Wednesday, December 25, 2013

Mel Frank Tool & Supply, Inc. v. Di-Chem Co. case brief

Mel Frank Tool & Supply, Inc. v. Di-Chem Co. case brief summary
580 N.W.2d 802 (1998)

CASE SYNOPSIS
Appellee lessor commenced an action against appellant lessee, which alleged breach of the lease and damages to the premises. The Iowa District Court for Pottawattamie County entered a judgment in favor of the lessor. The lessee appealed that judgment. It also appealed a finding that a real estate agent had prepared the lease on its behalf.

CASE FACTS
The lessee, a chemical distributor, leased premises from the lessor. Those premises were vacated after the city enacted an ordinance, which prohibited the storage of hazardous materials.

DISCUSSION

  • On appeal, the court held that the ordinance did not excuse the lessee's breach. 
  • When a party's principal purpose in making the contract was substantially frustrated by the occurrence of an event that was beyond the control or expectation of the parties, its duty to render performance was discharged. 
  • However, the frustrating event had to nullify a basic assumption upon which the contract was made and had to be so severe that it could not be regarded as within the risks assumed under the contract. 
  • Thus, so long as there was a serviceable use for the property, a party's performance was expected even though the remaining uses were less lucrative. 
  • Because the lessee failed to establish that its entire inventory consisted of hazardous materials, it could not establish frustration of purpose. 
  • The court also found that a clause in the parties' lease did not allow the lessee to terminate its obligations and that the trial court's finding about the real estate agent was harmless error.
CONCLUSION
The court affirmed the trial court's judgment in favor of the lessor.

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