WHAT IF THE FACTS WERE DIFFERENT? Suppose that Luu had decided to use the premises for a restaurant, but the wording of the lease had not changed. In this situation, if Luu sought to cancel the lease, would Merry Homes succeed in a suit for breach of contract? Discuss your answer.

THE ETHICAL DIMENSION “Ignorance of the law is no excuse.” How does this case affirm that adage?

Chi Hung Luu leased premises in Houston, Texas, from Merry Homes, Inc., with the intention of opening a bar and nightclub on the property. The lease provided that Luu could only use the premises for operating a nightclub or bar and for no other purpose. The lease also prohibited Luu from using the premises for, among other things, “any activity that violated any applicable federal, state, or local law.” After he signed the lease, Luu submitted an application for a liquor license to the city of Houston. The city denied the application because a city ordinance prohibited the sale of alcoholic beverages where the premises were located, which was fewer than three hundred feet from a public school. The city suggested that Luu take advantage of the “restaurant exception” to the law, which allowed restaurants in such areas to serve alcoholic beverages. Luu considered the restaurant possibility but decided that it would not be financially feasible. When Merry Homes refused to cancel the lease and refund Luu’s $6,000 security deposit, Luu brought an action against Merry Homes in a Texas state court. Luu sought a declaratory judgment that the lease was void because it could not be performed legally. Merry Homes counterclaimed for breach of contract and sought to recover eight months of unpaid rent. The trial court declared the lease void, and Merry Homes appealed.