Four Eights, LLC v. Salem – Case Brief Summary (Tennessee)

In Four Eights, LLC v. Salem, 194 S.W.3d 484 (Tenn. Ct. App. 2005), the parties entered into a lease agreement with an option to purchase the leased premises for "its then fair market value." Id. at 486. The lease further provided that "the Fair Market Value must be determined by the Lessor and Lessee, negotiating in good faith . . . ." Id.

When the lessee sued the lessor to enforce the purchase option, the trial court ruled that the agreement was too indefinite to enforce. Id.

The court of appeals affirmed, holding that while "fair market value" has a common meaning, the lease provision that fair market value must be determined through good-faith negotiation was an unenforceable agreement to agree:

"If the parties had simply utilized the term "fair market value," then the Court could have ascertained the same based on common usage. By adding the provision that "Fair Market Value must be determined by the Lessor and Lessee, negotiating in good faith" . . . , the parties basically made an "agreement to agree" to something in the future, and such agreements have generally been held unenforceable, both in this jurisdiction and others." Id.