ContractsProf Blog

Editor: Jeremy Telman
Valparaiso University Law School

Thursday, July 30, 2020

The Gap and Lease Obligations

In another case involving pandemic-related contractual breaches, the Gap is suing Simon Property Group, the owner of multiple shopping malls, to get out of its leases.  This is after Simon sued Gap in June when Gap went on a rent strike to save money.  At that time, the CEO of Simon, David Simon, said, “The bottom line is, we do have a contract and we do expect to get paid.”  At that time, Gap owed Simon $65.9 million in rent and fees.  Now Gap is suing to cancel its leases or avoid rent indefinitely, retroactive to March when its stores were ordered to close as part of government orders or restrictions.  According to an article published in Bloomberg, Gap is arguing that the Covid-19 pandemic caused it “severe and irreparable hardships” and that it “frustrated the express purpose of these leases and made their principal object illegal, impossible, and impracticable, all for a period of time that remains unknown and unknowable.”  (It seems to me that the Gap legal department needs to brush up on their basic assumption defenses, rather than throwing them all in the same pot in a messy stew).

Simon is not the only mall owner who is being subject to Gap’s “illegal, impossible, and impracticable” argument.  It’s also not the first time the Gap has tangled with a mall owner over lease payments.  Last week, it was ordered to continue paying rent on a space in the Bow Tie Building in New York.  The judge did, however, give the Gap a 10-percent reduction in rent in light of the “extraordinary circumstances” caused by the pandemic.

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