## Facts

- A commercial landlord owned a vacant building in Woodbridge, New Jersey and engaged multiple brokers, including a real estate brokerage, to locate a tenant.
- A prospective tenant’s principal asked the broker to find a site; the broker showed him the building and relayed negotiations over rent and other lease terms.
- The landlord and the tenant’s principal met and orally agreed on most lease terms, but the landlord refused to lease to a newly formed “shell” entity and required established related corporations to execute the lease.
- The broker prepared a written memorandum dated May 10, 1972 reflecting terms discussed; the tenant’s principal signed while seeking to secure the property.
- On May 11, 1972, the landlord and the tenant’s principal signed a further written memorandum stating the essential lease terms and indicating that a more formal lease would later be prepared.
- The tenant entities later repudiated and refused to proceed.
- The broker sought the leasing commission allegedly lost due to the tenant’s nonperformance; the landlord sought out-of-pocket expenses incurred in reliance on the deal.
- The trial court entered judgment for the landlord (reliance expenses) and the broker (lost commission); the tenant entities appealed.

## Issues

1. Whether the May 11, 1972 signed memorandum constituted a binding lease (or binding agreement to lease) despite contemplation of a later formal lease and omission of some customary provisions.
2. If a binding agreement existed, whether the tenant’s repudiation supported (a) the landlord’s recovery of reliance expenses and (b) the broker’s recovery of its commission.

## Decision

- The appellate court affirmed the judgments for the landlord and the broker.
- The May 11 memorandum was enforceable because it reflected mutual assent and included the essential lease terms, even though a later formal lease was anticipated and some routine clauses were not included.
- The tenant entities’ refusal to perform constituted a breach supporting the landlord’s reliance damages.
- The broker was entitled to recover the commission it would have earned because it procured a tenant that entered into a binding written agreement accepted by the landlord, and the tenant’s breach caused the commission to be lost.

## Legal Principles

- A writing signed by both sides that states the essential terms of a commercial lease can be an enforceable contract even if the parties expect to execute a more detailed formal lease later.
- The omission of customary, nonessential lease clauses does not prevent enforcement when the parties have agreed on the material terms and objectively manifested intent to be bound.
- A broker’s right to a commission may be established when the broker produces a tenant who enters into an enforceable agreement on the lease terms accepted by the landlord; the tenant’s subsequent repudiation does not defeat the broker’s claim when the loss of the commission is attributable to the tenant’s breach.
- Upon breach of an enforceable lease agreement before performance, reliance-type damages for reasonably foreseeable and proven out-of-pocket expenditures may be awarded to the landlord.

## Conclusion

The court held that the parties’ signed May 11 memorandum formed a binding lease agreement despite the expectation of a later formal lease, and it affirmed awards against the repudiating tenant entities for the landlord’s reliance expenses and the broker’s lost commission.


Berg Agency v. Sleepworld-Willingboro, Inc., 136 N.J. Super. 369, 346 A.2d 419 (N.J. Super. Ct. App. Div. 1975)