## Facts

- A landlord leased retail space to a tenant for a five-year term with graduated monthly rent from $500 to $650.
- The lease included a renewal clause allowing a five-year renewal at annual rentals “to be agreed upon,” conditioned on timely written notice.
- The tenant timely exercised the renewal option.
- The landlord would renew only at a starting rent of $900 per month.
- The tenant obtained an appraisal valuing fair market rent for the renewal term at $545.41 per month.
- The tenant sued seeking specific performance of the renewal clause, requesting renewal at the appraised figure or at a rent the court found reasonable.
- The landlord began a holdover proceeding to evict the tenant.
- The trial court granted summary judgment for the landlord, dismissing the tenant’s complaint as an unenforceable agreement to agree.
- The intermediate appellate court reinstated the complaint, reasoning such a clause could be enforced if the parties did not intend termination upon failure to agree, and that a court could set a reasonable rent.
- The state’s highest court reviewed the enforceability of the renewal clause.

## Issues

1. Whether a lease renewal clause providing that renewal rent is “to be agreed upon,” without any standard or mechanism, is sufficiently definite to be enforceable.
2. If the clause is enforceable, whether a court may fix a “reasonable rent” when the parties fail to agree.

## Decision

- The court reversed the intermediate appellate court and reinstated dismissal of the tenant’s complaint.
- A renewal provision leaving rent “to be agreed upon,” with no objective standard, formula, or dispute-resolution mechanism, is unenforceable for indefiniteness.
- A court may not supply a rent term (including “reasonable rent” or fair market value) where the parties did not provide a basis for determining rent.
- The intermediate appellate court’s “intent not to terminate” approach was rejected as inconsistent with the requirement that essential terms be definite.

## Legal Principles

- A contract is enforceable only if the parties’ agreement on material terms can be determined with reasonable certainty.
- Rent is an essential term of a lease renewal; a clause that reserves rent for future agreement, without a stated standard or method to resolve disagreement, is an unenforceable agreement to agree.
- Courts enforce bargains made by the parties but do not create material terms where the parties have supplied no objective measure for doing so.
- A missing essential term may be supplied only where the agreement itself or an established course of dealing provides an objective basis for fixing the term.

## Conclusion

The court held that a lease renewal clause stating that renewal rent is “to be agreed upon,” without any objective standard or mechanism, is too indefinite to enforce, and the judiciary cannot impose a “reasonable rent” to create a renewal contract the parties did not complete.


Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher, 52 N.Y.2d 105, 417 N.E.2d 541 (N.Y. 1981)