Yes. The pharmacy can legally break the lease. The landlord's promise not to allow another drug store was a huge, essential part of the deal, not just a minor detail. When the landlord broke that key promise, it ruined the whole reason the pharmacy wanted to be there in the first place. Since the landlord didn't hold up their end of the bargain on such an important issue, the pharmacy didn't have to keep paying rent.

Yes, the drug store was allowed to leave and stop paying rent. The landlord's promise that they would be the only drug store was super important and the main reason they rented the space. The landlord broke this big promise by letting the doctor sell drugs too. This really hurt the drug store's business in a major way.

When figuring out leases, we need to look at them like contracts and try to understand what both sides really wanted. The drug store made it clear the 'only store' promise was a huge deal to them. By letting the doctor sell drugs and not fixing it after the drug store complained, the landlord basically said they didn't care about their promise.

The landlord's broken promise was a big deal that went against the main reason the drug store rented the space, even if it's hard to put an exact dollar amount on how much business they lost. The drug store didn't give up their right to leave, since they complained right away and tried to get the landlord to fix things before finally moving out.

I agree with the final decision, but I see the matter a bit differently. I think the key promise—that only the defendant could run a drug store in the building—was broken because the owner let another similar business operate without acting fast. This hurt the defendant’s business because it lost its unique advantage. Unlike the detailed approach seen in the majority opinion, I focus on how the delay in stopping the problem made things worse. The owner’s hesitation showed they were not fully committed to protecting the promise, and that is why I support this judgment.

"Waiver may be shown by conduct; and it may be the result of an act which, according to its natural import, is so inconsistent with the intent to enforce the right in question as to induce a reasonable belief that such right has been relinquished

Courts taking this position hold that only the material covenants of a lease are mutually dependent.

—the tenant leased space in the lessor's building for use as a drug store; the lease contained an express prohibition against the landlord leasing other space in the same building for that purpose.

Commercial leases "should be construed according to the rules for the interpretation of contracts generally and in conformity with the fundamental principle that the intentions of the parties should be given effect as far as possible

Factors considered in determining whether a covenant is independent or dependent overlap with factors considered in determining whether a breach is material.

The evolution of landlord tenant law progressed from status to property to contract and has been continuously plagued by tensions resulting from the simultaneous operation of property law and contract principles

The court reasoned that since a lease constitutes both a conveyance of a leasehold interest [2] and a contract

—a breach of contractual right in a trivial or inappreciable respect will not justify rescission of the agreement by the party entitled to the benefit in question

While it is true that a lease is primarily a conveyance in that it transfers an estate to the lessee, it also presents the aspect of a contract.

"This dual character serves to create two distinct sets of rights and obligations— `one comprising those growing out of the relation of landlord and tenant, and said to be based on the "privity of estate," and the other comprising those growing out of the express stipulations of the lease, and so said to be based on "privity of contract

Yes. A lessor's breach of a restrictive covenant that goes to the whole consideration of the lease justifies the lessee's termination. Leases are not merely conveyances but are also contracts, and their covenants should be interpreted according to the parties' intentions. Here, the restrictive covenant was not incidental; it was a dependent covenant vital to the lessee's business, which relied on patronage from the building's professional tenants. The lessor breached this covenant both by executing an ambiguous lease with Dr. Boonshaft that it knew would permit a competing drug store, and by acquiescing in the violation after being notified by Horton & Converse. Because the breach was material and frustrated the entire purpose of the lease for Horton & Converse, it was justified in rescinding the contract and vacating the premises without further liability for rent.

Yes, the lessor's breach of the restrictive covenant justified the lessee's termination of the lease and refusal to perform further obligations under it, because the covenant was a dependent one that went to the whole consideration of the lease for the lessee. The lessor's allowance of a competing drug store on the ninth floor was a substantial breach that defeated the lessee's entire purpose in entering the lease. 

The lease should be interpreted according to general contract principles to give effect to the parties' intentions. The restrictive covenant was vital to the lessee's business and thus a dependent covenant, the breach of which entitled the lessee to terminate the lease. The lessor's conduct in allowing the competing drug store and failing to resolve the lessee's protest amounted to acquiescence in the breach. 

The breach was substantial and material, going to the root of the consideration for the lessee, as the loss of business from the competing store was significant though difficult to quantify monetarily. The lessee did not waive the breach, as it promptly protested and took reasonable steps before vacating.

I concur in the judgment, but my reasoning diverges in part from that of the majority. I affirm the outcome because the plaintiff’s leasing to Dr. Boonshaft fundamentally breached the exclusive covenant by allowing a competing drug establishment to operate in an environment that was promised to be free of such competition. Unlike the majority, which emphasizes the contractual interdependence of the lease provisions, I place greater weight on the plaintiff’s delay and inaction in addressing the breach because this delay effectively amounted to a tacit waiver of its duty to protect defendant’s business. In my view, the failure to act immediately not only undermined the purpose of the exclusive covenant but also intensified the financial harm to the defendant, thereby justifying the rescission of the lease.

Medico-Dental Building Co. v. Horton & Converse

Case Podcast

Rule of Law:

The Legal Principle

Facts:

Procedural Posture:

How It Got Here

Issue:

Legal Question at Stake

Opinions:

Majority, Concurrences & Dissents

Analysis:

Why This Case Matters

Gunnerbot