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The process of entering into a Lease Agreement can be time
consuming and complex. This process can be affected by a number of
factors which can result in the parties not constructing a formal
written agreement. This issue is reflected in the case of
Doueihi v Construction Technologies Australia Pty Ltd [2016]
NSWCA 105 where an "informal tenant" was able to
successfully secure a Lease through the Doctrine of Equitable
Estoppel.
What is Equitable Estoppel?
The Doctrine of Equitable Estoppel restricts one party from
making a legal claim that contradicts their prior actions or
claims.
How does Equitable Estoppel apply?
Time and time again parties enter into contracts which are not
legally binding. This decision can be a result of the parties
assuming that for example, living with someone in a domestic
relationship will surely secure their agreement. This circumstance
was evident in the Doueihi v Construction Technologies
Australia Pty Ltd case. Construction Technologies Australia
Pty Ltd's major shareholder, Hogan, assumed that a legally
binding agreement was not necessary, but rather he relied on his
personal relationship with the appellant to the agreement.
However, this personal relationship had come to an end, causing
significant issues when Hogan sought to legally secure the
agreement and failed. Additionally, Construction Technologies
Australia had incurred enormous expenses fitting out the premises
in question, having done so on the presumption of a legal interest
in the premises.
Construction Technologies Australia ended up with a decision in
their favour in this case. Ultimately the court found that they
would be able to secure the Lease based on the ability to prove
that there was a presumed legal relationship that would exist.
Hence, Doueihi was stopped from denying Construction
Technologies Australia's legal interest in the premises.
What does this mean for you?
This case is a clear reflection of the issues that can arise
within the formation and execution of a lease agreement, and
contracts in general.
The costs of drafting a lease agreement or a contract are minor
compared to the costs of the litigation should disputes arise.
Landlords should be sure to enter quality lease agreements with
their tenants and moreover, ensure that any pre-existing informal
agreements are put into writing.
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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The tenant's decision to enter into a new lease was based on its own misunderstanding of the landlord's representations.
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