Which case won?

casea
The case for the landlord
  • The tenant was very familiar with the premises and had dealt with the agent for some years so there was a level of trust between us during the negotiations.
  • After the original lease expired, the tenant was not trying to locate alternative premises nor were we trying to find an alternative tenant.
  • The revised proposal contained all the essential terms legally necessary to create a valid lease.
  • The email exchanges show that both parties intended to be immediately bound by the terms of the revised proposal as soon as the tenant accepted them, with those terms to be substituted by a formal lease in due course.
  • When the tenant accepted the revised proposal, a binding lease agreement was therefore created and the tenant should pay us damages for its breach of that lease.
caseb
The case for the tenant
  • The licence fee payable for use of the six car bays and the “make good” clause were essential terms of any lease and were never agreed between the parties. There had been no “meeting of the minds” on these important items.
  • Indeed, we would never have accepted the revised proposal if it had specified the licence fees later contained in the draft lease documents and if it had contained no option to renew.
  • It was the intention of the parties that a concluded bargain on the new lease would not be reached unless and until formal documents were executed.
  • Formal documents were never executed and we are not in breach of any new lease.

So, which case won?

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Case A Case B

Case A won. You were right!

How people voted
a36%
b64%

Expert commentary on the court's decision

Nathan HeardManaging Director
"This case provides a timely caution about the dangers of email negotiations. While emails are often casual and informal, that doesn’t mean they can’t create legal relationships. If you don’t intend to be legally bound until a later stage, you need to state that clearly from the outset."
What was the intent of the parties

In the case Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21, the court had to determine what the intention of the parties was at the time they exchanged emails about the revised proposal. As stated by Buss JA: “The relevant intention is intention to contract, and not what the parties intended by the terms of the alleged concluded and binding agreement.”

Identifying intent of the parties requires an objective assessment

His Honour set out the relevant legal principles, as articulated by the High Court in Masters v Cameron (1954) 91 CLR 353 and developed in subsequent case law, including that:

  • The search for the ‘intention to create contractual relations’ requires an objective assessment of the state of affairs between the parties rather than an assessment of the subjective intention of each party; and
  • The subject matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances may be taken into account in determining whether a completed and binding agreement has been made.
The facts and circumstances of each case are different

In relation to the facts and circumstances of this case, the court found that:

  • Vantage Systems Pty Ltd (Vantage) had been very familiar with the premises and had dealt with the agent for some years, so there was a level of trust between the parties during the negotiations conducive to an intention to create a further legal relationship.
  • After the original lease had expired, Vantage was not trying to locate alternative premises nor was Priolo Corporation Pty Ltd (Priolo) trying to find an alternative tenant. Again, this was indicative that the parties intended to create legal relations.
  • The revised proposal contained all the essential terms legally necessary to create a valid lease. The terms relating to the car bay licence fees and the “make good” clause were not matters of legal or commercial significance.
  • The revised proposal did not involve Priolo or Vantage accepting any terms that were materially more onerous or materially less advantageous, from a legal or commercial perspective, than those contained in the original lease.
Landlord successful; parties intended to contract

Ultimately the court determined that, on an objective assessment, and after having regard to all relevant facts and circumstances, both Priolo and Vantage were willing to and did bind themselves to a new lease on the terms set out in the revised proposal. The subsequent negotiations, dealings and communications between the parties did not destroy the earlier concluded and binding agreement between them.

How can you avoid this result when negotiating a deal or transaction?

This case provides a timely caution about the dangers of email negotiations. While emails are often considered a casual and informal form of communication, that doesn’t mean they can’t create legal relationships. The court will examine all communications between parties to a transaction and make an objective assessment as to whether and when they intended to be legally bound.

If you don’t intend to be legally bound until formal documents are executed, you should state that clearly from the outset and reiterate it throughout any negotiations.

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