Under the doctrine of commercial frustration, if the occurrence of an event, not foreseen by the parties and not caused by or under the control of either party, destroys or nearly destroys the value of the performance or the object or purpose of the contract, then the parties are excused from further performance. If, on the other hand, the event was reasonably foreseeable, then the parties should have provided for its occurrence in the contract.
Adbar, L.C. v. New Beginnings C-Star
Defendant, a rehabilitation facility, entered negotiations with plaintiff to lease a building in St. Louis. Upon receiving a preliminary indication from the zoning administrator that its use of the building would be permitted, the parties entered a three-year lease. Afterwards, the city denied defendant's occupancy permit application.
Defendant appealed the decision, but was denied again. Defendant sought and was granted a writ from the circuit court for an occupancy permit, but this was revoked. This was then reissued, but the state then threatened to rescind all state contract with defendant if it moved into the new location. Defendant then decided not to occupy the building, and plaintiff sued for breach of contract.
Trial court ruled that defendant was excused from its performance because of commercial frustration.
Does the doctrine of commercial performance excuse defendant's performance?
The possibility of defendant's funding being rescinded is alleged to be a intervening event that would frustrate the lease agreement. The possibility of a state funded organization to have its funding rescinded is foreseeable. Likewise it is foreseeable that a drug and alcohol abuse treatment facility could encounter neighborhood resistance when attempting to move into a new location.
In addition, neither the value of nor the purpose of the lease was actually destroyed. Defendant's funding was never rescinded or restricted, and the purpose of allowing a rehabilitation center to operate still existed.
No, the doctrine of commercial frustration does not excuse defendant's performance. Reversed in part.