Merry Homes, Inc. Vs. Chi Hung Luu: Case Study
Andrea Lazalde
Professor Mendiola
Legal Environment of Business
October 21, 2014
Court of Appeals of Texas, Houston (1st Dist.)
MERRY HOMES, INC., Appellant v. CHI HUNG LUU, Appellee.
ISSUE:
Chi Hung Luu, appellee, leased premises in Houston Texas, from Merry Homes, Inc., with the intention of opening a bar or nightclub on the property. After Luu signed the lease, he submitted an application for a liquor license to the city of Houston. The city denied the application and Luu sought a declaratory judgment that the lease was void because it could not be performed legally. Merry Homes, appellant, counterclaimed for breach of contract and sought to recover eight months of unpaid rent.
RULE:
Section 266 of Restatement of Contracts provides: Where at the time a contract is made, a party’s performance under it is impracticable without his fault because of a fact of which he has no reason to know and the nonexistence of which is a basic assumption on which the contract is made, no duty to render that performance arises, unless the language or circumstances indicate the contrary.
APPLICATION: …show more content…
As Luu cannot obtain a liquor license and therefore cannot perform under the lease without violating the statute and ordinance, the trial court properly determined that this lease is void for illegality. The Texas Supreme Court “has long recognized Texas’s strong public policy in favor of preserving the freedom of contract.” Freedom of contract, however, is not unlimited: “As a rule, parties have the right to contract as they see fit as long as their agreement does not violate the law or public policy.” Merry Homes cannot indirectly receive benefits--monthly rental payments—from what the law says it cannot do
Professor Mendiola
Legal Environment of Business
October 21, 2014
Court of Appeals of Texas, Houston (1st Dist.)
MERRY HOMES, INC., Appellant v. CHI HUNG LUU, Appellee.
ISSUE:
Chi Hung Luu, appellee, leased premises in Houston Texas, from Merry Homes, Inc., with the intention of opening a bar or nightclub on the property. After Luu signed the lease, he submitted an application for a liquor license to the city of Houston. The city denied the application and Luu sought a declaratory judgment that the lease was void because it could not be performed legally. Merry Homes, appellant, counterclaimed for breach of contract and sought to recover eight months of unpaid rent.
RULE:
Section 266 of Restatement of Contracts provides: Where at the time a contract is made, a party’s performance under it is impracticable without his fault because of a fact of which he has no reason to know and the nonexistence of which is a basic assumption on which the contract is made, no duty to render that performance arises, unless the language or circumstances indicate the contrary.
APPLICATION: …show more content…
As Luu cannot obtain a liquor license and therefore cannot perform under the lease without violating the statute and ordinance, the trial court properly determined that this lease is void for illegality. The Texas Supreme Court “has long recognized Texas’s strong public policy in favor of preserving the freedom of contract.” Freedom of contract, however, is not unlimited: “As a rule, parties have the right to contract as they see fit as long as their agreement does not violate the law or public policy.” Merry Homes cannot indirectly receive benefits--monthly rental payments—from what the law says it cannot do