Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher

52 N.Y.2d 105 · New York Court of Appeals · 1981

Facts

In 1973, a landlord leased a retail store to a tenant for a five-year term with rent increasing annually. The lease included a renewal clause allowing the tenant to renew for an additional five years "at annual rentals to be agreed upon." The tenant gave timely notice of intent to renew, but the landlord proposed a significantly higher rent of $900 per month. The tenant's appraiser opined a fair market rental value of $545.41, but the parties could not agree on a new rent.

Procedural history

The tenant commenced an action for specific performance in Supreme Court, Suffolk County, while the landlord initiated a holdover proceeding in District Court. The Supreme Court granted the landlord summary judgment, dismissing the tenant's complaint on the grounds that the agreement to agree was unenforceable, and denied the tenant's motion to consolidate. The tenant appealed, and the Appellate Division reversed, reinstating the complaint and granting consolidation, reasoning the clause could be enforceable if the parties intended not to terminate. Both parties then appealed to this court (Court of Appeals) by leave of the Appellate Division.

Issue

Is a lease renewal clause that states the rent for the renewal period is "to be agreed upon" enforceable, or is it an unenforceable agreement to agree?

Holding

The court held that the lease renewal clause was an unenforceable agreement to agree due to indefiniteness. It reversed the Appellate Division's order and reinstated the Supreme Court's dismissal of the tenant's complaint.

Rule

A contract must be sufficiently certain and specific as to material matters for its terms to be ascertained and enforced. A mere agreement to agree, where a material term like rent is left for future negotiations, is unenforceable under common law, especially for real property transactions. While an explicit rent amount is not always required, the agreement must provide a methodology or objective extrinsic standard for determining the rent within its four corners. Without such a mechanism, a court cannot impose a "reasonable rent" without creating a new agreement for the parties, which violates the principle of mutual assent.

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