Lloyd v. Murphy
Supreme Court of
25 Cal.2d 48, 153 P.2d 47
Facts: Before the
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.