Mercury Investment Co. v. F.W. Woolworth Co.
Supreme Court of Oklahoma
706 P.2d 523 (1985)
Mercury Investment Co. (plaintiff) leased shopping-center space to F.W. Woolworth Co. (defendant) as an anchor tenant meant to draw shoppers for the whole center's benefit. The 15-year lease guaranteed Woolworth would pay a substantial minimum annual rent, plus additional percentage rent if its gross receipts exceeded a set base. Woolworth's receipts never exceeded that base, so it never paid percentage rent. Mercury sued to terminate the lease, arguing Woolworth had breached an implied covenant to diligently run its store so as to generate percentage rent and draw customers to the center. The trial court granted summary judgment for Woolworth; the Court of Appeals reversed.
Whether, when a lease includes both a percentage-rent provision and a guaranteed substantial minimum rent, the law implies a covenant to diligently operate the business so as to generate percentage rent.