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The plaintiff Walker sued the defendant Keith seeking to enforce an option to renew a 10-year lease agreement. The original lease allowed Walker to renew for another 10 years but did not specify the rent amount or include a specific method for calculating rent, only that it would be based on "comparative business conditions." The trial court enforced the option and set the rent at $125 per month. The appellate court reversed, holding that an option to renew a lease is not enforceable if it fails to specify all essential terms such as the rent amount or include a clear method for determining rent. Since the renewal provision did not establish how rent would be calculated, it was too indefinite to be enforced under classical contract law principles requiring certainty of terms
The plaintiff Walker sued the defendant Keith seeking to enforce an option to renew a 10-year lease agreement. The original lease allowed Walker to renew for another 10 years but did not specify the rent amount or include a specific method for calculating rent, only that it would be based on "comparative business conditions." The trial court enforced the option and set the rent at $125 per month. The appellate court reversed, holding that an option to renew a lease is not enforceable if it fails to specify all essential terms such as the rent amount or include a clear method for determining rent. Since the renewal provision did not establish how rent would be calculated, it was too indefinite to be enforced under classical contract law principles requiring certainty of terms
The plaintiff Walker sued the defendant Keith seeking to enforce an option to renew a 10-year lease agreement. The original lease allowed Walker to renew for another 10 years but did not specify the rent amount or include a specific method for calculating rent, only that it would be based on "comparative business conditions." The trial court enforced the option and set the rent at $125 per month. The appellate court reversed, holding that an option to renew a lease is not enforceable if it fails to specify all essential terms such as the rent amount or include a clear method for determining rent. Since the renewal provision did not establish how rent would be calculated, it was too indefinite to be enforced under classical contract law principles requiring certainty of terms
Contracts Case Brief # 9 * Classical Contract Law *
Title and Citation: Walker v. Keith, 382 S.W.2d 198 (1964)
Identities of Parties: P (Walker) signed a ten- year period lease with D (Keith) Procedural History: P sued D; the court at trial enforced the option, and set the rent at $125 per month. D appealed to the Kentucky court of appeals. P filed suit for a declaratory judgment (to get amount of rent) Went to equity court, with chancellor Facts: P entered into a ten-year lease agreement with D, the lease contained a provision for an option for renewing the lease at the end of ten-year period. The provision included the same term for the lease except the amount of rent was not specified, nor was a specific method of calculating the rent; it said rent would be based on comparative business conditions. P notified D of intent to renew the lease (through proper notice of renewal) but the parties could not agree on the rent. P sued. Option Contract o PR (Walker) ------------ PE o Option to renewal leave for another 10 years Rent is the consideration (dual duty) for the contract o Paying for the option for the renewal, and paying to have place Issue(s): Was the provision in the lease for renewal an enforceable contract without essential material clearly outlined (amount of rent)? Was there a specific way to calculate the rent? Was there a mechanism in place that could have allowed to calcite the lease Holding and Rule: No, in ordered for a future-contract to be enforceable and valid it must specify all material and essential terms and leave nothing to be agreed upon as a result of future negotiations. No way to calculate the rent Courts Reasoning: The material terms of a contract must be specified with certainty, including the terms of future agreements. If the parties fail to agree on the material terms of the future agreements or how the parties will negotiate the terms in the future, then the contract fails for lack of certainty. Agreements to agree in the future are not enforceable contracts. Rent is a material term to a contract. Here, the parties failed to include an agreed upon rental amount in the
renewal provision of the contract. While the contract did contain
language about adjusting the new rent based upon comparative business conditions, this language is not sufficiently definite because it does not provide an exact method for calculating the rent. Therefore, the renewal provision is fatally defective.
Classical Contract Law ------------- parties must agree on
all ESSENTIAL terms (etc. rent)
Judgment and Order: The decision of the chancellor is reversed.