Under English law it has been long established that a change of economic and/or market circumstances is not regarded as being a force majeure event. In a recent case, a defendant sought to challenge that position.
In a recent application, the Commercial Court in London was asked to consider whether the "unanticipated, unforeseeable and cataclysmic downward spiral of the world's financial markets" triggered a contractual force majeure clause in an aircraft purchase agreement.
Aero Toy Store (ATS) agreed to purchase a new Bombardier executive jet aircraft from Tandrin for US$31.75 million. ATS paid a US$3 million deposit to an escrow agent. The balance was payable upon delivery. ATS failed to accept Tandrin's tendered delivery and/or to pay the balance of the purchase price. Tandrin purported to exercise its contractual right to terminate the agreement on the grounds of alleged breach by ATS and to recover the deposit (as liquidated damages for breach). The agreement was subject to English law and contained an English non-exclusive jurisdiction clause. Tandrin brought proceedings in the Commercial Court, London, seeking summary judgment against ATS.
ATS argued in its defence that the "unanticipated, unforeseeable and cataclysmic downward spiral of the world's financial markets" triggered the contractual force majeure clause. The relevant part of the clause provided as follows:
"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 labour disputes; inability to obtain aircraft materials, accessories, equipment or parts from vendors; or any other cause beyond [Aero Toy Store's] reasonable control...."
Hamblen J, in granting Tandrin's application, held that it is well established under English law that a change in economic and/or market circumstances affecting the profitability of a contract or the ease with which the parties' obligations can be performed, is not regarded as being a force majeure event. Whether a force majeure clause in a contract is triggered depends on the proper construction of the wording of the specific clause; "force majeure" is not a term of art. The particular clause simply did not refer to economic circumstances and there was therefore no basis for otherwise construing the provision so as to include the same
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