## Facts

- A neon-sign company leased illuminated neon sign installations to a drive-in restaurant operator under a written agreement, retaining title and undertaking installation and maintenance.
- The restaurant operator agreed to pay monthly rent for a fixed term; the signs were intended for nighttime advertising and illumination.
- A federal wartime emergency order later prohibited all outside lighting, including neon signs, between sunset and sunrise in the area where the restaurant operated.
- The prohibition remained in effect during the relevant period, preventing nighttime illumination of the signs.
- The parties fully performed the lease through the day before the order took effect.
- After the order, the restaurant operator offered to terminate the contract and allow removal of the signs; the lessor refused.
- The restaurant operator stopped paying monthly rent after the order; the lessor sued to recover unpaid installments.
- The trial court found the contract’s principal purpose was frustrated without fault of either party as of the date of the order, excused further performance, and treated the contract as terminated.

## Issues

1. Whether a supervening governmental blackout order prohibiting nighttime illumination frustrated the principal purpose of a neon-sign lease, discharging the parties from further performance.

## Decision

- The appellate court affirmed judgment for the restaurant operator.
- The court held the blackout order frustrated the contract’s essential, mutual purpose—nighttime advertising and illumination.
- Because the frustration was caused by a supervening governmental act and occurred without fault of either party, both parties were excused from further performance and the contract terminated as of the order’s effective date.
- The lessor could not recover rent accruing after the frustration date.

## Legal Principles

- A contract may be discharged under the doctrine of frustration of purpose when an unforeseen supervening event substantially destroys the principal, mutually understood purpose of the agreement.
- A supervening governmental prohibition can constitute the qualifying event when it makes the contemplated use illegal or commercially worthless.
- Discharge for frustration does not require physical impossibility of performance; it is sufficient that the contract’s central value to the parties is defeated.
- When frustration is established without fault and without an agreed contractual allocation of the risk, both parties are excused from future obligations.

## Conclusion

The court enforced frustration of purpose to discharge a neon-sign lease after a wartime blackout order barred nighttime illumination, concluding that the order destroyed the agreement’s principal objective and relieved both parties from further performance going forward.


20th Century Lites, Inc. v. Goodman, 149 P.2d 88 (Cal. App. Dep’t Super. Ct. 1944)