The Indiana Court of Appeals recently granted a church’s petition to rehear a breach of contract case and reaffirmed its previous ruling against a church that had failed to carry out the terms of its lease with its landlord.
In Randy Faulker & Associates, Inc. and Randall W. Faulkner v. The Restoration Church, Inc., 41A01-1506-PL-706, the lease agreement between Randy Faulker & Associates, Inc. (“Landlord”) and The Restoration Church, Inc. (“Church”) called for the Church to give the Landlord timely notice of its intent to renew its lease each year. Despite continuing to pay rent and occupying the premises, the Church never provided the Landlord with such notice. After some time, the Landlord informed the Church that the lease was terminated due to non-renewal and that the Church would have to vacate the premises. In response, the Church filed suit against the Landlord for, amongst other things, breach of contract.
Initially, the trial court found for the Church, determining the Landlord waived its right to a timely notice of the Church’s intent to renew the lease when it accepted the Church’s untimely notices and annual rent payments. The Indiana Court of Appeals reversed that decision, however, concluding that the act of holding over and paying rent did not constitute sufficient notice to the Landlord from the Church because the lease specifically called for written notice of intent to renew the lease in advance of the lease term ending.
The Church filed a petition for rehearing in the Court of Appeals, arguing that the court failed to take into account a provision of the lease which the Church argued imposed a duty of good faith on both parties, and the Landlord breached that duty by lulling the Church into believing that, in practice, the specific notice of renewal requirement would not be enforced. The Court of Appeals granted the Church’s request for rehearing but reaffirmed its decision in favor of the Landlord.
In reaffirming its prior decision, the Court of Appeals identified another provision in the lease that said the Landlord’s failure to enforce one term of the lease “shall not be deemed a waiver of any subsequent breach or default.” The Court held that the general lease provision pertaining to “good faith” did not supersede the more specific and express provisions found elsewhere in the lease.
This case illustrates the importance not only of careful contract drafting but also of the necessity for parties to carefully read and abide by the express terms of their contracts.
For more information about this or any other area of contract law, please contact attorney Steve Theising at stheising@KDDK.com or (812) 423-3183, or contact any member of the KDDK Business Law practice team.
About the Author
Steven M. Theising, an attorney at Kahn, Dees, Donovan & Kahn, LLP (KDDK), in Evansville, Indiana, practices primarily in the areas of business, real estate, tax and employee benefits, construction, and healthcare law. Steve utilizes his accounting and financial background to provide both legal and practical business analysis in negotiating, resolving and closing business, construction and real estate transactions and disputes. He also assists clients with addressing and resolving estate planning issues.