Friday, February 26, 2021
Commercial tenants who are unable to pay their rent as a result of COVID-19 shutdown and capacity-limit orders have, thus far, found little relief from courts, who have by and large rejected their common law defenses seeking a discharge of lease obligations. One recent Massachusetts case, however, sides with a commercial tenant, albeit under narrow circumstances, approving of the often-unsuccessful “frustration of purpose” defense.
In
UMNV 205-207 Newbury, LLC v. Caffé Nero Americas Inc., pending in Massachusetts Superior Court, the defendant tenant Caffé Nero could not make its rent payments after Massachusetts Governor Charlie Baker barred all restaurants in Massachusetts from allowing on-premises dining. In a lawsuit for damages filed by landlord UMNV, Caffé Nero argued that its rental payment obligations should be discharged under the “frustration of purpose” doctrine, which excuses a party from performing contractual obligations when an event neither anticipated nor caused by either party, the risk of which was not allocated by the contract, destroys the purpose of the contract, thereby destroying the value of the performance.