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  • The NSW Court of Appeal has applied established principles in finding that no new agreement arose between a landlord and tenant, despite significant discussions about the possibility of a new lease.
  • Among other things, the classes of arrangement described in Masters v Cameron remain important for analysis. In particular, a court will consider whether communications between the parties, objectively construed, indicate an intention to be immediately bound by an arrangement between them.

When can commercial parties who are involved in negotiations be said to have reached a binding contract? This question frequently arises in business dealings, especially where one party makes an offer or proposal to the other party, but significant terms remain unresolved. A recent NSW Court of Appeal decision, OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120, is the latest in a long line of cases on this point.

Factual background

The appellant, OXS, was the lessee of premises at The Rocks, where it operated a restaurant. The respondent to the appeal, the Sydney Harbour Foreshore Authority (SHFA), was a NSW public authority and was the owner and lessor of the premises. There was a lease between the parties that was due to expire in 2014. In January 2011, OXS requested an extension of seven years to its lease. In February 2011, SHFA sent a letter (‘February letter’) to OXS stating that it was ‘prepared to offer you a new 10-year lease commencing on 1 July 2011 on commercial terms at the prevailing market rate’, subject to OXS fulfilling certain conditions, including the lodgement of a development application. OXS responded shortly afterwards, purporting to ‘accept’ the offer.

Subsequently, SHFA received advice that its February letter was a proposal, not a binding agreement. The Minister noted the advice. SHFA subsequently withdrew its offer in writing in September 2011, stating that the Minister had indicated he would not consent to the proposed lease. OXS responded in writing and protested that there was an agreement for lease and that the parties were bound. Various other correspondences occurred over the next two years.

Finally, in December 2013, SHFA informed OXS that the current lease would not be renewed and would expire, as scheduled, in June 2014.

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