Friday, September 29, 2017
"You can stay here until we come to an agreement!" Watch out for what happens if you never reach an agreement!
One of the thorniest issues I find to teach students is when an agreement is enforceable vs. when it is merely an agreement to agree. A recent case out of Wisconsin, Adrikos Real Estate Holding LLC v. Murphy, Appeal No. 2016AP1313, addresses this very issue. The document in question read,
The seller, Murphy, shall retain the right to occupy the Property for a period of 15 days following the closing date of the agreement . . . . Thereafter, the seller, Murphy, shall retain the right to occupy the Property until such date that parties reach an agreement for the purchase and sale . . . .
The parties never reached an agreement for the purchase and sale. Instead, Adrikos sought to evict Murphy. Murphy, however, argued that the contract gave him the right to stay on the property until they reached agreement for the purchase and sale--which they hadn't.
The lower court found the agreement to be unenforceable as merely an agreement to agree. This court disagreed. The agreement explicitly granted Murphy the right to occupy the property until a purchase and sale agreement was reached. This didn't render the contract an agreement to agree; rather, it made a future agreement a "triggering condition" of the presently enforceable first agreement.
Having found the agreement enforceable, the court then considered if, because it didn't have a particular end date, it was terminable at will and Adrikos could evict Murphy at any time. The court found that the agreement did have an end date, though: the agreement for the purchase and sale. The court found, though, that, depending on the circumstances, this could convert the contract into a perpetual lease, which was disfavored under Wisconsin law, and if so, the court should read in a reasonable duration for the occupancy right. It remanded for further determination on this question.