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SCB101 Laws

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SCB101 Laws

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Course Code: SCB101
University: University Of Canberra

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Country: Australia


a) Coronet Casino operates on a recently redeveloped area of Sydney Harbour.When Coronet vacated its previous premises 2 years ago, it leased the premisesvia a commercial lease, to a hotel company called Loire for a term of 2 years. It was a term of the lease that Loire would undertake refurbishment of the building at its own cost. This amounted to several hundred thousand dollars. There was no right of renewal for a further term in the lease but Sophie who was negotiating the lease on behalf of Coronet said, “You don’t need to worry, it is in our interest for you to be operating this hotel. We are in this for the long haul. You will be looked after at renewal time.
You are employed in Coronet’s property management office. Sophie seeks your advice. She tells you that Loire has requested a renewal of the lease for a further 2 year term but that Coronet does not want to renew the lease as it has other plans for the building. Advise Sophie whether or not Coronet is legally entitled to refuse to renew the lease. Give reasons and provide legal authority for your advice.Consider an alternative scenario where the lease to Loire contained a right of renewal for a term of 2 years subject to compliance with the lease conditions. One of those conditions was that Coronet would accommodate their high rollers (gamblers who bring a minimum $50,000 to the table) and other corporate guests in the Loire hotel for a minimum of 20 nights per month. Three months into the term Loire complained that Coronet was not booking the minimum number of nights agreed. Loire settled the matter by deducting the shortfall from the rent due for the 4th month. Coronet had not agreed to this deduction but did not raise any issues at the time.


Question 1
Whether Sophie can stop Coronet Casino from legally refusing the renewal of lease based on the statement made while the original lease was being negotiated, or not?
A collateral contract can be defined as a separate contract which runs parallel to the original contract. In general, it is a single term contract in which the agreement terms are based on contract. Lord Moulton, in Heilbut Symons & Co v Buckleton provided that collateral contract is such promise which fails to be a part of the main contract and is enforceable through a collateral contract being drawn. This contract is evidenced on the basis of principle and authority and the consideration is made in the main contract or in some other contract. So, the collateral contract is a complement to the main contract and at the same time, has independent existence and its status or character is not doubted for its legal validity.
Promissory estoppel is another key concept under the contract law which stops a person from going back on the promise which had been made by the promisor and where the promisee relies upon such promise in such a manner that a subsequent withdrawal of this promise would be in detriment to the person relying upon such promise. In such cases, the promise is applied even when a formal consideration is absent. This concept was revived through the obiter statement made in Central London Property Trust Ltd v High Trees Ltd by Denning J, where the defendant would be made liable had they claimed the reduced rent for the promised period.
A key case which revolves around these two concepts is the recent case of Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd. This case covers a crucial decision regarding the promissory estoppel and collateral contracts based on pre-contractual negotiations and a possible defence which can be cited using these two concepts. In this case also, a statement was made regarding the tenant being “looked after at renewal time” by the Crown when the initial five year period lease was being offered. The High Court in this case stated that the statement which was made by the Crown did not give rise to a collateral statement, in addition to the estoppel claim being invalid. The reason for this was the requirement for the representation made to be clear, precise and unambiguous. This statement was deemed as nothing more than “vaguely encouraging” which led to the tenant not being entitled to claim damages from the Crown.
In this case, Sophie can claim that a collateral contract had been formed as the promise was made during the pre-negotiations of the original lease, where she was promised to be looked after when the renewal period fell due. This was a term incidental to the main contract but not covered under the main contract, thus making it a collateral contract as per Heilbut Symons & Co v Buckleton. Applying the promissory estoppel, if Coronet Casino is not stopped from going back on their promise, it would be unfair on Sophie, so Coronet Casino must be stopped using this concept as per the case of Central London Property Trust Ltd v High Trees Ltd.
However, this claim of Sophie would fail due to similarity between her case and the case of Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd. As was held in this case by the High Court, the term “would be looked after at the renewal time” is vague and unclear as it is nothing more than “vaguely encouraging”.
To conclude, the claims of Sophie would not succeed against Coronet Casino due to the unclear promise, which cancels out the applicability of collateral contract and promissory estoppel. And so, Coronet Casino cannot be stopped from legally refusing the renewal of lease.
Question 2
Whether Sophie can stop Coronet Casino from legally refusing the renewal of lease based on the terms and consideration revolving around the case study, or not?
A contract is a promise to fulfil the obligations covered under the terms, where one party is to pay the consideration amount and the other party is to do the task as per the contract. The formation of any contract requires certain key components, included in which are offer, acceptance, clarity regarding terms of the contract, capacity, consideration and intention. Once an offer is made, it is to be accepted by the other party. Felthouse v Bindley cannot be deemed as an acceptance to a particular offer and the same has to be accepted clearly.
The terms of the contract have to be followed. In case the same is not done, it could lead to the contract being terminated as a result of the breach of contract. In simple terms, when one of the parties to contract fails to fulfil the terms on which the contract was drawn, the contract is deemed to have been breached. When a condition stated under a contract is breached, the aggrieved party gets the right to terminate the contract or can apply for damages. The other remedies which are available for the breach of contract include specific performance, rescission of contract or injunction. An injunction is to be sought when a contractual right is being infringed. Damages are awarded in such cases where the person who was harmed was required to be put in a place where they had been in case the contract had been performed as per Addis v Gramophone. And where the damages are not an adequate remedy, the court may ask for specific performance of the terms of the contract.
In the given case study, one of the terms is for Coronet to bring high rollers for Sophie for a minimum 20 nights in every month. However, this term was not fulfilled by Coronet. This allows Sophie to raise a claim of breach of contract by Coronet and claim damages in terms of monetary compensation so that based on Addis v Gramophone, she would be put in such financial position, where she would have been in case these high rollers had come to her as she would have earned revenues from such occurrence. Also, Sophie can apply for specific performance of Coronet regarding the lease being extended as the breach was on Coronet’s part and not on part of Sophie. Sophie can also choose to rescind the contract as a condition under the contract had been breached and if Coronet denies the extension, seek an injunction order against Coronet from doing so. But, that would not allow her to get the lease renewed, so the best option is to claim compensation and seek specific performance on part of Coronet for extension of lease.
Coronet can also make a claim in this case, for the non payment of the full rent by Sophie based on specific performance. Non-performance by one party does not allow the other party to stop performing their side of the contract. Also, the parties had not agreed on the reduced rent and a silence of Coronet does not mean they accepted the reduced rent. So, Sophie was required to pay the full rent as no new agreement or a collateral contract had been drawn, which could give rise to a promissory estoppel.
Hence, Sophie can stop Coronet Casino from legally refusing the renewal of lease based on the breach of contract by Coronet and applying for specific performance for extension of lease and damages for the loss of revenue.
Andrews N, Contract Law (Cambridge University Press, 2nd ed, 2015)
Davies PS, JC Smith’s the Law of Contract (Oxford University Press, 2016)
Elliott C, and Quinn F, Contract Law (Pearson Education Limited, 9th ed, 2013)
Gibson A, and Fraser D, Business Law (Pearson Higher Education AU, 2013)
Latimer P, Australian Business Law 2012 (CCH Australia Limited, 31st ed, 2012)
Poole J, Casebook on Contract Law (Oxford University Press, 12th ed, 2014)
Stone R, and Devenney J, Text, Cases and Materials on Contract Law (Routledge, 3rd ed, 2014)
Addis v Gramophone [1909] AC 488
Central London Property Trust Ltd v High Trees Ltd [1947] KB 130
Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26
Felthouse v Bindley (1862) 142 ER 1037
Heilbut Symons & Co v Buckleton [1913] AC 30
Cohen R, Looked after at renewal time – did the disappointed tenant have a claim? (22 August 2016)

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