“Frustration Of Purpose” Discharges Commercial Tenant’s Rent Obligation

Court Decisions |

By Joel K. Goloskie

While specificity is typically a good thing in contract drafting, sometimes, too much specificity can backfire. A commercial landlord in Boston discovered this recently when the Suffolk County Superior Court discharged rent otherwise owed by a cafe operator during the period when the Governor had issued an emergency order banning on-premises consumption of food and drink. Interestingly, the case was filed not by the tenant, but by the landlord, who was seeking payment of back rent, eviction of the tenant due to default, and attorney’s fees. In fact, the tenant had already quit the premises after receiving an eviction notice.
The lease at issue expressly limited the tenant to using the premises to operate a “Caffé Nero themed cafe,” and not for any other purpose. Because the tenant’s café business was effectively shut down for several months by an executive order barring indoor or outdoor service of food and drink in response to the COVID-19 pandemic, the court found that the “frustration of purpose” doctrine excused the tenant from its obligation to pay rent during the period of that executive order.
The court cited to a 1991 decision by the Supreme Judicial Court (SJC) which held that the “frustration of purpose” doctrine excuses a party to a lease or other contract from performing its contractual obligations “when an event neither anticipated nor caused by either party, the risk of which was not allocated by the contract, destroys the object or purpose of the contract, thus destroying the value of performance.” The court further noted that “either the force majeure provision (which addresses impossibility but not frustration of purpose) nor the independent covenant provision bars this defense.”
While it is anticipated that this decision will be appealed, it was issued by a well-respected jurist of the Business Litigation Section of the Suffolk County Superior Court, and was directly tied to prior SJC case law. As such, many commercial tenants whose businesses were shut down by executive order may find that their obligation to pay rent for that period is excused. Moreover, since the “frustration of purpose” doctrine is not unique to Massachusetts, it should be expected that this issue will continue to be litigated for some time to come. For more information, please contact PLDO Partner Joel K. Goloskie at 866-353-3310 or email jgoloskie@pldolaw.com.

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