Is Sunlight Pty Ltd correct? Explain your answer with proper legal basis and authorities

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Question - Hugo Long rented ground floor shop premises for his takeaway store from Sunlight Pty Ltd. He lived in a unit on the second floor of the property. When the lease expired and a new lease was being negotiated, Sunlight sought to include a condition that the premises could only be used for business purposes. Hugo explained that he wanted to continue living in the second floor unit since it was convenient for him and he would not renew the lease if this was refused. Sunlight advised that if Hugo signs a new lease, which includes the condition regarding its exclusive business use, they would allow him to live in the unit. Assured by this promise, Hugo signed a 2-year lease extension. He would never have signed the extension if he was not allowed to live in the unit and would have rented elsewhere.

After eight months, Sunlight Pty Ltd got a call from a local developer about buying the entire property (shop and unit) but required it to be vacant. Sunlight looked to terminate the lease because Hugo had broken the condition by living in the second floor unit. Is Sunlight Pty Ltd correct? Explain your answer with proper legal basis and authorities.

Answer -

In the given case scenario, Sunlight Pty Ltd has broken its' promise made to Hugo Long to let him live on the second floor of the property. However, it was also an act of negligence on behalf of Hugo Long to not take a written signed document or including the term of living on the second floor in the new rental lease agreement. Oral promise not abiding by law is not enforceable in the court of law. So, considering this scenario, Sunlight Pty Ltd is right as they have complied with the terms of the contract. The terms of the contract signed by Hugo Long clearly stated the use of the premises exclusively for business purposes only.

As per contract law, there are two types of contracts, expressed contracts, wherein there is an oral and written documented proof signed by both the parties to the agreement containing all the terms and conditions of the contract, and implied contracts that are not specifically stated or documented in writing, but with the custom usage, or by statue, or by prior dealing or by court, they are considered to be valid contracts. There also are misleading contracts wherein the intention is to deceive the other party. In this case, the terms of the contract were explicit and should have been adhered to. An oral promise in contradiction to the written document shall not be considered valid in this scenario. A lease agreement is the primary document of a lease contract between the lessor and lessee.

This agreement is signed by both the parties, that is, lessor and lessee, which acts as the primary document that binds both the parties to the contract. In this scenario, the lease agreement clearly stated exclusive use of the property for business purposes only, and hence Hugo Long should have not believed on the oral promise made by Sunlight Pty Ltd and should have exercised care, diligence while entering into the contract. Because of negligence on behalf of Hugo Long, he will now not be able to claim any damages for the harm caused to him. Sunlight Pty ltd will be successful in the termination of the contract because of not fulfilling of certain terms of the lease agreement as signed by both the parties to the contract.

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