Lindner v. Mid-Continent Petroleum Corp.

Supreme Court of Arkansas · Property

Propertyleasesconsiderationmutualityleasemutualityconsiderationillusory promise

Facts

Mrs. Lindner leased her filling station to Mid-Continent for three years, with an option to extend for two more years, at a rental of one cent per gallon of motor fuel sold on the premises. The lease gave Mid-Continent the privilege of terminating at any time upon ten days' notice to Mrs. Lindner. Mid-Continent subleased the station to Paul Lindner on a month-to-month basis, and the parties arranged to offset rents; Mid-Continent and Paul Lindner also entered a separate supply agreement cancelable on ten days' notice. In 1951, after Paul Lindner removed Mid-Continent advertising and began buying from a competitor, Mid-Continent terminated its sublease and supply agreement with him, and the Lindners then attempted to cancel Mrs. Lindner's lease and refused to surrender possession.

Issue

Whether Mrs. Lindner's lease to Mid-Continent was void for lack of mutuality because Mid-Continent could terminate on ten days' notice while Mrs. Lindner had no similar right. Also, whether Mid-Continent was in default for failing to pay rent after it was wrongfully denied possession.

Rule

The requirement of mutuality does not mean that each party's obligation must be exactly coextensive with the other's; it is enough that each party unconditionally undertakes a duty that the law treats as sufficient consideration for the other's promise. A promise is insufficient only if it is illusory, but a termination clause requiring notice still imposes a binding duty and can supply consideration. When a tenant is wrongfully deprived of possession by the landlord, no rent is due during that period.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Tulsa, Olivia Mercer leased a small warehouse to Red Mesa Supply LLC for four years. The lease allowed Red Mesa to terminate at any time on 14 days' written notice, but gave Olivia no comparable termination right.

If Olivia later argues the lease is unenforceable for lack of mutuality because only Red Mesa may terminate on notice, how should a court rule?

Explanation. The majority treated the issue as one of consideration, not equal reciprocity. A lease is not void merely because the lessee alone may terminate on notice. The key question is whether the lessee undertook any binding legal duty. A notice requirement means the lessee is at least bound through the notice period, which is sufficient consideration. (Derived from Lindner v. Mid-Continent Petroleum Corp. (n.d.).)