The following clause (with minor variations) is often found in lease agreements:- “The Tenant shall have the right to renew this Agreement for a period of 1 (one) year on the same terms and conditions, save that the rental shall be agreed to in writing between the Parties.” A clause of this nature seems to provide the tenant with a right to renew the lease agreement, however, the latter part of the clause unequivocally indicates that the tenant has a right to renew on condition that the rental amount is agreed upon, in essence, an agreement to agree.
Three elements are required for a valid lease agreement in respect of immovable property to be concluded, namely the parties (identity of the landlord and tenant), the price (rental payable), and the object being leased (the leased premises). These three elements are referred to as the essentialia or the essential elements of the agreement. Should you not have an agreement on one or more of these elements, the agreement cannot be validly concluded.
It is important to note that the rental payable must either be ascertained or ascertainable. For example, should the agreement specify that the rental shall escalate by a certain percentage during the renewal period or should the clause appoint a third party to determine the rental amount, the rental amount is ascertainable and as such, this element is satisfied.
Each type of agreement has its own essential elements and it is crucial that agreement in respect of these elements is reached. Should the parties have simply agreed to agree to one of the essential elements, the contract is not binding.
FAIRBRIDGES WERTHEIM BECKER
Article by Nicola Mullineux – Source: www.lionessesofafrica.com