Summary of INDEFINITE PROMISES – Joseph Martin Deli v. Schumacher (1981)
Court of Appeals of New York
52 N.Y.2d 105, 417 N.E.2d 541
Procedural History: D appealed from an order where the Appellate Court affirmed an order of trial court granting P’s motion for summary judgment in his action for specific performance seeking renewal of a lease.
Facts: D leased a retail store to P for a five-year term. The contract contained a renewal clause allowing P to renew the lease for an additional period at annual rentals ‘to be agreed upon.’ P gave timely notice of its desire to renew. D would only renew for a rent substantially higher than the one P was currently paying. P commenced an action for specific performance to compel defendant to extend the lease at a rate fixed by P’s hired appraiser or at such a sum the courts would determine was fair. Trial court dismissed P’s complaint. Lower appellate court reversed, ruling that the renewal clause in the lease providing for future agreements on the rent to be paid during the renewal term was enforceable. D appealed.
Issue: Was the appellate court correct in its decision to reverse the holding of the trial court? >No.
Is an ‘agreement to agree’ substantially definite, and therefore enforceable as a term of a contract? >No.
Holding: Ruling of the trial court is reinstated. Appellate court erred in its finding that the term of the contract was enforceable. An agreement to agree, in which a material term is left for future negotiations, is unenforceable.
Reasoning: The law can only be invoked to enforce a contract when the promise is sufficiently certain and specific, in a way that what was promised can be ascertained. In this case, an inclusion of the methodology for which to determine the future rent in the original contract would have rendered it enforceable. In this case, neither party was bound to any formula. Simple wording of the contract leaves no room for the resolution of the ambiguity – the gap is too big, or too important for a court to fill it.
Rule: An ‘agreement to agree’ must include some methodology or objective formula acceptable to both parties to the contract for reaching the future agreement on the material fact must be included in the contract for it to be enforceable.
Concurrence: Does not agree that no course of dealing between parties to a lease can have an agreement for ‘future rentals to be agreed upon.’
Dissent: If tenant can establish entitlement to renewal, the presence of a provision calling for ‘rentals to be agreed upon’ should not prevent judicial intervention in determining a reasonable rent.