Sufficiently Definite Option

In the atypical setting of an appeal from an arbitration award (under the TAA), the Fifth Court concluded that the price set by an option agreement was sufficiently definite:

[T]he Option Provision included a formula to determine the purchase price, limiting the purchase price to the greater of the mutually agreed upon appraiser’s calculations, including assumption guidelines for same, or a definite sum of taxes owing, present value of anticipated tax credits not yet received by limited partner, and $100.00. In reaching this conclusion, we reject MHT’s argument that this case is similar to that of Playoff Corp. v. Blackwell, in which the parties entered into an employment contract that promised the employee 25% of a portion of the company’s fair market value upon his termination but did not agree, however, on how the company’s fair market value would be determined, instead agreeing that it would be determined based on a specific formula that the parties would have to agree to in the future after “later negotiations.”

The Court also said: “[W]e agree with other courts that have held that when parties to an agreement specify that a third person is to fix the price, the contract is not unenforceable for lack of definiteness.” Multi-Housing Tax Credit Partners XXXI v. White Settlement Senior Living, LLC, No. 05-22-00721-CV (Jan. 26, 2024) (mem. op.).