Inna is the owner of a particular vacant commercial lot in San Fernando, La Union. On January 1, 2026, Inna and Lynel entered into an oral five-year contract of lease involving the said property for PHP 50,000.00 per month. The parties stipulated, among others, that Lynel “SHALL USE THE PROPERTY AS A PARKING LOT AND SHALL NOT INTRODUCE ANY IMPROVEMENT THEREON WITHIN A PERIOD OF TWO YEARS FROM JANUARY 1, 2026.” On July 1, 2026, Lynel erected a two-story commercial building on the property. Upon discovery thereof, Inna demanded that Lynel demolish the building and vacate the premises. The demand fell on deaf ears. On August 5, 2026, Inna filed an action for damages against Lynel for breach of contract. Lynel argued that her contract with Inna is not in writing, and thus, unenforceable by action. Is Lynel correct? Explain.
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No, Lynel is not correct. Under Article 1403(2)(e) of the Civil Code, an agreement for the leasing of real property for a longer period than one year is covered by the Statute of Frauds. However, settled jurisprudence dictates that the
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Quick check
Under Article 1403(2)(e) of the Civil Code, what type of real property lease agreement falls within the coverage of the Statute of Frauds?
Article 1403(2)(e) of the Civil Code explicitly requires an agreement for the leasing of real property for a period longer than one year to be in writing to be enforceable while purely executory.
To what category of contracts does the Statute of Frauds exclusively apply under settled jurisprudence?
Settled jurisprudence dictates that the Statute of Frauds applies exclusively to purely executory contracts and does not apply to contracts that have been partially or totally executed.
Why was the oral five-year lease contract between Inna and Lynel taken out of the operation of the Statute of Frauds?
Taking possession of the commercial lot and occupying the premises under the oral agreement constituted partial performance, removing the lease from the Statute of Frauds.
What is the legal effect of partial performance on an oral lease contract that would otherwise be covered by the Statute of Frauds?
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What remedy is available to a lessor under civil law if a lessee breaches a negative covenant prohibiting the introduction of improvements on the leased land?
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Learn more about these topics
1. Statute of Frauds
Under Article 1403(2)(e) of the Civil Code, a lease of real property for over one year falls under the Statute of Frauds. However, the Statute applies exclusively to executory contracts where no performance has occurred. Under the doctrine of partial performance, when a lessee takes possession and occupies the premises, the oral agreement is removed from the Statute of Frauds. Partial execution renders the oral lease enforceable, preventing parties from using formal requirements to perpetuate fraud.
2. Negative Obligations
Under Article 1168 of the Civil Code, when an obligation consists in not doing and the obligor performs the forbidden act, it shall be undone at their expense. Furthermore, under Article 1170, contravention of the tenor of an obligation creates liability for damages. When a lessee breaches a negative covenant by erecting unauthorized structures, the lessor may demand the demolition of the improvements at the lessee's cost and recover damages for breach of contract.
3. Oral Lease Validity
Under Philippine civil law, an oral real property lease exceeding one year is valid, as special form is not required for contract validity. Unenforceability under the Statute of Frauds does not render a contract void, but merely bars court action while executory. Once partially performed, the oral contract becomes fully enforceable. Consequently, a party who has accepted contractual benefits cannot evade liability for a subsequent breach by pleading the absence of a written instrument.