“Yet, he ought to pay his rent,” is a famous legal conclusion from the grand case of Paradine v. Jane evoked by Mark Edwards recently in this blog, a wonderful early specimen in the law denying excuse from contractual obligation due to supervening events. Later chestnuts (like Taylor v. Caldwell to Krell v. Henry) relax the rigid stance denying impossibility, impracticability or frustration of purpose as excuses from contractual obligation, but only if the risks arising from a supervening event (fire, flood, riot, disease and the like) are not allocated, expressly or implicitly, by contract.
The common law’s navigation of these doctrines prompt parties to include in contracts express provisions excusing performance of obligations upon the occurrence or non-occurrence of stated supervening events. Parties can include any sorts of events they wish. A common example of the kinds of clauses that result, often generically described as force majeure clauses, follows:
“If either party to this contract 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.”
Pending in New York court is a claim that a similar sort of clause enables the real estate developer, Donald Trump, and companies he controls, to delay repayment of obligations for borrowed money to Deutche Bank, and a syndicate of other banks. The borrowers want a declaratory judgment that prevailing real estate market conditions are within such a clause and beyond the borrowers’ control. Accordingly, they want to lawfully delay repayment of a $40 million installment due last month under a $640 million construction loan. The substantive argument is that sales of condo and hotel units the construction loan supported have failed to materialize as anticipated (only $204 million have closed and $353 million are under contract).