Stop & Shop, Inc. v. Ganem, 347 Mass. 697, 200 N.E.2d 248 (Mass. 1964)
Stop & Shop v. Ganem is a leading Massachusetts decision on whether courts should imply a covenant of continuous operation into commercial leases that provide for percentage rent.
Does a commercial lease that provides for percentage rent, in addition to a fixed minimum rent, include an implied covenant requiring the tenant to continuously operate its business on the premises to generate sales absent an express continuous-operation clause?
Courts will not imply a covenant of continuous operation in a percentage-rent lease absent clear contractual language or necessity to effectuate the parties' intent. An implied covenant arises only when indispensable to give the contract business efficacy and when it is so clearly within the contemplation of the parties that they deemed it unnecessary to express. The presence of a substantial fixed minimum rent strongly weighs against implying a duty to continuously operate, and courts are reluctant to impose open-ended personal service or operational obligations that the parties did not bargain for in express terms.
No. The Supreme Judicial Court of Massachusetts held that the lease did not contain an implied covenant requiring Stop & Shop to continuously operate its supermarket or otherwise generate sales. Because the lease provided for a substantial fixed minimum rent and lacked any express continuous-operation clause, the tenant did not breach the lease by ceasing retail operations while continuing to pay minimum rent.
Stop & Shop v. Ganem is a cornerstone case in commercial leasing and contract law. It teaches that percentage-rent structures do not, by themselves, create an implied duty to operate; if a landlord wants to prevent a tenant from going dark, the lease must say so expressly. The case underscores the limited role of implied covenants, the importance of minimum-rent provisions in risk allocation, and the judiciary's reluctance to impose ongoing operational duties without clear agreement. For law students, it is a prime example of how courts harmonize contract-interpretation principles with property-law concepts in modern commercial leasing.