Complete the Case Questions Based on the Case Below:

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 Lid. (Tandrin) agreed A recent judicial statement disapproving the notion that to sell a Bombardier executive jet aircraft to Aero Toy economic circumstances can generally found a claim Store, L.L.C. (ATS) for U.S. $31.75 million. ATS paid a for force majeure or frustration appears in Thames Val- U.S. $3 million deposit to an escrow agent. Both the ley Power Lid. v. Total Gas & Power Lid. [2006] 1 Lloyd's deposit and the balance of the purchase price were due Rep. 441, where Christopher Clarke J. said this: to be paid to Tandrin on delivery of the aircraft. Tandrin subsequently purchased the aircraft from a third-party . . . It does not at all follow that the supplier is enti- vendor for U.S. $26.5 million. However, ATS failed to tled to rely upon an increase in the market price in comparison to the contract price as a force majeure accept Tandrin's tendered delivery of the aircraft in Jan- circumstance. . . . This conclusion is consistent with uary 2009 or pay the balance of the purchase price. a line of cases, both on force majeure clauses and Tandrin terminated the agreement in February 2009 on frustration, . . . ., to the effect that the fact that the consequence of which was (according to the agree- contract has become expensive to perform, even ment) that the deposit became payable to Tandrin as dramatically more expensive, is not a ground to liquidated damages. However, ATS failed to instruct the relieve a party on the grounds of force majeure or escrow agent to pay the deposit to Tandrin. Tandrin sub- frustration. I take as an example Tennants (Lan- sequently sold the aircraft for U.S. $24 million. cashire) Ltd v CS Wilson & Co Lid [1917] AC 495, a Tandrin filed a lawsuit against ATS for breach of force majeure case where Lord Loreburn observed contract. ATS claimed that its contractual obligations at page 510: were excused by a force majeure clause contained The argument that a man can be excused from per- within the agreement. The clause read as follows: formance of his contract when it becomes "commer- 7.17 Force Majeure. Neither party shall be liable to cially impossible" seems to me to be a dangerous the other as a result of any failure of, or delay in the contention which ought not to be admitted unless performance of, its obligations hereunder, for the the parties plainly contracted to that effect. period that such failure or delay is due to: Acts of God or the public enemy; war, insurrection or riots; Whether a force majeure clause in a contract is fires; governmental actions; strikes or labor dis- triggered depends on the proper construction of the putes; inability to obtain aircraft materials, accesso- wording of that clause; "force majeure" is not a term ries, equipment or parts from vendors; or any other of art. Here, there are a number of hurdles in the way cause beyond Seller's reasonable control. Upon the of clause 7.17 being construed in such a way as to per- occurrence of any such event, the time required for mit ATS to rely on market conditions as a force majeure performance by such party of its obligations arising event. under this Agreement, shall be extended by a period The phrase "any other cause beyond the Seller's equal to the duration of such event. reasonable control" should be read in the context of the ATS claimed that the "unanticipated, unforesee- entire clause. The specific instances of force majeure able and cataclysmic downward spiral of the world's in the preceding words are as follows: "act of God or financial markets" triggered the force majeure clause, the public enemy; war; insurrection or riots; fires; gov- thereby postponing the time for ATS to complete the ernmental actions; strikes or labour disputes; inability purchase and potentially affecting the price at which to obtain the aircraft materials, accessories, equipment ATS should be entitled to purchase the aircraft. or parts from the vendors." Whilst there is no require- ment to construe the phrase "any other cause beyond HAMBLEN, JUSTICE the Seller's reasonable control" ejusdem generis with It is well established under English law that a change those earlier specific examples, it is telling that there in economic/market circumstances, affecting the profit- is nothing in any of those specific examples of force ability of a contract or the ease with which the parties majeure in clause 7.17 which is even remotely con obligations can be performed, is not regarded as being nected with economic downturn, market circumstances a force majeure event. Thus a failure of performance or the financing of the deal. due to the provision of insufficient financial resources Further, it is striking that the clause does not refer has been held not to amount to force majeure-see The to "any other cause beyond the Purchaser's reasonable Concadoro [1916] AC 2 AC 199; and likewise a rise in control" or "any other cause beyond either party's rea- cost or expense-see Brauer & Co. (GB) Lid. v. James sonable control" but only to "any other cause beyond Clark (Brush Materials) Ltd. [1952] 2 All ER 497. the Seller's reasonable control." The natural and ordinarymeaning 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 ugen.There would be nothing particularly surprising if this part of the force majeu re clause was limited in this way since it is the seller who has the principal perfor- mance obligations under the AgreementThe purchas- er's essential performance obligation is to pay the price and accept delivery. obligations that are far less Iiltely to be affected by force majeure circumstances. The expression "any other cause beyond the Seli- 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 centre! or influence over. the pur- chaser's financing arrangements: or any back-to-baci: 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 these matters which have some connec- tion with the seller's obligations under the Agreement andror 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 efthe 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 r\"any other cause beyond either pa rty'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. ie. 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. *i-i- 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 difficuities it is encountering. For the reasons above. 1 acceptTandrin'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 11?. i hold that ATS has no real prospect of establishing either that ciause 11? 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 111'. I therefore conclude that there is no triable argu- ment that ATS can rely on the force majeure clause to excuse its non-perfo rmance. 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 ATE' interpretation of the agreement to include instances beyond the seller and purchaser's control. Case lI'Lluestiens 'I. [in what basis did the court refuse to enforce the force majeure clause to excuse ATS' failure to perform? 2. Enould 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