Atlantic LB, Inc. v. Vrbicek - Superior Court - August 4, 2006
http://www.courts.state.pa.us/OpPosting/Superior/out/a21008_06.pdf
Given the terms of the lease in this case, the commercial tenant was held to be not in default and entitled to exercise an option to buy. The trial court "properly utilized the doctrine of substantal performance...to avoid an unacceptable forfeiture."
The lease had a "time is of the essense" clause, and the tenants were chronically late in paying rent over several extended periods. However, under terms of the lease, "nonpayment alone was insufficient...to constitute an automatic default." The lease had a specific term stating that continued failure to perform for 10 days after written notice of nonperformance was given was a default. In each of two instances, the tenants cured the rent defaults within the 10 days periods and no rent was owing at the time the landlord brought the case.
Although "Pennsylvania law permits forfeiture of a tenant's rights for non-payment of rent...[a] court should not enforce forfeiture 'when the contract has been carried out or its literal fulfillment has been prevented by oversight or uncontrollable circumstances." The "doctrine of substantial performance has been created as an instrument of justice intended to avoid forfeiture because of technical, inadvertent or unimportant questions....The doctrine is 'intended for the protection and relief of those who have faithfully and honestly endeavored to perform their contracts in all material and substantial particulars."
The court stressed that the doctrine was applicable in this case "because of the language of the agreement as written....[T]his decision is not intended to be used indiscriminately as authority in all commercial leases for nonpayment of sums due. To the contrary, we emphasise the importance of careful attention to how these agreements are drafted and to the terms of the agreements as drafted" -- noting again that in this case, default was defined as failure to cure within 10 days of notice of default.
