Break lease with rustration of Purpose?
all right hi again and welcome back to attorney Steve contracts college okay so we get a lot of people asking me a lot of things on Facebook a lot of questions on YouTube people calling saying how do I get out on my lease I am like stuck I’m not making any business I have a three four or five thousand dollar month rental payment on a residential or commercial property without further ado let’s head to the attorney Steve litigation white board and find out one way that you may be out be able to get out of your contract so let’s head on over to our contracts college up here okay so I’m gonna tell you about the Kellett this is California law check the law in your state every state is different of course this is general legal information only not legal advice okay so but this is the case of lloyd versus Murphy this is a case that worked its way up to the California Supreme Court in 1944 this was back in World War two kind of some unprecedented times back then in precedent unprecedented times right now with this coronavirus covet 19 a KA China virus so it’s called all kinds of things so here we have a case back then we had in June of 1940 we had the National Defense Act okay so this act was already in place it was an act of Congress a federal law and it was already in place but the parties Lloyd and Murphy’s despite that and turned into a contract a few months later as you can see but a little bit over a year later about 14 months later they entered into a contract to as I have here selling servicing new cars there were some few exceptions for used cars repairs and gas so the parties entered into a contract for you property law students out there that creates what type of interest a leasehold interest that creates a leasehold interest and in general you know when you lease the property generally it’s yours so a lot of courts will say hey you know what you leased it you assume the risk you assume the risks of the good times and the bad okay but here’s what happened so obviously they entered into contract so there were certain things that they assumed that the property would be usable for that purpose there’s certain as I put over here certain presupposed conditions that parties have when they enter into a contract so here they entered into this contract and here we go from 8 441 right up here what’s that a few months later three four months later all of a sudden under the Act they restrict the sales first of all they prohibited this sales and then they amended it to say we can restrict the sale of new new vehicles to military vehicles only ok so there was a prohibition or a restriction on selling the new cars and so the party to the contract said you know what this is how I make my money I sell new cars what’s going on here this contract I want out I want out so the real question is can you get out can you get out now a lot of companies are going through this right now with the covet big companies small company retail companies restaurants a lot of restaurants can’t pay the bills right now ok in fact you I was just watching the other day on the news with Louisiana during a Mardi Gras area there’s like these companies are used to making you know thousands and thousands if not millions of dollars and you go and there’s the take out only you know that’s gonna be tough to stay in business a lot of people are laying people off when you lay people off you don’t have people working for you don’t raise the revenues ok so it sucks for everybody so he wants out he says I can’t sell the cars anymore landlord says we’ll wait a second you can still service cars you can still repair cars you can still sell gas hey and I’ll even let you do other things if you want just let me know so Tennant says now I want out I want out question is can he get out ok this is the doctrine of frustration of purpose ok if you go to law school you’re gonna find this a lot of people are brushing up now most the smart people are coming to attorney Steve contracts college ok I don’t want to brag but I did am juror got the top grade in contracts law I don’t want to brag but sometimes you have to toot your own horn anyway so he comes back World War two restricts it and the doctrine of frustration of purpose was raised and went up to the California Supreme Court and I’m gonna post down here I’m gonna post some case law in the message section the description section down here so make sure you check that out it’s gonna have some good case law for you okay if you need to cite it or you want to read up on some further cases okay so he says now let’s talk about once out of the contract landlord says no I’m not letting you out and eventually he fought he sends his notice of repudiation there’s your there’s your contract word of the day it just feels good to say that repudiation repudiation say that just say just rolls off your tongue feels good that means to cancel or terminate your contract so he the tenant did it first orally and then followed up in writing and then said okay I hope it works landlord said I’m filing a motion well first of all the landlord followed his duty to mitigate duty to mitigate because you can’t collect damages that you don’t mitigate he went out and he did find a new tenant which is the duty and but however there was someone paid rent and landlord said you know what you’re paying that rent you’re paying that rent okay so the doctor and a frustration of purpose I want you to realize this is very limited okay very limited the courts in very few limited circumstances want to actually let you out of your contract okay a lot of times you’re assumed to to assume the risk that it you know just because you’re making less money now just because you were making 50,000 a month now you’re making 2,000 a month because of the coronavirus a lot of courts are probably gonna say yeah you know things happen and you take the risk right but the doctrine of frustration of purpose is a recognized doctor and I have it up here okay now but there’s some very strict rules like to try to get this to actually work in a court case and by the way we do offer low-cost consultations to review your contracts let you know where you stand and also if you need to work out do commercial loan workouts but take a look at this first of all it requires let me switch my color up here so you can follow me unforeseeable risk so if the risk was foreseeable like they said here in the Lloyd vs.
Murphy case it was seeable we were kind of in war times like you didn’t know this you didn’t know that maybe they would stop selling vehicles now you can argue these things you know lawyers do they get paid to go to court and argue these things but it was foreseeable so it can’t be a foreseeable risk now many times now we can probably say covet viral I mean who who anticipated a global pandemic right after you enter into lease so that’s something that’s probably gonna be argued we’ll see how it turns out presuppose conditions turn out to be false you thought that there you know that you were going to be able to legally use your unit then they pass a law and that says you know selling guns is now illegal so now you got to shut down your shop okay now that would be raise the Second Amendment issue don’t get me wrong but things that you presuppose turn out to be false that’s gonna help your case your lease has a no value okay so really the the crux of this is you want to be able to go to court and say judge my lease has absolutely no value whatsoever I can’t do this I can’t do that it’s impossible I can’t make much money anymore like like nothing so there has to be a severe lack of value in the return performance okay so again it this is not going to work in every case I don’t want people to get excited and go frustration of purpose I saw it on attorney Steve Channel contracts college know it’s gonna be very limited now for example let me switch here I’ll stay here sublease if you can if your contract contemplates subleasing rights that’s a little value you can go sublease go find another party now it’s a lot of work it’s not going to be easy but there there’s still value in your leasehold interest okay so that may that may hurt your claim if you have a subleasing clause in there now it may depend if the contract is if the landlord can withhold is consent or so that’s where you have to review the contract okay or here’s another thing you may also look at new purposes okay I was talking with the client today and I said well have you thought about any new purposes things that are listed as essential businesses under these new kovat laws that you see a lot of cities passing states essential business okay I’m not gonna go into those now but if you have this kind of value some kind of value you may not be able to get out of your lease okay if you assume the risks here’s where we have our force majeure I if you haven’t seen my video I’ve got a great video on force majeure everybody’s loving it and it’s hard to spell force Maj EU re force majeure if you assume the risk of an act of God and you signed a clause that says I’m gonna pay rent anyway a smart landlord will have that in there and I’ll say you pay rent anyway okay if you have that in there you probably assume the risk not always you may still want to have your case looked at if you have severe financial hardship I’m sorry I’m sweating cuz all these lights in here finally let’s see so yeah so the court did not release the tenant the court said now you could have foresaw this you assume the risk you know so forth and so on now what a lot of people are doing now is loan workouts commercial workouts they’re saying well tenant landlord first step go to your land and hey you guys doing this I mean you helping me out we’re struggling we’re all struggling you know when the tide goes down it goes down for everybody when ty goes up usually helps a lot of people okay working it out seeing if your landlord or work on it if they won’t then you need to maybe look at some more forceful options okay and again this is gonna be a limited frustration of purpose doctrine but it is on the books I’m gonna read you a quote in a second here evictions now we’ll check your city in your County your state a lot of cities counties States are now restricting the ability to evict saying if a tenant is late commercial or residential they’re doing this in Fresno now my hometown my hope not my hometown my college alma mater FSU go Bulldogs they’re restricting the residential commercial evictions okay so look look at and see if that may be a remedy for you there also some cities and counties states offering loans check that out so check out your jurisdiction are there any loans available for example I just noticed in Fresno they have what I call to save the small business act I believe it’s called interest free if you stay in business for a year you do not have to pay the loan back okay so that’s pretty nice so check the RULES see what options are available out there if you need a contract review and you just saved I’ve got nothing else to look at is or anything possible did the landlord breach the contract is there anything I can look at you can find us on the web at attorney Steve dot-com the first name in legal services so I hope this has been helpful it’s a general legal overview here some good contract language some good understanding of defenses and how something like this might work out in real life okay so again you can find us on the web TV com be nice to each other don’t horde at the grocery store so have fun be safe we’re gonna get through this we are gonna get through this people stay positive keep your heads up the doctrines of impossibility commercial impracticability or as a Uniform Commercial Code knows it excuse by failure of presupposed conditions comprised unclimbed Peaks of contract doctrine clearly all of the famous early and mid 20th century mountain airs Corbin Williston and Farnsworth and many lesser men have made attempts on this topic but none has succeeded in conquering the very summit in spite of attempts by all the contract buffs and even in the face of eloquent and persuasive general statements it remains impossible to predict with accuracy how the law will apply to a variety of relatively common cases both the cases and the cold commentary are full of weasel words such as severe shortage market increase and basic assumptions and force majeure
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