Joseph Martin, Jr. Deli v. Schumacher

NY COA - 1981 (417 N.E. 2d 541)

Facts:

• P leased a retail store from D for a five-year term. The rent was graduated upwards, starting at $500 and ending at $650 in the final year.
• The lease said that P could renew the lease for another 5 year term "at annual rentals to be agreed upon".
• P renewed the lease and D asked for $900/mo rent. P hired an appraiser who said that fair market value was only $550/mo.
• P sued D to get the lower rate.

Procedural History:

• Trial court found for D, dismissed P's claim, contract was unenforceable for uncertainty.
• Appellate court reversed, found for P, contract enforceable.
• NY COA reversed, dismissed P's claim, contract was unenforceable for uncertainty.

Issues:

• Can a real estate lease contract be enforceable if the rent for a renewal period is not included in the lease?

Holding/Rule:

• A real estate lease contract is not enforceable if important details, such as the rent amount for the renewal period, is not included in the lease.
• A mere agreement to agree, in which a material term is left for future negotiations, is unenforceable.

Reasoning:

• Definiteness as to material matters is the very essence in contract law. Impenetrable vagueness and uncertainty will not do.
• It would have sufficed if a methodology for determining the rent was to be found somewhere in the lease.
• The renewal clause says nothing else besides the fact that "annual rentals [are] to be agreed upon".
• Nowhere is there an inkling that either of the parties assented to have the rent set by a judge, an arbitrator, or some other third party.
• The UCC is limited to the sale of goods and is not applicable to real estate contracts.

Dissent:

• The UCC should be allowed to apply in cases involving real estate contracts.
• The court should be able to set the rent at a reasonable rate in order to avoid a forfeiture.

Notes:

• Prof thinks that the court should have set the price or said a reason why the real estate was too unique to set a price.