Lloyd v. Murphy
Citation and Court
Lloyd v. Murphy, 25 Cal. 2d 48 (Cal. 1944) (Traynor, J.)
Facts
Murphy leased property from Lloyd in 1941 for the purpose of selling new cars. After the United States entered World War II, the federal government severely restricted the sale of new automobiles to civilians. Murphy argued that the wartime restrictions frustrated the purpose of the lease—selling new cars—and sought to be excused from further rental obligations.
Issue
Whether wartime government restrictions on the sale of new automobiles so fundamentally frustrated the purpose of a lease for a car dealership as to excuse the lessee from the remaining rental payments.
Holding
Justice Traynor held that the frustration-of-purpose doctrine did not excuse Murphy because the restriction on new car sales was foreseeable when the lease was signed (war clouds were already gathering), Murphy retained the ability to use the property for other purposes, and the frustration was not total.
Rule / Doctrine
The frustration-of-purpose doctrine excuses a party’s performance when a supervening event, not caused by that party, destroys the principal purpose of the contract. However, frustration is not available when: (1) the frustrating event was foreseeable at contracting; (2) the purpose was not totally frustrated; or (3) the party assumed the risk of the event. Courts apply the doctrine narrowly.
Significance
The leading California case articulating the limits of the frustration-of-purpose doctrine. Traynor’s opinion carefully distinguishes frustration from impossibility and sets a high bar for when frustration excuses performance. Paired with Mineral Park Land Co. v. Howard on impracticability and Canadian Industrial Alcohol Co. v. Dunbar Molasses Co. on risk assumption.