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PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT IN THIS COMPLEX BREACH OF CONTRACT ACTION INVOLVING THE SALE OF A BUSINESS AND A RELATED LEASE WAS PROPERLY GRANTED; THE TERMS OF THE CONTRACTS WERE UNAMBIGUOUS AND NEITHER THE DOCTRINE OF PREVENTION NOR THE DOCTRINE OF FRUSTRATION OF PURPOSE APPLIED (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Mazzarelli, determined plaintiffs’ motion for summary judgment in this complex business-sale and lease breach of contract action was properly granted. The transaction involved the sale of an ambulatory surgery business and lease of the premises to the buyer. More specifically, the transaction included an asset purchase agreement, an administrative services agreement, a lease agreement and a personal guarantee. The facts are too involved to fairly summarize. Essentially, the buyers (defendants) defaulted on several aspects of the contracts and their defenses were rejected. The First Department held the terms of the contracts were clear and unambiguous, the doctrine of prevention did not apply, and the frustration of purpose doctrine did not apply:

“`[U]nder the doctrine of prevention, when a party to a contract causes the failure of the performance of the obligation due, it cannot in any way take advantage of that failure'” … . In other words, “a party to a contract cannot rely on the failure of another to perform a condition precedent where he has frustrated or prevented the occurrence of the condition” … . …

“In order to invoke the doctrine of frustration of purpose, 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” … . Examples of a lease’s purposes being declared frustrated have included situations where the tenant was unable to use the premises as a restaurant until a public sewer was completed, which took nearly three years after the lease was executed … , and where a tenant who entered into a lease of premises for office space could not occupy the premises because the certificate of occupancy allowed only residential use and the landlord refused to correct it  … .

However, “frustration of purpose . . . is not available where the event which prevented performance was foreseeable and provision could have been made for its occurrence” … . Center for Specialty Care, Inc. v CSC Acquisition I, LLC, 2020 NY Slip Op 03631, First Dept 6-25-20

 

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