## Facts

- Property owners John W. Neal and Clara B. Neal sent a signed written proposal to lease specified commercial property in Beverly Hills to Store Properties, Inc. for 99 years beginning November 1, 1944.
- The proposal stated major economic terms, including a detailed rent schedule, an $18,000 payment upon execution/delivery of the lease, and “net lease” obligations requiring the lessee to pay taxes, assessments, insurance, and maintenance.
- The proposal required the parties, within 30 days after acceptance, to execute a formal lease containing the stated terms plus other provisions “usual and customary” in long-term net leases, subject to mutual approval.
- The proposal allowed either party to terminate if the formal lease was not executed within the 30-day period.
- Store Properties accepted the proposal in writing and alleged it paid a $5,000 deposit and agreed to place $30,000 in escrow as a guarantee of improvements.
- No formal lease was executed; the Neals refused to proceed. An unsigned draft lease existed but was never signed.
- Store Properties sued for specific performance. The trial court sustained the Neals’ demurrer to the second amended complaint without leave to amend and dismissed the action.

## Issues

1. Whether the signed proposal and written acceptance created an enforceable contract for a 99-year lease or merely contemplated a future agreement.
2. Whether the alleged lease agreement was sufficiently definite and complete to be specifically enforced.
3. Whether the writings satisfied the statute of frauds applicable to leases exceeding one year.

## Decision

- The Court of Appeal affirmed the judgment of dismissal.
- The court held the proposal and acceptance reflected preliminary negotiations and an agreement to agree, not a binding lease contract.
- Because essential lease provisions were left for later inclusion and mutual approval in a formal lease, the alleged agreement was too indefinite for specific performance.
- The unsigned draft lease did not satisfy the statute of frauds requirement of a writing subscribed by the party to be charged for a lease exceeding one year.

## Legal Principles

- Specific performance requires contractual terms to be sufficiently certain to determine the precise act to be done.
- A writing that contemplates execution of a later formal lease, reserves mutual approval of additional customary provisions, and permits termination if the formal document is not executed generally indicates no present intent to be bound.
- For leases longer than one year, the statute of frauds requires a written instrument subscribed by the party to be charged; an unsigned lease draft is insufficient.
- An agreement to enter into a lease in the future is not specifically enforceable when material terms are left open for future negotiation and approval.

## Conclusion

The court treated the signed proposal and acceptance as nonbinding preliminary arrangements because the parties conditioned any final obligation on executing a later formal lease with additional mutually approved provisions, and no compliant signed lease was ever executed.


Store Props., Inc. v. Neal, 72 Cal. App. 2d 112 (Cal. Ct. App. 1945)