meaning of such a provision is that it is addressing the position of the seller rather...

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meaning of such a provision is that it is addressing the position of the seller rather than the purchaser and is a force majeure circumstance that only the seller can rely upon. There would be nothing particularly surprising if this part of the force majeure clause was limited in this way since it is the seller who has the principal perfor- mance obligations under the Agreement. The purchas- er's essential performance obligation is to pay the price and accept delivery, obligations that are far less likely to be affected by force majeure circumstances. The expression "any other cause beyond the Sell- er's reasonable control" cannot sensibly be construed to include matters with which the seller was never expected to be concerned. For instance, the seller would never have been expected to be concerned with, still less to have any control or influence over, the pur- chaser's financing arrangements; or any back-to-back sale by the purchaser to a third party which would have provided the purchase monies. Instead, the expression "any other cause beyond the seller's reasonable control" should be construed to comprise only those matters which have some connec- tion with the seller's obligations under the Agreement and/or with which the seller would have been expected to be concerned. For instance, matters relevant to the delivery of the aircraft (which is the obligation of the seller and a matter principally under the seller's control) would be caught by that clause, such as the seller being unable to deliver the aircraft on time due to a pandemic causing a dearth of delivery pilots. To construe the clause as if it were worded "any other cause beyond the purchaser's control," or "any other cause beyond either party's control," would be wrong because it would give no meaning to the words "the seller's" [and] would fundamentally change the meaning of the phrase. If the clause were to be construed as ATS contends, i.e. as if it applied to matters over which the seller could never be expected to have any influence, it would have an unacceptably wide ambit. If, as ATS contends, it is entitled to rely on force majeure events beyond the seller's rather than ATS's control, it would mean that it could rely on force majeure events which were not beyond its control, which would be an absurdity. Under English law, just as the burden of proof is on the party seeking to rely upon a force majeure clause to prove the facts bringing the case within the clause, so the burden of proof is on ATS to show that this force majeure clause is capable of being construed so as to include any funding difficulties it is encountering. For the reasons above, I accept Tandrin's submission that ATS cannot show this. For all these reasons, I accept and hold that ATS has not shown that as a matter of principle extreme economic circumstances can arguably give rise to force majeure in the context of a clause such as clause 7.17. I hold that ATS has no real prospect of establishing either that clause 7.17 should be construed as ATS asserts or that as a matter of law it is arguable that the circum- stances contended for by ATS can give rise to force majeure under clause 7.17. I therefore conclude that there is no triable argu- ment that ATS can rely on the force majeure clause to excuse its non-performance. Decision. The court refused to excuse ATS' failure to perform on the basis of the force majeure clause. English law does not recognize that a change in eco- nomic circumstances excuses contractual performance. The court also disagreed with ATS' interpretation of the agreement to include instances beyond the seller and purchaser's control. Case Questions 1. On what basis did the court refuse to enforce the force majeure clause to excuse ATS' failure to perform? 2. Should economic or market circumstances ever serve as a basis for failure to perform contrac- tual duties? Why or why not? Under what cir- cumstances should such circumstances excuse performance? 3. If you were ATS' attorney, how would you have drafted the force majeure clause to excuse per- formance in the event your client could not obtain financing? Tandrin Aviation Holdings Ltd. v. Aero Toy Store, LLC [2010] EWHC 40 (United Kingdom, High Court of Justice, Queen's Bench Division, Commercial Court) BACKGROUND AND FACTS Plaintiff Tandrin Aviation Holdings Ltd. (Tandrin) agreed to sell a Bombardier executive jet aircraft to Aero Toy Store, L.L.C. (ATS) for U.S. $31.75 million. ATS paid a U.S. $3 million deposit to an escrow agent. Both the deposit and the balance of the purchase price were due to be paid to Tandrin on delivery of the aircraft. Tandrin subsequently purchased the aircraft from a third-party vendor for U.S. $26.5 million. However, ATS failed to accept Tandrin's tendered delivery of the aircraft in Jan- uary 2009 or pay the balance of the purchase price. Tandrin terminated the agreement in February 2009 the consequence of which was (according to the agree- ment) that the deposit became payable to Tandrin as liquidated damages. However, ATS failed to instruct the escrow agent to pay the deposit to Tandrin. Tandrin sub- sequently sold the aircraft for U.S. $24 million. Tandrin filed a lawsuit against ATS for breach of contract. ATS claimed that its contractual obligations were excused by a force majeure clause contained within the agreement. The clause read as follows: 7.17 Force Majeure. Neither party shall be liable to the other as a result of any failure of, or delay in the performance of, its obligations hereunder, for the period that such failure or delay is due to: Acts of God or the public enemy; war, insurrection or riots; fires; governmental actions; strikes or labor dis- putes; inability to obtain aircraft materials, accesso- ries, equipment or parts from vendors; or any other cause beyond Seller's reasonable control. Upon the occurrence of any such event, the time required for performance by such party of its obligations arising under this Agreement, shall be extended by a period equal to the duration of such event. ATS claimed that the "unanticipated, unforesee- able and cataclysmic downward spiral of the world's financial markets" triggered the force majeure clause, thereby postponing the time for ATS to complete the purchase and potentially affecting the price at which ATS should be entitled to purchase the aircraft. HAMBLEN, JUSTICE It is well established under English law that a change in economic/market circumstances, affecting the profit- ability of a contract or the ease with which the parties' obligations can be performed, is not regarded as being a force majeure event. Thus a failure of performance due to the provision of insufficient financial resources has been held not to amount to force majeure-see The Concadoro [1916] AC 2 AC 199; and likewise a rise in cost or expense-see Brauer & Co. (GB) Ltd. v. James Clark (Brush Materials) Ltd. [1952] 2 All ER 497. A recent judicial statement disapproving the notion that economic circumstances can generally found a claim for force majeure or frustration appears in Thames Val- ley Power Ltd. v. Total Gas & Power Ltd. [2006] 1 Lloyd's Rep. 441, where Christopher Clarke J. said this: It does not at all follow that the supplier is enti- tled to rely upon an increase in the market price in comparison to the contract price as a force majeure circumstance....This conclusion is consistent with a line of cases, both on force majeure clauses and on frustration,...., to the effect that the fact that a contract has become expensive to perform, even dramatically more expensive, is not a ground to relieve a party on the grounds of force majeure or frustration. I take as an example Tennants (Lan- cashire) Ltd v CS Wilson & Co Ltd [1917] AC 495, a force majeure case where Lord Loreburn observed at page 510: The argument that a man can be excused from per- formance of his contract when it becomes "commer- cially impossible" seems to me to be a dangerous contention which ought not to be admitted unless the parties plainly contracted to that effect. Whether a force majeure clause in a contract is triggered depends on the proper construction of the wording of that clause; "force majeure" is not a term of art. Here, there are a number of hurdles in the way of clause 7.17 being construed in such a way as to per- mit ATS to rely on market conditions as a force majeure event. The phrase "any other cause beyond the Seller's reasonable control" should be read in the context of the entire clause. The specific instances of force majeure in the preceding words are as follows: "act of God or the public enemy; war; insurrection or riots; fires; gov- ernmental actions; strikes or labour disputes; inability to obtain the aircraft materials, accessories, equipment or parts from the vendors." Whilst there is no require- ment to construe the phrase "any other cause beyond the Seller's reasonable control" ejusdem generis with those earlier specific examples, it is telling that there is nothing in any of those specific examples of force majeure in clause 7.17 which is even remotely con- nected with economic downturn, market circumstances or the financing of the deal. Further, it is striking that the clause does not refer to "any other cause beyond the Purchaser's reasonable control" or "any other cause beyond either party's rea- sonable control" but only to "any other cause beyond the Seller's reasonable control." The natural and ordinary meaning of such a provision is that it is addressing the position of the seller rather than the purchaser and is a force majeure circumstance that only the seller can rely upon. There would be nothing particularly surprising if this part of the force majeure clause was limited in this way since it is the seller who has the principal perfor- mance obligations under the Agreement. The purchas- er's essential performance obligation is to pay the price and accept delivery, obligations that are far less likely to be affected by force majeure circumstances. The expression "any other cause beyond the Sell- er's reasonable control" cannot sensibly be construed to include matters with which the seller was never expected to be concerned. For instance, the seller would never have been expected to be concerned with, still less to have any control or influence over, the pur- chaser's financing arrangements; or any back-to-back sale by the purchaser to a third party which would have provided the purchase monies. Instead, the expression "any other cause beyond the seller's reasonable control" should be construed to comprise only those matters which have some connec- tion with the seller's obligations under the Agreement and/or with which the seller would have been expected to be concerned. For instance, matters relevant to the delivery of the aircraft (which is the obligation of the seller and a matter principally under the seller's control) would be caught by that clause, such as the seller being unable to deliver the aircraft on time due to a pandemic causing a dearth of delivery pilots. To construe the clause as if it were worded "any other cause beyond the purchaser's control," or "any other cause beyond either party's control," would be wrong because it would give no meaning to the words "the seller's" [and] would fundamentally change the meaning of the phrase. If the clause were to be construed as ATS contends, i.e. as if it applied to matters over which the seller could never be expected to have any influence, it would have an unacceptably wide ambit. If, as ATS contends, it is entitled to rely on force majeure events beyond the seller's rather than ATS's control, it would mean that it could rely on force majeure events which were not beyond its control, which would be an absurdity. Under English law, just as the burden of proof is on the party seeking to rely upon a force majeure clause to prove the facts bringing the case within the clause, so the burden of proof is on ATS to show that this force majeure clause is capable of being construed so as to include any funding difficulties it is encountering. For the reasons above, I accept Tandrin's submission that ATS cannot show this. For all these reasons, I accept and hold that ATS has not shown that as a matter of principle extreme economic circumstances can arguably give rise to force majeure in the context of a clause such as clause 7.17. I hold that ATS has no real prospect of establishing either that clause 7.17 should be construed as ATS asserts or that as a matter of law it is arguable that the circum- stances contended for by ATS can give rise to force majeure under clause 7.17. I therefore conclude that there is no triable argu- ment that ATS can rely on the force majeure clause to excuse its non-performance. Decision. The court refused to excuse ATS' failure to perform on the basis of the force majeure clause. English law does not recognize that a change in eco- nomic circumstances excuses contractual performance. The court also disagreed with ATS' interpretation of the agreement to include instances beyond the seller and purchaser's control. Case Questions 1. On what basis did the court refuse to enforce the force majeure clause to excuse ATS' failure to perform? 2. Should economic or market circumstances ever serve as a basis for failure to perform contrac- tual duties? Why or why not? Under what cir- cumstances should such circumstances excuse performance? 3. If you were ATS' attorney, how would you have drafted the force majeure clause to excuse per- formance in the event your client could not obtain financing? Tandrin Aviation Holdings Ltd. v. Aero Toy Store, LLC [2010] EWHC 40 (United Kingdom, High Court of Justice, Queen's Bench Division, Commercial Court) BACKGROUND AND FACTS Plaintiff Tandrin Aviation Holdings Ltd. (Tandrin) agreed to sell a Bombardier executive jet aircraft to Aero Toy Store, L.L.C. (ATS) for U.S. $31.75 million. ATS paid a U.S. $3 million deposit to an escrow agent. Both the deposit and the balance of the purchase price were due to be paid to Tandrin on delivery of the aircraft. Tandrin subsequently purchased the aircraft from a third-party vendor for U.S. $26.5 million. However, ATS failed to accept Tandrin's tendered delivery of the aircraft in Jan- uary 2009 or pay the balance of the purchase price. Tandrin terminated the agreement in February 2009 the consequence of which was (according to the agree- ment) that the deposit became payable to Tandrin as liquidated damages. However, ATS failed to instruct the escrow agent to pay the deposit to Tandrin. Tandrin sub- sequently sold the aircraft for U.S. $24 million. Tandrin filed a lawsuit against ATS for breach of contract. ATS claimed that its contractual obligations were excused by a force majeure clause contained within the agreement. The clause read as follows: 7.17 Force Majeure. Neither party shall be liable to the other as a result of any failure of, or delay in the performance of, its obligations hereunder, for the period that such failure or delay is due to: Acts of God or the public enemy; war, insurrection or riots; fires; governmental actions; strikes or labor dis- putes; inability to obtain aircraft materials, accesso- ries, equipment or parts from vendors; or any other cause beyond Seller's reasonable control. Upon the occurrence of any such event, the time required for performance by such party of its obligations arising under this Agreement, shall be extended by a period equal to the duration of such event. ATS claimed that the "unanticipated, unforesee- able and cataclysmic downward spiral of the world's financial markets" triggered the force majeure clause, thereby postponing the time for ATS to complete the purchase and potentially affecting the price at which ATS should be entitled to purchase the aircraft. HAMBLEN, JUSTICE It is well established under English law that a change in economic/market circumstances, affecting the profit- ability of a contract or the ease with which the parties' obligations can be performed, is not regarded as being a force majeure event. Thus a failure of performance due to the provision of insufficient financial resources has been held not to amount to force majeure-see The Concadoro [1916] AC 2 AC 199; and likewise a rise in cost or expense-see Brauer & Co. (GB) Ltd. v. James Clark (Brush Materials) Ltd. [1952] 2 All ER 497. A recent judicial statement disapproving the notion that economic circumstances can generally found a claim for force majeure or frustration appears in Thames Val- ley Power Ltd. v. Total Gas & Power Ltd. [2006] 1 Lloyd's Rep. 441, where Christopher Clarke J. said this: It does not at all follow that the supplier is enti- tled to rely upon an increase in the market price in comparison to the contract price as a force majeure circumstance....This conclusion is consistent with a line of cases, both on force majeure clauses and on frustration,...., to the effect that the fact that a contract has become expensive to perform, even dramatically more expensive, is not a ground to relieve a party on the grounds of force majeure or frustration. I take as an example Tennants (Lan- cashire) Ltd v CS Wilson & Co Ltd [1917] AC 495, a force majeure case where Lord Loreburn observed at page 510: The argument that a man can be excused from per- formance of his contract when it becomes "commer- cially impossible" seems to me to be a dangerous contention which ought not to be admitted unless the parties plainly contracted to that effect. Whether a force majeure clause in a contract is triggered depends on the proper construction of the wording of that clause; "force majeure" is not a term of art. Here, there are a number of hurdles in the way of clause 7.17 being construed in such a way as to per- mit ATS to rely on market conditions as a force majeure event. The phrase "any other cause beyond the Seller's reasonable control" should be read in the context of the entire clause. The specific instances of force majeure in the preceding words are as follows: "act of God or the public enemy; war; insurrection or riots; fires; gov- ernmental actions; strikes or labour disputes; inability to obtain the aircraft materials, accessories, equipment or parts from the vendors." Whilst there is no require- ment to construe the phrase "any other cause beyond the Seller's reasonable control" ejusdem generis with those earlier specific examples, it is telling that there is nothing in any of those specific examples of force majeure in clause 7.17 which is even remotely con- nected with economic downturn, market circumstances or the financing of the deal. Further, it is striking that the clause does not refer to "any other cause beyond the Purchaser's reasonable control" or "any other cause beyond either party's rea- sonable control" but only to "any other cause beyond the Seller's reasonable control." The natural and ordinary