You have probably heard some horror stories about people not
reading the complete terms of a lease and ending up in a drawn out
legal battle which costs more money than it is worth. Commercial
leases are no different – you can be locked into a lease
without even signing any paperwork.
Here's a case study about Priolo Corporation Pty Ltd
(Priolo) who learnt this lesson the hard way.
Commercial property owner, Priolo, leased a property to Vantage
Systems Pty Ltd (Vantage), which included six car parking
With the original lease due to expire, discussions began about a
new lease and Priolo emailed a proposal to Vantage, later revising
it for Vantage to consider.
The revised proposal covered all typical lease details but
mistakenly set the car parking licence fee at $375 per car space
per annum, instead of $375 per month for each space. Vantage
noticed the mistake but didn't draw it to anybody's
This in itself is a warning to lawyers and clients alike –
make sure all details are correct! When situations like this arise
you can't rely on the ethics of the other party, especially if
the lease (as in this instance) works in their favour.
In this case, there was a subsequent dispute about whether or
not the two companies were bound under the revised proposal.
The Court of Appeal held that Priolo and Vantage had intended to
be bound as soon as the terms of the revised proposal were agreed
This case is evidence that dealings and negotiations around
commercial leasing have the potential to bind you. If the
requirements of a valid contract are satisfied then the parties
will be bound - even if formal documents have not been prepared or
signed. As a lawyer, of course I recommend that you sign and
exchange contracts in person, however it's not always possible
for some parties and email may be the only option. If this is the
case, you should document all correspondence and read over all
material provided by the other party.
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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Do not depart from the contract terms, or encourage the other party to do so, unless you plan to alter the contract.
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