Unit 5: Contract of Lease
5.1 Meaning and Nature of Lease Contract
A contract of lease is one by which the lessor grants the lessee the right to use and enjoy property (movable or immovable) for a certain term, in return for rent or other consideration. What passes is not ownership but a possessory interest for the term — the leasehold. In Nepal, the Muluki Civil Code 2074, Part 5, Chapter 12 (Contracts of Lease) governs the contract’s face (chapter verified from the Code’s official table of contents), while the landlord-and-tenant relationship’s protective rules live in the Part 4, Chapter 9 (House Rent) discipline of the same Code — the Code’s own division of the terrain.
Lease’s neighbours (the three contrasts):
| Point | Lease | Licence | Mortgage |
|—|—|—|—|
| What passes | Exclusive possession for a term | A bare permission to use (no interest in land) | A security interest — possession stays with the mortgagor unless the form provides otherwise |
| Consideration | Rent | Fee/charge | The secured debt |
| Transfer of interest | Yes (a term’s grant) | No | Yes — but defeasible on redemption (Property Law, Semester 3) |
5.2 Essential Elements and Formation
- Parties competent to contract (the general law — Law of Contract-I, Unit 3).
- A determinate property — the demised premises (land, house, flat, vehicle, equipment).
- A term — fixed, periodic or renewable; a lease must have a beginning and an end (an endless “lease” is a transfer in substance).
- Rent or other consideration — the price of enjoyment.
- Delivery of possession to the lessee (the leasehold’s birth).
- Formalities as the law requires: in Nepali practice, written lease deeds for immovables — and registration where the transaction’s nature demands it (the registration law’s discipline); long-term leases affecting land commonly pass through the offices’ documentation route.
5.3 Rights and Duties of Lessor and Lessee
Lessor — duties: to deliver possession at the term’s start; to disclose latent material defects
This is a preview. The complete Law of Contract-II notes — full unit, Exam Focus box and model questions — are in the PDF / full version. Get the complete notes →