The two issues that health clubs and active living facilities are facing is how to create enough revenue to cover expenses while capacity for engagement is limited to 40% of what was originally budgeted and what can be done to reduce expenses. Additionally, neither interruption of insurance, nor governmental intervention can seemingly provide desired relief. It looks bleak, looks impossible to overcome… but, keep reading as there may be a way to cut lease/rent expenses.
Cherie Carter Scott once stated “extraordinary people visualize not what is possible or probable, but rather what is impossible. And by visualizing the impossible, they begin to see it as possible.” Unprecedented times have brought on monumental challenges for club owners attempting to keep a delicate balance between effectively servicing members while respecting limitations put on them due to Covid-19.

To that end there may be available seldom used legal doctrines called “impossibility of performance” and “frustration of purpose” to support clubs facing seemingly insurmountable challenges

“Impossibility of performance” regards to a signed contract and occurs when a particular condition, such as a pandemic, impacts existing conditions. For example, if a person agrees to sell a dog to another person for $100 tomorrow, and the dog is killed by getting hit by a car today, the contract to sell the dog is impossible to execute.

“Frustration of purpose” occurs when the parties reasonably can expect and anticipate that events in the future will continue to be the same as when they made the contract. For example, an event that involves hundreds of people who have to travel to a distant place would not be able to do so if planes and trains were not running.

These two examples are simply stated. Whether a judicial determination would hold that the selling of the deceased dog would be “impossibility of performance” and the failure to be able to travel would be “frustration of purpose” is dependent on the totality of the facts. The application of these doctrines are very fact specific.

But these doctrines may be applicable to leases with landlords, leases with equipment vendors, and other types of contracts. When events such as the current pandemic occur, depending on all of the facts, there may be an opportunity to engage in discussions leading to modifications of the contract. For more information on “Impossibility of performance” and “frustration of purpose”, contact us at Bobby@activeentities.com or Rich@activeentities.com.

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