Q Sunlight looked to terminate the lease because Hugo had broken the condition by living in the second floor unit. Home, - Why Sunlight terminate the lease 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 - Answer: Sunlight Pty Ltd is not correct. By terminating the lease contract it will be violating an essential term of the lease contract. This term is that if Hugo signed a new lease, it would allow Hugo to live in the unit. In the case of Ellul and Ellul v. Oakes (1972), the Supreme Court of South Australia held that if any written or oral statement, made before the signing of a contract or during the signing of a contract, is intended to be promissory in nature then that statement is a Term of the contract. The Court in its judgment ruled that violation of a Term of contract is breach of contract. The Court also clarified when a statement is promissory in nature. The Court said that any written or oral statement that is made by one party with the purpose of inducing the other party to enter into the contract is promissory in nature. In this case it is very clear that Sunlight Pty Ltd made the promise to Hugo that it will allow him to live in unit above the shop in order to induce him to sign the lease contract. So this statement is promissory in nature. Violating it will mean that Sunlight is violating a term of the contract. It will be in breach of contract. It will have to pay compensatory damages to Hugo for this breach of contract. One can argue that statute of fraud says that lease contracts of more than a year should have all their terms in written form. The promise made to Hugo regarding allowing him to live in the unit above the shop is not in written form. On the other hand, the condition that the premise will only be allowed for business purpose is written in the lease contract. The essential purpose of statute of fraud is to prevent frauds. Sunlight will be wrong to use the statute of fraud for doing the fraud over Hugo by violating its promise to allow him to live in the unit above the shop if he signed the lease. Related: Explain the meanings and scope of Private Law Why Sunlight terminate the lease Is their company insolvent? Action against the company for unpaid wages
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