52 N.Y.2d 105 (1981)
An agreement to agree on a material term, such as rent in a lease renewal, is generally unenforceable if it lacks a definite methodology or objective standard for determining the term.
Summary
Joseph Martin, Jr., Delicatessen, Inc. (tenant) sought to enforce a lease renewal clause against Henry D. Schumacher (landlord) that specified “annual rentals to be agreed upon.” When the parties failed to agree on the new rent, the tenant sued for specific performance. The New York Court of Appeals held that the renewal clause was unenforceable because it was merely an agreement to agree, lacking any definite terms or methodology for determining future rent. The court emphasized that contracts must be sufficiently certain and specific to be enforceable.
Facts
The tenant leased a retail store from the landlord for a five-year term, with the lease containing a renewal option for an additional five years at “annual rentals to be agreed upon.” The tenant provided timely notice of intent to renew. The landlord demanded a monthly rent of $900, while the tenant’s appraiser valued the rent at $545.41. The lease renewal clause did not provide any method or standard for determining the rental amount for the renewal period.
Procedural History
The tenant sued the landlord in Supreme Court for specific performance, seeking to compel lease renewal at the appraised value or a court-determined reasonable rent. The landlord initiated a holdover proceeding in District Court to evict the tenant. The Supreme Court dismissed the tenant’s complaint, holding the agreement to agree was unenforceable and denied consolidation of the cases. The Appellate Division reversed, finding the clause enforceable if the parties intended not to terminate the lease upon failure to agree, and directed the trial court to set a reasonable rent. The New York Court of Appeals granted leave to appeal.
Issue(s)
Whether a lease renewal clause specifying that the rent for the renewal period is “to be agreed upon” is enforceable when the parties fail to reach an agreement.
Holding
No, because a mere agreement to agree on a material term, like rent, is unenforceable if it lacks definiteness and provides no objective method for determining the term.
Court’s Reasoning
The court reasoned that contracts must be sufficiently certain and specific to be enforceable. A “mere agreement to agree, in which a material term is left for future negotiations, is unenforceable.” The court distinguished this case from situations where a methodology for determining rent is found within the lease or where the agreement invites recourse to an objective extrinsic event or standard. The renewal clause in this case lacked any such mechanism; it simply stated “annual rentals to be agreed upon,” providing no basis for determining a specific rent. The court emphasized the importance of definiteness in real estate contracts and declined to impose a judicially determined “reasonable rent,” as that would be creating a bargain the parties did not make themselves. The court noted, “before the power of law can be invoked to enforce a promise, it must be sufficiently certain and specific so that what was promised can be ascertained.”
Judge Meyer concurred, arguing that a course of dealing between parties to a lease could make such a clause enforceable, but the facts of this case did not support such a finding. Judge Jasen dissented, advocating for judicial intervention to fix a reasonable rent to avoid forfeiture when a tenant establishes entitlement to renewal.