COVID-19 is not ground for exiting a contract if it is not possible under its terms

Lessees who ceased to pay rent sought to prevent forfeiture of the guarantee given as part of the lease agreement, contending that the COVID-19 crisis amounted to a frustration of the contract, but on the other hand refused to vacate the property.
The Court held that the lessor has the right to forfeit the guarantee, as the COVID-19 crisis was not included in the frustration of contract clause set in the lease agreement. Israeli law stipulates the contention of frustration requires three cumulative conditions, which case law stipulates that such will be reviewed under strict scrutiny: First – at the time set for consummation of the contract, the possibility of consummation is fundamentally disrupted and rendered impossible; Second –at the time of execution of the contract the party contending frustration did not know and could not have known, or foreseen, the circumstances that caused the frustration; and third, the inability of the breaching side to prevent the frustrating circumstances. This is a matter that may be defined in the contract and if the parties have so done, their determination must be respected. Here, the contract set that frustration of contract occurs only if the property is wholly destroyed and also the lessees refused to vacate the property. Therefore, the COVID-19 crisis does not constitute a justification for cessation of payment of rent and therefore the lessor has the right to forfeit the guarantee.