Hugo Boss - CONTRACT PERFORMANCE & BREACH

Question 1

Facts

Answer 1

HB operated retail store in NYC under 13-year commercial lease with LL A/R Retail. Then Covid hit, and NY imposed restrictions on in-store shopping, including temporary closure and then capacity limits. LL sued for nonpayment of rent. HB claimed common law defenses of “frustration of purpose” & “impossibility of performance” to rescind/reform lease; that under the lease terms, the pandemic was (1) a “casualty” rendering premises untenantable, (2) that pandemic was a “hazard” entitling HB to rent abatement and recovery of “overpaid” rent.

Question 2

Holding

Answer 2

No. Summary Judgment for Landlord. HB claims dismissed.

Question 3

Reasoning

Answer 3

(1) Tenant not entitled to invoke lease provision for termination in event of “casualty” because pandemic is not a casualty as term denotes physical damage to premises. HB also never exercised option to terminate.
(2) Tenant not entitled to rent abatement/reduction due to existence of “hazard” that rendered premises unusable, because HB provided no evidence that the property was “completely or partially destroyed” or “damaged” as required under lease terms. Tenant merely argued their use suffered.

Question 4

Reasoning

Frustration of purpose = ?

Answer 4

“Frustration of purpose” is a “narrow” common law defense that requires that “the frustrated purpose must be so completely the basis of the contract that, as both parties understood, without it, the transaction would have made little sense.” Works like an “implied condition.” Requires (1) “complete destruction of basis of the contract”, (2) that event frustrating K be “wholly unforeseeable.” Here, the pandemic & gov’t orders did not completely destroy HB’s purpose, just made it less profitable