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20th Century Lites, Inc. v. Goodman

    Brief Fact Summary.

    Plaintiff sued Defendant when Defendant ceased making payments for the neon signs he leased from Plaintiff because the United States government issued an order prohibiting all outside neon or lighting equipment between the hours of sunset and sunrise. The trial court found that the purpose of the contract had been frustrated and that, consequently, both parties were excused from performance. Defendant appealed.

    Synopsis of Rule of Law.

    Performance under a contract is excused where the purpose of the contract is frustrated without the fault of either party.

    Facts.

    On September 3, 1941, 20th Century Lites, Inc. (Plaintiff) agreed to lease neon sign installations to Herman Goodman (Defendant). Defendant made monthly payments under the lease until August 1942. On August 5, 1942, the United States government issued an order prohibiting all outside neon or lighting equipment between the hours of sunset and sunrise. Defendant thereafter sought to have Plaintiff remove the signs and to have the contract terminated. Plaintiff refused. Beginning September 1, 1942, Defendant ceased making payments. Plaintiff sued. The trial court found that the purpose of the contract had been frustrated and that, consequently, both parties were excused from performance. Defendant appealed.

    Issue.

    Whether performance under a contract is excused where the purpose of the contract is frustrated without the fault of either party.

    Held.

    Yes. The trial court’s ruling is affirmed. Performance under a contract is excused where the purpose of the contract is frustrated without the fault of either party.

    Discussion.

    The doctrine of commercial frustration excuses performance of a contract where the purpose of the contract is frustrated without the fault of either party. 20th Century Lite argues that the purpose of the contract was not frustrated. It relies on San Joaquin L. & P. Corp. v. Costaloupes, 274 P. 84 (1929), in which a court found a contract for the provision of electricity to a tract of land was not frustrated after the defendant’s factory on the land had been destroyed by fire. In that case, the defendant could have rebuilt and availed itself of the electricity. This case is distinguishable because there is nothing Defendant can voluntarily do in order to avail himself of the use of the neon signs.


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