Will this force majeure clause excuse our performance when something unexpected stops us?
Only if the clause names the event. New York reads force majeure clauses, clauses excusing nonperformance due to circumstances beyond the parties' control, as a narrow defence: ordinarily only if the clause specifically includes the event that actually prevented performance will the party be excused. A catch-all such as 'or other similar causes beyond the control of such party' does not enlarge it: the general words are not given expansive meaning and are confined to things of the same kind or nature as the particular matters mentioned. The common-law impossibility defence is no wider: it requires destruction of the subject matter or the means of performance, produced by an unanticipated event that could not have been foreseen or guarded against in the contract.
The trap
The New York trap is the risk-allocation logic behind the narrowness: if the party could have foreseen and guarded against the event when it undertook the obligation, neither the clause nor impossibility helps. In Kel Kim (a unanimous memorandum of the Court of Appeals, affirming with costs after Special Term nullified the lease and directed the tenant to vacate and a divided Appellate Division affirmed), the tenant's inability to renew liability insurance during an insurance-market crisis was held outside both doctrines: the lease required it to 'procure and maintain in full force and effect a public liability insurance policy', and the Court held that that inability 'could have been foreseen and guarded against when it specifically undertook that obligation in the lease, and therefore the obligation cannot be excused on this basis'. The listed events in that clause: labour disputes, inability to procure materials, utility failure, restrictive governmental laws or regulations, riots, insurrection, war, adverse weather, Acts of God: are quoted from the lease itself, and the Court held that they 'are different in kind and nature from Kel Kim's inability to procure and maintain public liability insurance' because 'The recited events pertain to a party's ability to conduct day-to-day commercial operations on the premises.' The tenant argued that the same could be said of maintaining insurance, and lost: the Court held such an event 'materially different', because an always-maintain-insurance covenant goes 'not to frustrated expectations in day-to-day commercial operations on the premises -- such as interruptions in the availability of labor, materials and utility services -- but to the bargained-for protection of the landlord's unrelated economic interests'. That is how tightly the ejusdem generis limit binds. Drafting consequence: name pandemics, supply-chain failure, cyber events and government shutdowns expressly, and say the catch-all is not limited to the enumerated kinds.
9 authorities
The words that state the rule
For much the same underlying reason, contractual force majeure clauses — or clauses excusing nonperformance due to circumstances beyond the control of the parties — under the common law provide a similarly narrow defense. Ordinarily, only if the force majeure clause specifically includes the event that actually prevents a party’s performance will that party *903 be excused.
The words that state the rule
The principle of interpretation applicable to such clauses is that the general words are not to be given expansive meaning; they are confined to things of the same kind or nature as the particular matters mentioned
The words that state the rule
While such defenses have been recognized in the common law, they have been applied narrowly, due in part to judicial recognition that the purpose of contract law is to allocate the risks that might affect performance and that performance should be excused only in extreme circumstances (see, Wallach, The Excuse Defense in the Law of Contracts: Judicial Frustration of the U.C.C. Attempt to Liberalize the Law of Commercial Impracticability, 55 Notre Dame Law 203, 207 [1979]). Impossibility excuses a party’s performance only when the destruction of the subject matter of the contract or the means of performance makes performance objectively impossible. Moreover, the impossibility must be produced by an unanticipated event that could not have been foreseen or guarded against in the contract
The words that state the rule
Here, of course, the contractual provision does not specifically include plaintiffs inability to procure and maintain insurance. Nor does this inability fall within the catchall "or other similar causes beyond the control of such party.”
The words that state the rule
The clause reads: "If either party to this Lease shall be delayed or prevented from the performance of any obligation through no fault of their own by reason of labor disputes, inability to procure materials, failure of utility service, restrictive governmental laws or regulations, riots, insurrection, war, adverse weather, Acts of God, or other similar causes beyond the control of such party, the performance of such obligation shall be excused for the period of the delay.”
The words that state the rule
The lease required Kel Kim to "procure and maintain in full force and effect a public liability insurance policy or policies in a solvent and responsible company or companies * * * of not less than Five Hundred Thousand Dollars * * * to any single person and in the aggregate of not less than One Million Dollars * * * on account of any single accident”.
The words that state the rule
Special Term granted defendants’ motion for summary judgment, nullified the lease, and directed Kel Kim to vacate the premises. A divided Appellate Division affirmed.
The words that state the rule
Applying these principles, we conclude that plaintiff’s predicament is not within the embrace of the doctrine of impossibility. Kel Kim’s inability to procure and maintain requisite coverage could have been foreseen and guarded against when it specifically undertook that obligation in the lease, and therefore the obligation cannot be excused on this basis.
The words that state the rule
We agree with the conclusion reached by the majority below that the events listed in the force majeure clause here are different in kind and nature from Kel Kim’s inability to procure and maintain public liability insurance. The recited events pertain to a party’s ability to conduct day-to-day commercial operations on the premises. While Kel Kim urges that the same may be said of a failure to procure and maintain insurance, such an event is materially different. The requirement that specified amounts of public liability insurance at all times be maintained goes not to frustrated expectations in day-to-day commercial operations on the premises — such as interruptions in the availability of labor, materials and utility services — but to the bargained-for protection of the landlord’s unrelated economic interests where the tenant chooses to continue operating a public roller skating rink on the premises. Chief Judge Wachtler and Judges Simons, Kaye, Alexander, Titone, Hancock, Jr., and Bellacosa concur. Order affirmed, with costs, in a memorandum.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.