Los Banos Gravel Co. v. Freeman

In Los Banos Gravel Co. v. Freeman (1976) 58 Cal. App. 3d 785, the tenants leased a parcel of unimproved property near the freeway, but the lease provided that the premises were to be used only for a service station and restaurant, and the lease required construction to begin within 120 days. The rent was based on a percentage of the gross income from the products and services sold on the property. The court concluded that, "as in Ott Hardware Co. v. Yost (1945), it is very clear that the lease provisions compelled the construction of the service station and the restaurant and that the obligation of the lessee was not optional but mandatory. The agreement for the leasing had no viability unless the preliminary condition for construction was complied with: the construction to begin within 120 days or the respondent-lessor would be relieved from any and all liability. As was stated in Newport v. Hedges Mo.App. 1962 358 S.W.2d at page 446: 'We cannot escape the conclusion that the parties not only contemplated and intended but also contracted for the operation of a certain business to be conducted on the then unimproved vacant lot; that the construction of the building, if indeed not required by the contract, was required in fact for the operation of such business.'" (Los Banos Gravel, supra, 58 Cal. App. 3d at p. 797.)