Using IRAC: In June 2016 Pedro decided he would leave his employment and launch his own caf so he started looking for suitable premises.
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Using IRAC:


In June 2016 Pedro decided he would leave his employment and launch his own café

so he started looking for suitable premises. He looked at a small local shopping centre that had a large supermarket and a number of smaller shops that were vacant. He had several conversations with Helen, the landlord for all of the shops in the centre. He said that he wanted to open a café but was worried that there wouldn't be many people visiting the shopping centre because most of the shops were empty. Helen said that the supermarket attracted a lot of customers and that she had signed leases for 2 of the 4 vacant shops with those leases to commence in September. She said, "A butcher is going into one shop and the other will be a bakery." 


"That's great" Pedro replied. "I wouldn't want there to be another café."

Helen said, "We always make sure there is a mix of businesses since it is a small centre."


The lease was to be for a term of 3 years. Pedro made inquiries about whether he could have a right of renewal for a further term of 3 years.


"Don't worry" said Helen. "I'll make sure you are looked after. I like to have long term tenants."


Pedro agreed to lease the shop from 1 July 2016 for a term of 3 years at a monthly rental of $2,000 payable in advance on the first day of the month. Helen and Pedro signed a written lease agreement. The written lease did not include a right of renewal neither did it say anything about the other shops in the centre.


The bakery opened up as expected in September, but the butcher never entered occupation. Helen had negotiations with a butcher but a lease with the butcher was never signed.


One year later in July 2017 Pedro was at home watching the evening news and discovered that the supermarket in his little shopping centre had gone into liquidation. The supermarket closed its doors and ceased trading at 5pm that same day. Pedro was alarmed as without the supermarket there would be very little passing trade. Pedro's fears were well founded. His trade in July and August was down by 50%. He phoned Helen at the end of August and said that he was having trouble paying the rent as his business had suffered due to the closure of the supermarket. Helen told him that he could pay $1,000 rent for each of September and October.


The bakery was also struggling to attract customers so in September 2017 the bakery started serving coffee, mostly takeaway, but they also put in a couple of small tables and chairs inside and just outside of the bakery.


Pedro complained to Helen but she said that she can't stop the bakery serving coffee and in any event there was nothing in the lease with Pedro that said anything about what the business of the other shops could be and he should stop complaining as she had already reduced his rent for two months


In December 2017 things really turned around for the better. A new vibrant supermarket opened up in the centre and the other smaller vacant shops were leased soon after. All goes well until May 2019 when Helen tells Pedro she won't be renewing his lease and that on 1 June he will need to pay an additional $2,000 for rent still owing from July and August 2017.


Pedro contacts you for advice. He has spent a lot of money renovating his shop as he understood he would be able to renew for a further term of 3 years. He is also outraged that Helen has asked for payment of the $2,000 rent she said she would forgo in 2017. He said that he only entered in the lease because the supermarket was already there and the butcher and baker were going in and she said he would be the only café. Pedro seeks your advice about whether he can renew the lease, whether he has to pay $2,000 and whether he has any claim in relation to the butcher never opening, the first supermarket closing down and the bakery serving coffee. Cite cases and legislation in your advice.


Only answer this questions on the basis of Contract Law. In particular do not consider the potential application of Australian Consumer Law.

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