A lessee and lessor who entered into a lease agreement to operate a commercial business on an agricultural land contrary to the zoning designation, sought from each other indemnification and compensation, after the city forced evacuation and pressed charges.
The Court rejected the mutual claims and held that the lessee and the lessor are equally responsible for the damages and expenses incurred by them. A party who consciously assumes the risk of damage occurring will not be able to sue the other, and the damage will be left on the shoulders of the one who suffered. Here, both parties were well aware that the contract was problematic and that the planned use of the leased property is illegal. Although the parties anticipated a situation in which the lessee would be required to vacate, each of them acted knowingly to maximize their profits and each of them gained a significant financial benefit from the lease agreement. Therefore, both parties took upon themselves a joint risk of the failure of the transaction and therefore they cannot make contentions, one against the other, for damages and expenses incurred as a result of the consequences of their actions and omissions.