Court Opinion

ID: 6553464
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:31:50.839082+00
Date Added: 2024-06-11T15:56:10.167151
License: Public Domain

Sam BIRD, Judge, dissenting. The majority holds that the lease-renewal clause is not ambiguous and clearly means that the same terms and conditions shall apply to the ten-year renewal period. I agree with the majority that this clause is not ambiguous; however, I do not agree with the conclusion of the majority that this unambiguous clause creates a general covenant to renew, by which the terms and conditions of the original one-year lease are made applicable to the ten-year renewal term. The majority states that “[t]he option given Lone under the lease agreement was to continue the lease on the same terms for one additional period of ten years, per the plain language used.” This plain language, which the majority construes as a general covenant to renew, states that “[t]he term of this agreement shall begin on the 2nd day Jan. 1998 and shall run continuously for 1 (ONE) year and shall have one full ten years option to lease again.” When no rent or other material term is specified in the contract, and no objective means for determining such term is specified, the contract must fail for uncertainty. See Heral v. Smith, 33 Ark. App. 143, 803 S.W.2d 938 (1991); Lonoke Nursing Home v. Bennett Family P’ship, 12 Ark. App. 282, 676 S.W.2d 461 (1984). In Lonoke Nursing Home, the dispute centered on an option to renew a property lease. The agreement provided that the renewal terms were to be “compatible to similar facilities.” The chancellor held that the option was void for lack of definiteness. This court affirmed, stating that the option was “fatally defective in that no definite method for determining the rental was established.” Lonoke Nursing Home, supra, at 285. In Heral, an option-to-renew clause provided for the terms and conditions of the renewed period to be negotiable, but not to exceed the annual cost-of-living index. The chancellor held that the clause was void for vagueness. This court affirmed, stating that “courts will not supply missing terms in a lease when the parties have not stated in their agreement a definite basis to guide the court’s effort to effectuate the parties’ agreement.” Heral, supra, at 145. The majority concludes that the present renewal clause is enforceable as a general covenant to renew. A general covenant to renew incorporates the same terms and conditions into the new lease. See Keating v. Michael, 154 Ark. 267, 242 S.W. 563 (1922). In Keating, Michael leased to Keating the west half of a lot. The contract provided to Keating an option to lease both the west and east halves of the lot at the end of the initial lease term. Our supreme court stated that this evidenced a new lease being formed because the option covered additional land, rather than a mere renewal of the same terms and conditions. Due to the lack of agreement as to the rent amount and the finding that there was no general covenant to renew, the court held that the contract failed for indefiniteness. Similar to the Keating contract, which provided that the option for the renewed lease could cover land in addition to that covered by the original lease, the original lease term in the case at bar was for one year, whereas the renewal option provides for a term of ten years. The same terms and conditions cannot simply be applied to the renewal period because the parties have already explicidy changed the terms and conditions of the renewal period by providing for a longer lease term, thus precluding its enforcement as a general covenant to renew. The parties failed, however, to provide for the amount of rent applicable to the renewal period; thus, the contract must fail for indefiniteness. To construe the lease renewal clause as a general covenant to renew would contradict the contract’s express terms. The second paragraph of the contract provides that the monthly rent shall be $500 per month “for the term of the lease.” The third paragraph states that “[t]he term of this agreement shall begin on the 2nd day Jan. 1998, and shall run continuously for 1 (ONE) year and shall have one full ten years option to lease again.” The term of the agreement provides only for a one-year term; thereafter, there is an option for an additional term. Different clauses in a contract must be read together and construed so that all of its parts harmonize, if that is at all possible. Sweeden v. Farmers Ins. Group, 71 Ark. App. 381, 30 S.W.3d 783 (2000). To read the renewal clause as integrating the $500 rental rate for the ten-year renewal period would contradict the express provision that the $500 rental rate applied to the expressed one-year term of the lease. These different clauses are harmonized by recognizing that the contract explicitly provides the rental rate for the one-year lease and explicidy remains silent as to the rent for the renewal period. Otherwise, construing the clauses would contradict the contract’s express terms. Because the contract fails to provide for the amount of rent for the renewal period and because the clause cannot be enforced as a general covenant to renew, the contract is void for indefiniteness; therefore, I would reverse with instructions to the trial court to dismiss appellee’s complaint. I am authorized to state that Judge NEAL joins in this dissenting opinion.