Assessment No.

7 - Essential Elements of Contracts

Read Carefully.

On May 30, 2002 Seri Product Co., as lessee, entered into a contract of lease with Jo Ri as lessor,
over a parcel of land located in C4 Boulevard, Navotas City for a period of ten (10) years. The contract of
lease provides, among other:

Renewal Clause:

“The LESSEE has the option to renew its leasehold interest in the leased premises for an additional ten
(10) years at the expiration of the term of the lease contract under such terms and conditions as may be
agreed upon by the parties provided that the LESSEE shall give the LESSOR, prior to the expiration of the
term of this Lease, 90 days notice, in writing, of its desire to procure such new Lease.”

On January 15, 2012, Seri Products manifested its intention to renew the lease contracts. One month
later, Seri Products Co. submitted to Jo Ri its proposed terms for the renewal of the lease. Jo Ri replied
with a counter offer which included, among others, lessening the period of the lease from ten years to
five years and increase in the rental fee and escalation rate per year.

On March 16, 2012, Seri Products Co. wrote a letter urging Jo Ri to adhere to the ten-year renewal
period under the original lease contracts and manifested its willingness to discuss the increase of rental
fee and the escalation rate per year. However, Jo Ri stood firm in the lessening of the lease contract to
five years only.

On April 21, 2012, a meeting was held between the representatives of Seri Products Co. and Jo Ri,
however no agreement was reached on the terms and conditions of the contract. On May 1, 2012, Jo Ri
formally sent a notice of non-renewal of the lease contracts.

On May 16, 2012, Seri Products Co. filed a complaint for specific performance against Jo Ri before the
RTC in Navotas City. Seri Products Co. prayed, among others, to compel Jo Ri to execute a new lease
contract for ten years pursuant to its option under Renewal Clause of the original contracts of lease.

Resolve the following issues:

1. Seri Products Co. claimed that under the renewal clause, the original lease contract is
automatically renewed for another ten years provided they will give the Lessor a notice 90 days before
the expiration of the lease contract of their intention to renew. Is Seri Products Co. correct? Decide the
issue with supporting law and/or jurisprudence.
2. Seri Products Co. claimed that upon signing the original lease contract, Jo Ri already manifested its
consent to renew the contract for another ten years. Is this contention correct? Decide the issue with
supporting law and/or jurisprudence.

3. Seri Products Co. claimed that the Renewal Clause was made in favor of the Lessee only and that
only the Lessee has the option to renew the contract. Is this contention correct? Decide the issue with
supporting law and/or jurisprudence.

For Case Digest:

HEIRS OF DR. MARIO S. INTAC and ANGELINA MENDOZA-INTAC, vs. COURT OF APPEALS and SPOUSES
MARCELO ROY, JR. and JOSEFINA MENDOZA-ROY and SPOUSES DOMINADOR LOZADA and MARTINA
MENDOZA-LOZADA, G.R. No. 173211, October 11, 2012

TRADERS ROYAL BANK v. CUISON LUMBER CO., INC., and JOSEFA JERODIAS VDA. DE CUISON, G.R. NO.
174286, June 5, 2009