Court Opinion

ID: 7873687
Source: CourtListenerOpinion
Date Created: 2022-09-08 20:58:07.283891+00
Date Added: 2024-06-11T16:31:19.776013
License: Public Domain

FOSHEIM, Justice
(dissenting).
While a majority of states have held that a clause giving the lessee an option to renew with the rent to be negotiated is unenforceable, the minority view has gained credible support in recent years. Courts enforcing such clauses stress that it is not a matter of rewriting or making a contract for the parties, but rather of giving effect to their obvious intent, that the rent for the renewal period be reasonable. Therefore, the majority’s reliance on Engle v. Heier, 84 S.D. 535, 173 N.W.2d 454 (1970), is misplaced in this case where the only question is the enforcement of one clause in an existing written contract.
Courts enforcing such clauses also rely on the long-standing principle that a lease is generally construed against the landlord where the provision was obviously intended for the benefit of the lessee. Another legal principle justifying enforcement is estoppel. Often, as here, the lessee made costly improvements and worked hard to establish good will in reliance on the renewal clause. Additionally, the renewal clause is part of the consideration offered to induce the lessee to enter into the lease. The lessor benefits from this clause by receiving a higher initial rent in consideration for its inclusion in the lease and from the improvements to the property the lessee makes in reliance on, and in anticipation of his rights under, such clause. Since the lessee has paid valuable consideration for the clause it follows that he should receive the benefit of the clause upon renewal. A detailed exposition of the trend enforcing such clauses, and on which this dissent draws its strengths, is found in Drees Farming Ass’n v. Thompson, 246 N.W.2d 883 (N.D.1976), Stancroff v. Brown, 76 Mich.App. 589, 257 N.W.2d 179 (1977), Playmate Club, Inc. v. Country Clubs, Inc., 62 Tenn.App. 383, 462 S.W.2d 890 (1970), and Annot., 58 A.L.R.3d 500 (1974).
I am authorized to state that Chief Justice WOLLMAN joins in this dissent.