A tenant terminated the lease agreement for an office she rented before the end of the stipulated period, in light of severe defects discovered, including recurring leaks and strong odors originating from a butcher shop located above the office (also owned by the landlord).
The Court determined that the lease agreement is terminated. In a case of a fundamental breach of contract, the injured party is entitled to terminate the contract. In the absence of a definition in the contract, a fundamental breach exists when a reasonable person would not have entered into the contract had he foreseen the breach and its consequences. Defects in the leased property will be considered a fundamental breach if they cause a substantial interference to the ordinary or agreed use of the leased property, provided that the landlord received a demand for their repair and did not repair them within a reasonable time, or if they are so severe that they undermine the business basis of the contract. Here, there were many defects, including leaks and odors that penetrated the office, which returned and recurred despite promises and attempts at repair, and which prevented the office from operating reasonably, especially one required to receive clients and house employees during the day. A reasonable person would not have entered into such an agreement if he had known that he would suffer from these defects. Therefore, the contract was cancelled.