Can a lease become binding before both parties sign the
A recent decision in the Supreme Court of NSW (Wayne Edward
John Streat v Fantastic Holdings (2011)) illustrates the fact
that a lease can become binding even when only one of the has
signed the document.
In this case, the lessor and lessee had negotiated a new lease
over the course of a few months. Both parties finally reached an
agreement, culminating in the lessee signing the lease and
forwarding it to the lessor for execution. However, the lessor
changed his mind about entering into the lease and refused to sign
the document, leaving the lessee to seek an order from the court
forcing the lessor to sign the lease.
The Court subsequently ordered that the parties had already
entered into a binding agreement, and that the execution by the
lessor was inevitable and a mere formality.
In coming to this conclusion, the Court looked at the
negotiations and the intentions of the parties, and decided that
the parties agreed to bind themselves on agreement of the
commercial terms of the lease. There was nothing else to do aside
from signing the document, and the lessee was therefore entitled to
an order forcing the lessor to sign the lease.
This decision by the Supreme Court highlights the need for
parties to be aware that agreements can become binding
before execution by both parties. If a lease is
negotiated and agreed upon, one party cannot simply change their
mind and decide not to go ahead with the lease. If they try to do
so, it is probable that a Court will hold that a binding agreement
has already come into place.
Given this precedent, it is critical that you understand exactly
what you are agreeing to during your lease negotiations and the
impact it might have on your business in the future. Expert legal
advice can help you to see the bigger picture and avoid
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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