Lease Not Frustrated by Pandemic Shutdown
Updated: Aug 16
A trial court ruling favoring a commercial landlord was affirmed because shutdown orders issued during the COVID-19 pandemic did not give rise to a valid frustration of purpose defense to excuse the tenant from performing under the lease. The landlord sought unpaid rent and possession. The trial court awarded both damages and possession. On appeal, the tenant argued that shutdown orders caused a three-month closure of the business, frustrating the lease's purpose. The appeals court rejected the argument and upheld the award.
WHY THIS IS IMPORTANT…Noting that the lease was already seven years into a ten-year term, the court ruled that a three-month shutdown order did not frustrate the lease's purpose. The tenant did not establish that the purpose of the lease was so frustrated that the transaction between the parties made little sense. The frustration of purpose doctrine addresses circumstances where an unanticipated event entirely or substantially destroys the contract's overall purpose, destroying the value of performance. This decision is basically where these cases are ending up around the country.