
correction of the submitted plans. Any subsequent alteration, addition or further
improvements on the leased premises will require the submission of the plan and for the
approval of the LESSOR. The LESSEE reserves the right to remove the said improvements
provided that no material damage may be caused to the leased property or that material
damage be restored to its original structure; except that which may be caused by the lapse
of time, ordinary wear and tear or inevitable causes.
7. UTILITIES. The subject building will be provided with electric power and facilities. All electric
bills for the power used by the LESSEE shall be paid by it and the LESSOR shall be
rendered free from the non-payment or cut-off for non-payment by the LESSEE.
8. LIGHTS AND LIGHTING FIXTURES. The subject areas are provided with lights, lighting
fixtures with fluorescent tubes and diffusers. These LESSOR supplied gadgets will be
replaced when busted or damaged with cost shouldered by the LESSEE.
9. LAWS AND ORDINANCES. The LESSEE shall comply and abide with the ordinances of the
city regarding the use of the premises, comply with health regulations and secure permits or
license for its business operations.
10. SUBLEASE, TRANSFER OF RIGHTS. The transfer of rights of the LESSEE under this
contract and,/or the sublease of any part or portion of the leased premises shall not be made
unless a written notice to the LESSOR is given and approval of the latter is secured. Any
violation of this condition will be a basis for the termination of the contract.
11. TERMINATION. The LESSEE shall peacefully vacate the leased premises and retum the
same in the condition it was first entered into, save that what has been lost or impaired by
the lapse of time, ordinary wear and tear or inevitable causes' Damage or injury to the
leased premises caused by the removal of articles or improvements made by the LESSEE
shall be allowed by the LESSOR, without cost/expense to the former.
Any party may terminate the contract for any cause at any time before the expiration of the
term agreed upon by giving the other party a written notice of termination for thirty (30) days
prior to the intended date
12. DELAY IN VACATION OF THE PREMISES. Except as provided for in the immediately
preceding paragraph, if the premises is not vacated within the seven (7) day moving out
period allowed by the LESSOR, then the LESSEE shall be charged with the corresponding
daily rentals of the premises to be effected from the expiration of the said grace period up to
the date when the premises is totally vacated. The daily rental payment is without prejudice
to the claim for damages caused by the LESSEE'S delay in vacating the premises.
13. NON-WAIVER. The failure of the LESSOR or of the LESSEE to insist upon the strict
performance of any terms, conditions and covenants hereof shall not be deemed a
relinquishment or waiver of any subsequent breach of default of such terms and conditions
and covenants
14. LITIGATION AND VENUE. In the event judicial relief against the guilty party is filed before
the regular courts, for the enforcement of the terms and conditions in the contract, the guilty
party, in addition to any other damages that may be awarded by the court, agrees to pay ten
percent (10%) to the amount claimed but in no case less than ten (10) thousand pesos as
attorney's fees, aside from the costs of litigation and other expenses which the law entitles
the aggrieved party to recover. The parties agree that the venue of court action is in the
proper court of Tacloban City, Leyte.

The main obligation that is incumbent upon the lessee is to provide the (P12, 000.00) deposit, pay
the rent, and any charges that will arise from specified violations in the contract to the LESSOR.
Furthermore, the LESSEE must pay for withholding tax and provide LESSOR the withholding tax
certificate.

Upon the duration of the stay, LESSEE can only use the premises for which it was intended to and
to maintain the same clean and sanitary subject to the building rules and regulations. LESSEE must
not bring any hazardous articles that could cause fire or explosions or else, if such accidents
happen then LESSEE shall be held responsible for all damages. Improvement plans shall be
submitted to the LESSOR for review and approval. LESSEE may call building electrician and
handyman for the purpose but charges will be shouldered by LESSEE. There is also a right to
remove the improvements provided that no damage will be caused to the property; except those
caused by wear and tear, inevitable causes, and lapse of time. Utility bills and busted lights will be
paid by the LESSEE. Furthermore, LESSEE shall comply and abide with the ordinances of the city
regarding the use of the premises, comply with health regulations and secure permits or license for
its business operations. Any plans for sublease would require a written notice to the LESSOR.

Finally, at the end of the lease, the LESSEE must vacate the premises within seven days and return
the premises in the same condition it was first entered into or else LESSEE shall be charged with
the corresponding daily rentals of the premises to be affected when the grace period is up. They
must assume responsibility for rental damage other than normal wear and tear, unless they can
prove that they were not responsible for such damage. For termination of contract for anytime and
for any cause, there must be a written notice for thirty days prior to the intended date.

6. Are the following provisions present in the contract and are these provisions consistent
with the Civil Code provisions on lease:
a. Assignment;
In the Art. 1654. The lessor is obliged: (1) To deliver the object of the contract in such a condition as
to render it fit for the use intended; (2) To make on the same during the lease all the necessary
repairs in order to keep it suitable for the use to which it has been devoted, unless there is a
stipulation to the contrary; (3) To maintain the lessee in the peaceful and adequate enjoyment of the
lease for the entire duration of the contract.
While in Art. 1657. The lessee is obliged: (1) To pay the price of the lease according to the terms
stipulated;(2) To use the thing leased as a diligent father of a family, devoting it to the use stipulated;
and in the absence of stipulation, to that which may be inferred from the nature of the thing leased,
according to the custom of the place; (3) To pay expenses for the deed of lease.

These articles in the Civil Code have been complied with and are present in the contract of lease.

b. Sub-lease;
In the contract of lease, the terms given under sublease is the following:
SUBLEASE, TRANSFER OF RIGHTS. The transfer of rights of the LESSEE under this contract
and,/or the sublease of any part or portion of the leased premises shall not be made unless a
written notice to the LESSOR is given and approval of the latter is secured. Any violation of this
condition will be a basis for the termination of the contract.

According to the civil code on lease, there is no particular law stipulating the need of the LESSEE to
make a written notice to the LESSOR for a sublease/ transfer of rights. However, the law allows
LESSEES to go into subleases.

c. Rescission;
In the contract of lease above, it is clearly stated that termination is possible for destruction of the
leased premises without fault of the parties. The LESSOR shall return any of the advance rentals for
the unexpired portion of the term and the deposit of P12,000 The LESSOR shall not be answerable
or responsible for any damage or injury to the properties or personalities of the LESSEE caused by
the destruction of the leased premises due to natural events or to any cause that is beyond the
LESSOR'S control.

The condition stipulated in the contract is in accordance to the Civil Code because according to the
law, if the thing is totally destroyed by a fortuitous event, then the lease is extinguished and both
parties aren’t liable for the damages. If destruction is partial then the lessee can choose between
deduction or rent or a rescission of the lease (1655). Furthermore, if obligations set forth in the
following then the aggrieved party may ask for the rescission of the contract and indemnification for
damages, or only the latter, allowing the contract to remain in force.

d. Damages
The contract is in line with the law specifically where LESSEE is responsible for the damages that
he/she have caused but not if damage was caused by natural calamity. However, there have been
additions to the conditions related to damages amongst the parties.

According to the contract, should there be damages made by natural calamities, then LESSEE is
not liable but LESSOR must do an immediate repair or restoration granting a moratorium or waiver
of rental payment for the period of time needed for such repair. When damages on the leased
property are made by the LESSEE, then the latter would have to pay for cost of damages. If
termination due to destruction of leased premises is without the fault of both parties then the
LESSOR shall return any advance rentals to LESSEE and LESSOR shall not be liable to the
damages done to the personalities or properties of the LESSEE caused by natural events or to any
cause that is beyond the LESSOR’S control.

7. What is the provision on improvements? Is it the same as the Civil Code provision/s?
According to the case, the provision on improvements stated that LESSEE should submit to the
LESSOR the plans for its proposed improvements within the premises for review and approval. The
LESSOR may also require certain amendments which regards to the correct tapping of electric
service and other utilities necessary. The LESSEE may avail building electrician and handyman for
the improvements, with charges shouldered by LESSEE. Where improvements affect the structure,
the LESSOR will require necessary correction of the submitted plans. Any corrections on
improvements will require submission and approval of the LESSOR. The LESSEE has right to
remove said improvements so long as no material damage may be caused to the property or
material damage be restored to its original structure; except which may be caused by lapse of time,
wear and tear, or inevitable causes.
The provision on improvements as compared to the Civil Code provision is not alike because the
provisions are additional conditions stated by the LESSOR. In the Civil Code, it is only stated that if
lessee makes useful improvements which are suitable to the use for which the lease is intended,
without altering the form of the property leased, then the LESSOR upon termination of the lease
shall pay the LESSEE one-half of the value for improvements at that time. If the LESSOR refuses to
reimburse said amount, then LESSEE may remove improvements, even though LESSOR may
suffer damages.

In the provision, it wasn’t stated that any useful improvements by the LESSEE will be reimbursed by
the LESSOR.

8. If you are the lessee, what provisions do you think should be amended, modified, and/or
deleted in your contract?
If I were the lessee, I would want to modify the following conditions in the contract:
1) Instead of LESSEE shouldering all the amount to be spent in the improvements made in the
property, the LESSOR must also contribute to the improvements spent if LESSOR agrees to
let it remain in the property. According to the civil code, the LESSOR must pay half of what
was spent in the improvements. This way, it would be fair to both parties, because both
made use of the said improvements. It would be unfair if only the LESSEE pays for the
improvements even if such improvements were to remain even after the termination of the
contract of lease.
2) “The monthly lease rate is TWELVE THOUSAND PESOS (P12,000.00) inclusive of all
government required fees and taxes and maintenance cost, etc…” Maintenance cost should
be clarified so that LESSEE will know what are inclusive in the maintenance costs because
maintenance such as light fixtures will be separately shouldered by the LESSEE as stated in
the conditions under LIGHTS AND LIGHTING FIXTURES.

B. General Questions
1. What is the difference between a lease with indeterminate time and implied new lease?
Lease with indeterminate time means that no time was given in the contract to show how long the
lessee is to lease the premises.

If the period for lease has not been fixed, it is understood to be from year to year, if rent agreed
upon is annual from month to month; if it is monthly; from week to week, if rent is weekly; and from
day to day, if the rent is to be paid daily. Even though rent is paid monthly, and not period for the
lease has been set, then the courts may fix a longer term for the lease after the lessee has occupied
the premises for over one year. If rent is paid weekly, the court may also determine a longer period
after lessee has been in possession of premises for over six months. In the case of daily rent, the
courts may fix a longer period if the lessee has stayed for over a month.

There is an implied new lease when at the end of the contract (month to month, week to week, etc),
lessee continues to enjoy 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. An implied new lease has
the following requisites:
a) Term of the original contract of lease has expired
b) The lessor has not given the lessee a notice to vacate
c) The lessee continued enjoying the thing leased for fifteen days with the acquiescence of the
lessor
In conclusion, the main difference between the two is that implied new lease gives the lessee a
chance to stay in the premises so long as it is with the lessor’s acceptance and that the following
requisites above is followed while lease with indeterminate period, is a lease without a specific
period from when to when the lessee would be leasing the premises.

2. What is the difference between lease and the other contracts (give an example of each):

Contract of Simple Loan Usufruct Commodatum Deposit


sale

Concept By the contract A person who Right to enjoy Commodatum is In a deposit, a


of sale seller receives a loan the property of loan for use of person receives
obligates himself of money or any another with the the thing loaned a thing
to transfer the other fungible but not its fruits.
obligation of belonging to
ownership and thing acquires
to deliver a the ownership preserving its another, with the
determinate thereof, and is form and obligation of
thing, and the bound to pay the substance safely keeping it
buyer to pay creditor an equal and of returning
therefore a price amount of the the same.
certain in money same kind and
or its equivalent. quality (1953)
(1458)

Purpose of Seller or vendor, Return of the Enjoy the Use of the thing Safekeeping,
Contract obligates himself equivalent only property and given but not its mere custody
to deliver and not the preserving its fruits
something to the identical thing form and
other party who because the substance
is the buyer or borrower
vendee who is acquires
bound to pay a ownership
sum of money or thereof
its equivalent.

Object of -Must be a Money or other -May be real or Movable or Movable or


Contract determinate fungible thing personal immovable immovable
thing property property property
-Must be licit -May be sterile
-Must be within or productive
commerce of -May be created
men over a right

Cause of Price certain in May be Enjoyment until Liberality of the Liberality of the
Contract money or its gratuitous or time stipulated bailor since it is depositary if
equivalent with a stipulation essentially gratuitous or
to pay interest gratuitous payment of
compensation if
onerous

Parties Buyer Lender= creditor Usufructuary Lendor= Bailor Depositor


Seller Borrower= Usufruct Borrower= Depositary
debtor Bailee

Requirement Seller must have Creditor must The thing under Bailor need not Depositor is not
that the party the right of have the usufruct is under be the owner of required to be
delivering the ownership to the capacity to the ownership of the thing loaned the owner of the
thing be the thing being transfer the person who thing deposited
owner of the transferred. ownership of the owns it and not since deposit
thing thing to the to the does not transfer
debtor usufructuary. ownership.
Depositary
cannot demand
that the
depositor prove
his ownership of
the thing
deposited.

Ownership Ownership ownership The usufructuary bailor retains the Depositor is not
passes to the passes to the does not own ownership of the required to be
vendee. borrower the property thing loaned; the owner of the
thing deposited.
No transfer of
ownership to the
depositary.

Obligation of The buyer must -Pay the creditor Usufructuary has Bailee is obliged Depositary is
the person in pay the price an equal amount the right to use to pay for obliged to keep
possession of and take the of the same kind the property but ordinary the thing safe
the thing delivery of the and quality cannot damage expenses for the and to return it
thing. -Pay interest, if or destroy it, or use and when required to
stipulated in dispose of the preservation of the depositor.
writing property. the thing loaned
-bailee is liable
for the loss of
the thing, even if
it should be
through a
fortuitous event

Obligations of -The seller must -Deliver to Before entering Bailor cannot -obligation to
the person who transfer, deliver, lender the thing the enjoyment of demand the pay expenses of
delivered the warrant the to be loaned. the property return of the preservation
thing thing, and should make an thing loaned till -obligation to
protect the thing inventory of all after the pay losses
until its delivery the property and expiration of the suffered due to
to the vendee. to give security period the character of
to fulfill stipulated, or the thing
obligations after the deposited,
accomplishment
of the use for
which the
commodatum
has been
constituted.
However, if in
the meantime,
he should have
urgent need of
the thing, he
may demand its
return or
temporary use.

Example Contract of sale *See attached *See attached Ex: Ex: direct
for a second photo photo Commodatum in deposit contract
hand Mitsubishi healthcare
Mirage G4 environment
*See attached
sedan with a
photo
plate number of *See attached
ABC 123 that photo
costs 950,000
pesos.
Simple Loan
Ex: direct deposit contract

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