## Facts

- Tok Hwang held a leasehold interest in a commercial lot near Denali National Park and owned improvements on the lot; he paid $20,000 annually under the primary lease.
- In 2012, Hwang subleased the leasehold to Alaska Fur Gallery, Inc. for three summer seasons at $55,000 annual rent.
- The sublease included the provision: “Lease includes an option to purchase premises with lease amount to be applied to negotiated purchase price.”
- In 2014, Alaska Fur sought to exercise the “option,” obtained an appraisal valuing the leasehold at roughly $150,000–$155,000, and asserted the rent was above market.
- Hwang rejected any obligation to sell or negotiate, asserting there was no agreed purchase price or method to determine price; the parties never reached sale terms.
- Alaska Fur sued for specific performance and damages, arguing the clause created either an enforceable purchase option or, at minimum, a binding agreement to negotiate in good faith.
- The superior court granted summary judgment to Hwang on indefiniteness grounds; Alaska Fur appealed.

## Issues

1. Whether the sublease language created an enforceable option to purchase the leasehold and improvements.
2. Whether the language created an enforceable agreement requiring the parties to negotiate a purchase in good faith.
3. Whether refusal to negotiate or sell breached the implied covenant of good faith and fair dealing.

## Decision

- The Alaska Supreme Court affirmed summary judgment for Hwang.
- The clause was too indefinite to enforce as an option to purchase because it lacked a price or definite method for determining price and omitted other essential terms.
- The clause did not create an enforceable agreement to negotiate in good faith because it provided no standards for breach and no mechanism to resolve impasse.
- The implied covenant of good faith and fair dealing did not impose a duty to negotiate or sell where the underlying purported obligation was unenforceable for indefiniteness.

## Legal Principles

- A real-property purchase option must state a purchase price or provide an objective, definite method for determining price and other essential terms; otherwise it is unenforceable.
- Courts will not supply missing essential terms for a real-property sale under the guise of interpretation or gap-filling when the parties’ expectations are unclear.
- References to a future “negotiated” price, without standards or an impasse-resolution mechanism, generally do not create a binding agreement to negotiate.
- The implied covenant of good faith and fair dealing cannot create substantive duties the parties did not assume and cannot cure indefiniteness of essential terms.

## Conclusion

Because the sublease provision lacked a price term or any definite pricing mechanism and contained no workable standards for a duty to negotiate, it was unenforceable as either a purchase option or an agreement to negotiate, and the lessor’s refusal to negotiate or sell did not violate the implied covenant of good faith and fair dealing.


Alaska Fur Gallery, Inc. v. Hwang, 394 P.3d 511 (Alaska 2017)