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Golden Bagels, Inc. v. Fairway Plaza Associates

A-7085-95T1 (N.J. Super. App. Div. 1997) (Unpublished)

LEASES; RESTRICTIVE COVENANTS—A retail lease granting a bagel shop protection from direct competition barred leasing to a donut shop because the Court deemed competition to relate to the bagel shop’s “breakfast” business and not solely to its “bagel” business.

The tenant, a bagel store, leased space in a shopping center pursuant to a lease that contained a provision that the landlord would not lease any space to any business which directly competed with the tenant’s. When the tenant learned that the landlord intended to lease space to a donut store, the tenant sought to enforce the direct competition clause and enjoin the landlord from making the lease. The landlord contended that the donut store would not be in direct competition with tenant because tenant sells bagels, not donuts. The trial court entered an order restraining the landlord from entering into the lease with the donut store or any other lease to any business that provides coffee and breakfast foods for morning commuters, ruling that such a store would be in direct competition with the tenant. The judge found the purpose of the restriction against direct competition was to protect the tenant and that simply not renting to another bagel store would afford no real protection. The judge looked to the circumstances of the negotiation of the lease and found that the parties intended to protect not just the main product but also the tenant’s commuter breakfast business, which accounted for more than 80% of tenant’s sales. On appeal, the Superior Court affirmed, holding that the parties’ intent is determinative, and that intent is demonstrated by the language of the lease and the circumstances of its negotiation.


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