Summary: Was COVID-19 and its resulting public health rules implemented to combat it, a “casualty” under a lease. Did COVID-19 make it impossible to operate a restaurant? 

55 Jackson Acquisition, LLC v. Roti Restaurants, 2022 IL App (1st) 210138 (March 18, 2022)

Facts: Plaintiff, landlord, brought suit against the tenant, Roti, for unpaid rent pursuant to the lease. Roti counterclaimed based on theories of impossibility, impracticability, and commercial frustration. It also claimed that COVID-19 was a casualty under the lease and that it was entitled to rent abatement. On cross-motions for summary judgment, the trial court held in favor of Roti.

Holding: The appellate court recognized that there is an ongoing debate about whether COVID-19 is a casualty for insurance purposes but held that COVID-19 was not a casualty under the terms of the lease. The terms of the lease that would allow abatement of rent for a casualty are focused on physical damage to the premises and what the landlord must do to repair the damage. Therefore, there was nothing the landlord could repair, and the provision did not apply to COVID-19. 

Reasoning: The court outlined the elements needed for Roti to succeed in its effort to prove impossibility, impracticability, or commercial frustration as a legal basis for not paying rent. 

“The doctrine of impossibility applies only if the parties did not and could not anticipate the circumstances creating the impossibility, the party claiming impossibility did not contribute to the circumstances, and that party demonstrates that it has tried all available practical alternatives to allow performance.” 
The impossibility doctrine is “narrowly applied” because “the purpose of contract law is to allocate the risks that might affect performance and performance should be excused only in extreme circumstances.” An Impossibility excusing performance can arise from an intervening governmental regulation or order. 
The doctrine of commercial frustration is an affirmative defense to the enforcement of a contract but “should not be applied liberally.” A party claiming frustration must show that (1) the frustrating event was not reasonably foreseeable and (2) the value of performance by the non-claiming party has been totally or nearly destroyed by the frustrating event.

Roti’s evidence showed that operating the restaurant under the public health department’s COVID-19 orders was impracticable despite reasonable efforts, but the landlord’s evidence showed that other restaurants in the building and the area were operating despite the same COVID-19 orders and that takeout and delivery were a possibility during the COVID-19 order. 

The conflicting evidence of each of the parties was held to raise a genuine issue of material fact as to whether operating the defendant’s restaurant was objectively impossible under the COVID-19 rules. Summary judgment for Roti was therefore erroneous and the case was reversed and remanded back to the trial court for further proceedings.