Facts: When Husband and Wife divorced, the court approved their marital dissolution agreement that provides:
The parties agree the real property situated [in Cleveland] shall be awarded to Wife free and clear of claims by Husband. Husband and Wife will enter into a separate rental agreement allowing Husband to farm, raise crops and livestock for up to seven years. . . . Upon entry of the Final Decree, Husband shall execute a quitclaim deed . . . which transfers his interest in this property to Wife. . . . After seven years, should Wife elect to sell the property, Husband shall have the option of the first refusal regarding the purchase.
Husband executed a quitclaim deed giving Wife his interest in the property.
The parties did not sign a farm lease as contemplated. Husband demonstrated no intention to farm the property.
Wife wanted to sell the property prior to the expiration of the seven-year period so she sued for declaratory judgment to declare the farm-lease provision and seven-year purchase option unenforceable as a matter of law.
The trial court ruled for Husband, holding he had a right of first refusal to purchase the property for seven years from the date the parties signed the marital dissolution agreement.
On Appeal: The Court of Appeals reversed the trial court.
Marital dissolution agreements are valid and enforceable contracts. Each provision of MDA should be construed in light of the entire MDA, and the language should be given its natural and ordinary meaning. When the language of the MDA is plain and unambiguous, Tennessee courts determine the intent of the parties from the four corners of the contract and enforce its plain terms as written without considering extrinsic evidence. All provisions of the MDA should be construed in harmony with each other to promote consistency and to avoid conflict between the provisions of the MDA.
The Court held that Wife could sell the property because Husband showed no interest in farming on the property during the seven-year period:
Construing the contract as a whole, as we are required to do, we find that the seven-year purchase option was tied to the farm lease contemplated by both parties. Obviously, the parties intended entering a farm lease prior to the Wife selling the property. Here, the provision states: “Husband and Wife will enter into a separate rental agreement allowing the Husband to farm, raise crops and livestock for up to seven years.” There is no serious debate as to the meaning of this provision. It is clear, unambiguous, and susceptible to only one interpretation. The provision continues that “after seven years, should Wife elect to sell the property, Husband shall have the option of the first refusal regarding the purchase.” This second provision gives the Husband a purchase option at the conclusion of the farm lease. The parties not having subsequently entered into the contemplated farm lease, the seven-year restriction is left orphaned. Separating these provisions therefore creates an ambiguity as to the running of the option. Such interpretation ignores that the parties intended to first enter into a farm lease.
Significantly, the MDA makes no provision for the parties not entering into a farm lease. . . . Giving the language of the provision its usual and ordinary meaning, it is obvious that the parties intended for [Wife] to be free to sell it, subject to [Husband’s] right of first refusal. Construing the contract as a whole, it appears to this court that the parties intended that [Husband] have the right of first refusal once a farm lease was no longer in the picture. It is uncontroverted that the parties did not subsequently enter into the contemplated farm lease, so [Wife] will not be in breach of contract for selling the property, as long as she gives [Husband] the right of first refusal.
The intent of the parties within the four corners of the document reveals that the parties intended [Husband] to have a right of first refusal once [Wife] was free to sell the property.
The trial court’s judgment was reversed, but Husband’s right of first refusal stands intact.
K.O.’s Comment: Mere agreements to agree are not enforceable. Contracts for future actions are only valid if they specify all material and essential terms. Here, both the trial court and the Court of Appeals found the farm-lease provision unenforceable because of its uncertainty, vagueness, and its reference to future action without sufficiently definite terms.