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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.

    Points of Law - for Law School Success

    That rule has been stated by us as follows: Where, from the nature of the contract and the surrounding circumstances, the parties from the beginning must have known that it could not be fulfilled unless, when the time for fulfillment arrived, some particular thing or condition of things continued to exist, so that they must be deemed, when entering into the contract, to have contemplated such continuing existence as the foundation of what was to be done; in the absence of any express or implied warranty that such thing or condition of things shall exist, the contract is to be considered as subject to an implied condition that the parties shall be excused, in case, before breach, performance becomes impossible or the purpose of the contract frustrated from such thing or condition ceasing to exist without default of either of the parties.

    View Full Point of Law
    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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