Cobble Hill Nursing Home, Inc. v. Henry & Warren Corp. - 74 N.Y.2d 475, 548 N.Y.S.2d 920, 548 N.E.2d 203 (1989)

Rule:

A price term is not necessarily indefinite because the agreement fails to specify a dollar figure, or leaves fixing the amount for the future, or contains no computational formula. Where at the time of agreement the parties have manifested their intent to be bound, a price term may be sufficiently definite if the amount can be determined objectively without the need for new expressions by the parties; a method for reducing uncertainty to certainty might, for example, be found within the agreement or ascertained by reference to an extrinsic event, commercial practice or trade usage. A price so arrived at would have been the end product of agreement between the parties themselves.

Facts:

The receivership agreement and the lease agreement gave the plaintiff nursing home receiver an option to purchase the nursing home at a price determined by the state health department in accordance with the New York Public Health Law and the health department's applicable regulations. The plaintiff receiver exercised the option. The health department supplied a computation of the purchase price, which it stated was the Medicaid allowable transfer price. The defendant nursing home lessor, however, refused, stating that it had no intention of selling the facility in question at a price to be established by the Department in accordance with the Public Health Law as it was presently constituted. According to the defendant, the transfer price established by the provisions was confiscatory in that it bore no relation to market value or any other reasonable criteria of true value for the facility. Plaintiff receiver filed an action for specific performance. The trial court dismissed plaintiff receiver’s suit on the ground that the option was void for indefiniteness. The appellate court affirmed. Plaintiff receiver challenged the decision. 

Issue:

Was the option void for indefiniteness, thereby warranting the decision against the plaintiff receiver? 

Answer:

No.

Conclusion:

On appeal, the court held that the price term was sufficiently definite, and thus, the option was enforceable. According to the court, where at the time of agreement, the parties manifested their intent to be bound, a price term was sufficiently definite if the amount could be determined objectively without the need for new expressions by the parties. Here, the option manifested the parties' intent that the price was to be fixed by the health department, itself providing an objective standard without the need for further expressions by the parties. Further, the health department's regulations provided a means of fixing a purchase price. Accordingly, the court reversed the order of the appellate court and granted judgment in the plaintiff receiver's favor.