Ersa Grae Corp. v. Fluor Corp

In Ersa Grae Corp. v. Fluor Corp. (1991) 1 Cal.App.4th 613, a lease contract was deemed to be sufficiently definite to be enforceable because "all material terms are sufficiently set forth." (Id. at p. 623.) In that case, Fluor had a license and a land lease from a third party allowing Fluor to construct an office building on the third party's land. (Id. at p. 617.) Fluor was not permitted to transfer its interest until the building was completed. (Ibid.) Before the building was constructed, Fluor entered into an agreement with Ersa Grae under which Ersa Grae would provide funding for the building, Fluor would transfer its interest in the building to Ersa Grae upon its completion, and Ersa Grae would lease space in the building to Fluor. (Id. at pp. 618-619.) Fluor refused to perform and Ersa Grae sued for breach of contract. (Id. at pp. 616, 620.) The court held that this contract did not omit a material term by failing to address the need to obtain the third party landowner's approval because, in fact, the parties had structured their deal in such a way that third party approval was not required. (Ersa Grae, supra, 1 Cal.App.4th at p. 624.) Also, the failure to specify the terms of the eventual lease that Ersa Grae would enter into with Fluor was not fatal to the contract's enforceability because the lease terms were not a material part of the agreement, and the agreement did commit the parties to complete the eventual lease documents in good faith. (Ibid.)