Alaska Fur Gallery, Inc. v. Tok Hwang

Rule of Law:

An option to purchase property is unenforceable if it lacks an essential term, such as the price or a definite method for determining the price. Similarly, a clause referencing a 'negotiated purchase price' does not create an enforceable agreement to negotiate unless it includes a specific method for resolving disputes.

Facts:

• Tok Hwang, the lessee of a commercial lot, subleased the property to Alaska Fur Gallery, Inc. in April 2012 for a three-summer term.
• The sublease agreement required Alaska Fur to pay $55,000 in annual rent.
• The agreement contained a clause stating: “Lease includes an option to purchase premises with lease amount to be applied to negotiated purchase price.”
• An owner of Alaska Fur, Manuel Hernandez, later stated he knowingly agreed to an above-market rent because he believed the rent payments would be credited towards the purchase price upon exercising the option.
• In 2014, Alaska Fur attempted to exercise the option and obtained an appraisal valuing the leasehold at $150,000 to $155,000 as a basis for discussion.
• Hwang refused to negotiate a purchase price or sell the leasehold, and the parties failed to reach an agreement.
• Hwang’s attorney informed Alaska Fur that no price or terms had ever been agreed to, rendering the option invalid.

Procedural Posture:

• Alaska Fur Gallery, Inc. sued Tok Hwang in superior court (the trial court), alleging breach of the lease agreement.
• Alaska Fur sought an order compelling Hwang to transfer the leasehold to it.
• Both parties moved for summary judgment.
• The superior court granted summary judgment in favor of Hwang, ruling that the option provision was unenforceable as written because it lacked an essential term (price).
• The superior court also held that the provision was not an enforceable agreement to negotiate.
• Alaska Fur (as appellant) appealed the superior court's summary judgment decision to the Supreme Court of Alaska.