Alaska Fur Gallery, Inc. v. Tok Hwang, 2017 Alas. LEXIS 43

Background

Hwang held a lease on commercial property and subleased it to Alaska Fur Gallery for three summers at $55,000/year; the sublease stated: “Lease includes an option to purchase premises with lease amount to be applied to negotiated purchase price.”
Alaska Fur sought to exercise the option in 2014 and commissioned an appraisal that valued the leasehold at $150,000–$155,000 but noted difficulty obtaining comps and opined $55,000 rent was above market.
Hwang refused to sell, asserting no price or terms had been agreed and that rent was not creditable to any purchase price.
Alaska Fur sued seeking specific performance (transfer of the leasehold) or, alternatively, damages equal to excess rent over fair rental value; Hwang moved to dismiss/for summary judgment asserting the option violated the statute of frauds and was unenforceable.
The superior court held the option provision unenforceable for lack of an essential term (price or method to determine price) and also rejected enforcement as an agreement to negotiate; Alaska Fur appealed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Was the lease clause an enforceable option to purchase?	The clause created an option; rent should be credit against a negotiated purchase price and court can fix price (appraisal).	No definite price or price-determination method; too indefinite to enforce.	Clause unenforceable as an option for lack of price or workable method to determine price.
Did the clause create an enforceable agreement to negotiate?	“Negotiated purchase price” implies a duty to negotiate in good faith; refusal to negotiate breached that agreement.	Mere reference to negotiation is insufficient; no dispute-resolution method or basis to determine breach.	Not enforceable as an agreement to negotiate—no mechanism to resolve disputes or measure breach.
Did Hwang breach the implied covenant of good faith and fair dealing?	Implied covenant required Hwang to enter good-faith negotiations to sell.	No enforceable option/agreement existed; covenant cannot create new obligations beyond parties’ expectations.	No breach: court will not imply a duty to negotiate or sell where contract terms do not support it.
Are damages or other remedies appropriate (e.g., applying rent to purchase price)?	Specific performance or damages for excess rent (difference between $55,000 and fair rent).	No basis for such remedies without an enforceable option or proven negotiated price; damages speculative.	No remedy awarded on claim to transfer or to apply rent; alternative damages claim unsupported by record.

Key Cases Cited

City of Kenai v. Ferguson, 732 P.2d 184 (Alaska 1987) (court may imply reasonable rent-adjustment mechanism when intent and context show parties expected market-based renegotiation)
Rego v. Decker, 482 P.2d 834 (Alaska 1971) (specific-performance of option enforced where option contained detailed terms or could be sensibly completed by court)
Davis v. Dykman, 938 P.2d 1002 (Alaska 1997) (agreements to negotiate or vague settlement terms are unenforceable absent a specific method to fix essential terms)
Valdez Fisheries Dev. Ass’n v. Alyeska Pipeline Serv. Co., 45 P.3d 657 (Alaska 2002) (letters lacking price and duration fail to show meeting of the minds; agreement too indefinite to enforce)
Cikan v. ARCO Alaska, Inc., 125 P.3d 335 (Alaska 2005) (summary-judgment standard and contract gap-filling principles)