Lloyd v. Murphy

Supreme Court of California, 1944.

25 Cal.2d 48, 153 P.2d 47

Dawson, pp. 681-684


Facts: Before the United States entered World War II, the plaintiffs leased some land to the defendant for five years solely to sell cars and gas unless the defendant got written permission to use it for other activities.  After the United States entered the war, the government ordered most new car sales discontinued.  The defendant got an oral waiver of the contract’s conditions from one of the plaintiffs.  However, the defendant left the premises and gave written notice that he was repudiating the contract.  The plaintiffs first gave written notice to the defendant reaffirming their oral waiver, then they gave up and started renting the property to others.  The plaintiffs sued for unpaid rent.  The trial court found for the plaintiffs, saying that war conditions hadn’t relieved the defendant of his duty under the contract.  The defendant appealed.


Issue: Was the purpose for which the property was leased so frustrated by war conditions that the defendant will be excused from performance?


Rule: Frustration arises when the “expected value of performance to the party seeking to be excused has been destroyed” by an unexpected event that causes an actual failure of consideration.


Analysis: The court finds that both parties knew that war was coming and that the government’s action of stopping all car sales was not unforeseeable.  Furthermore, the possibility for the defendant of selling new cars was not completely eliminated but merely restricted.


The court also refuses to apply the doctrine of frustration to this case on public policy grounds.  It would be expensive and wasteful for tenants to repudiate leases just because their businesses weren’t as successful as they expected.  This doctrine is only meant to be used in extreme cases, the court says.  The purpose of a lease must be totally destroyed or must become really difficult to accomplish in order for a lessee to be excused from paying rent.


Conclusion: The trial court’s judgment is upheld and the defendant must pay the back rent.


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