## Facts

- A commercial landlord leased restaurant premises in South Norwalk, Connecticut to a restaurant tenant for a 10-year term beginning January 1, 2019.
- The permitted use required operation of “a restaurant and bar selling food [and] beverages,” with incidental uses.
- The lease required the tenant to comply, at its own expense, with all present and future laws and regulations; it did not include a force majeure or rent-abatement clause excusing the tenant’s rent obligation.
- The tenant fell behind on rent in early 2020, cured, then stopped paying rent beginning in March 2020.
- During the COVID-19 pandemic, Connecticut executive orders temporarily prohibited on-premises dining, later allowing takeout/delivery, then outdoor dining, and then limited indoor dining.
- The tenant closed for part of spring 2020, later operated under restrictions, and vacated the premises in September 2020 after the landlord pursued termination/eviction.
- The landlord later relet the premises to a new restaurant tenant at a lower rent.
- After a court trial, the landlord obtained judgment for breach of lease and damages; the tenant appealed on common-law excuse defenses, and the landlord cross-appealed on the damages/mitigation analysis.

## Issues

1. Whether pandemic-related executive orders made the tenant’s performance objectively impossible or commercially impracticable, excusing rent nonpayment.
2. Whether the executive orders so substantially frustrated the lease’s principal purpose that the tenant’s duty to perform was discharged.
3. Whether the lease’s text allocated the risk of regulatory restrictions and related economic impact to the tenant and guarantor.
4. Whether the trial court misallocated the burden of proof on mitigation by effectively requiring the landlord to prove the reasonableness of its reletting at a lower rent.

## Decision

- The court held that the tenant was not discharged from its rent obligation by impossibility/impracticability or frustration of purpose.
- The court concluded the lease allocated the risk of pandemic-related regulation to the tenant, including through the compliance-with-laws clause and the absence of a tenant-protective force majeure provision.
- The court held the trial court erred on damages by placing the mitigation burden on the landlord rather than on the breaching tenant.
- The judgment was affirmed as to liability, reversed in part as to damages, and remanded for a new damages hearing applying the correct mitigation burden of proof.

## Legal Principles

- Impossibility/impracticability excuses performance only when a supervening event makes performance objectively impossible or fundamentally different, and the risk of the event was not allocated to the party seeking excuse; economic hardship alone does not suffice.
- Frustration of purpose requires a supervening event that virtually destroys the contract’s principal purpose, based on a basic assumption whose nonoccurrence was essential, and where the contract does not assign the risk to the party seeking discharge; temporary or partial interference in a long-term lease ordinarily is insufficient.
- In commercial leases, a tenant’s covenant to comply with all present and future laws and regulations at its own cost may operate as an allocation to the tenant of regulatory-change risk affecting its business operations.
- In breach-of-lease cases, the nonbreaching party must make reasonable efforts to mitigate damages, but the breaching party bears the burden to prove the mitigation efforts were unreasonable and that damages were avoidably increased; it is error to require the nonbreaching party to prove mitigation reasonableness.

## Conclusion

The court enforced the commercial lease despite COVID-19 restrictions because restaurant operations remained legally possible in some form and the lease assigned regulatory risk to the tenant; it ordered a new damages hearing because the breaching tenant, not the landlord, bears the burden to prove unreasonable mitigation.


AGW Sono Partners, LLC v. Downtown Soho, LLC, 343 Conn. 309 (Conn. 2022)