Legal Updates

Non-receipt of building management agreement for review in a commercial lease may indicate that no binding agreement was made

September 28, 2017

A lessor contended that prospective lessees of an office suddenly withdrew from the agreement after an oral commitment was made.
The Court rejected the claim and held that when it comes to an oral agreement it is necessary to prove with sufficient evidence that all the elements of a binding contract exist, such as intent and definiteness of terms. In this case it was proved that there was no basic agreement between the parties regarding the commencement date of the lease and the potential lessees did not receive the management agreement for review. This is not a technical matter because the management agreement and the liabilities toward the management company is a significant and important element in the engagement of each lessee in an office building, and the fact that the lessees did not receive the management agreement (nor did they know the management costs or the terms of the management agreement) indicates lack of definiteness of essential terms and lack of intent to create legal relations which indicates preliminary negotiations only.