Is it really a breach of contract when the circumstances didn’t allow you to fulfil the contract?
Lachman’s Emporium is suing the now-closed Looker’s Music Cafe for not paying over $360,000 in rent.
Closure of Nightclubs Due to COVID-19 As Defence
In its suit, the landlord is claiming rent amounting to $366,400. There is also interest of $25,281.60 for non-payment of the rent.
The landlord, Lachman’s Emporium, applied to the High Court for summary judgement. This means that they asked the court to basically let them win the case without going through a full trial.
However, the ex-tenant, Looker’s Music Cafe, said that the closure of nightclubs due to COVID-19 restrictions made it impossible for the premises to be used for its agreed-on purpose.
They are thus relying on the legal doctrine of frustration. It allows them to remove themselves from obligations when unforeseen events make it impossible for the fulfilment of a contract.
Before you all start trying to discharge yourselves from your contracts, mere hardship or increase in cost to fulfil the contract does not count!
Furthermore, the closed nightclub argued that the four-month rental waiver under the COVID-19 temporary relief measures wasn’t sufficient to cover their costs.
High Court Ruled Case to Go for Trial
On 27 January, the High Court dismissed Lachman’s Emporium’s application for summary judgement. A written judgement by Justice Choo Han Teck stated that the defendant has raised an issue, namely the legal doctrine of frustration, that should be determined by the court in a trial.
Yes, the main obligation to lease the premise was not rendered impossible by COVID-19 measures. But did both the landlord and ex-tenant have the common purpose of using the place as a nightclub?
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Applied to URA For Change in Premise’s Purpose
The tenancy agreement required the tenant to use the premises as a “pub/bar/cabaret/night club/discotheque/karaoke lounge only” for two years till December 2021.
The agreement was terminated in April 2021. The landlord then applied to the Urban Redevelopment Authority to use the premises as a restaurant, bar or bistro instead.
Justice Choo said that the landlord applying for permission to use the space as a restaurant was evidence that the landlord intended for the premises to be used as a music lounge.
With COVID-19 restrictions shutting nightclubs down in March 2020, that common purpose would’ve been impossible to achieve, thus frustrating the contract.
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