Under California law, if a commercial lease provides for a specific purpose or use of the leased premises and restricts the use of the premises to that specified purpose, the tenant may retain the right to terminate the lease under the doctrine of “commercial frustration” if the commercial tenant cannot use the premises for that purpose. See Industrial Development & Land Co. v. Goldschmidt, (1922) 56 Cal. App. 507, 511. Under a subsequent California case applying the doctrine of commercial frustration, Lloyd v. Murphy, (1944) 25 Cal. 2d 48, the doctrine was held to apply in situations where performance under the lease would create an extreme hardship for the tenant and there is present a complete, or nearly complete, destruction of the purpose stated in the commercial lease. Thus, substantial frustration making performance under the lease for the tenant unprofitable or more difficult or expensive, is not enough to establish an excuse for the tenant not to fulfill the lease requirements. See Lloyd supra at 55. Additionally, a tenant would not be excused under the commercial frustration doctrine if the event frustrating the purpose was reasonably foreseeable or if another purpose under the lease remains available to the tenant, or if there is reference in the lease to the frustrating event. See Lloyd surpa; see also Glenn R. Sewell Sheet Metal, Inc. v. Loverde, (1969) 70 Cal. 2d 666, 676.
Thus, commercial lease tenants should be mindful that although the commercial frustration doctrine exists, its application is strictly construed and would require demonstrating a complete destruction of the purpose stated in the commercial lease.