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Neither a decline in demand, nor an inability to sell gas at or above the contract price, constitutes a force majeure event.
Under the contracts between the parties, appellant and buyer, Producer's Gas Co. was required to take or pay for certain minimum quantities of gas from wells in which the appellee and seller, Kaiser-Francis Oil Co., had a percentage interest. When the resale price for natural gas declined, the buyer refused to pay for gas and also refused to pay for the minimum contract quantities of the gas which were not taken. The seller brought an action against the buyer seeking to enforce the provisions of the gas purchase contracts between the parties. The buyer argued that the force majeure provision in the contracts extended to a partial lack of demand caused by market forces thereby providing relief from the take-or-pay obligation contained in each contract. The buyer argued that a force majeure event occurred because the demand for gas sharply decreased, with a corresponding decrease in the resale price of gas that the buyer was obligated to take or pay for under the contracts. The buyer argued that there was an issue of fact concerning the extent of the failure of demand for gas. The district court granted the seller’s motion for summary judgment on the issue of liability and rejected all of the buyer’s defenses. The buyer appealed.
Did a force majeure event occur that warranted the non-fulfillment of buyer’s obligations under the contract?
The court affirmed the grant of summary judgment in favor of the seller, noting that the grant of the same was appropriate when the materials submitted to the court showed that there was no genuine issue as to any material fact and that the moving party was entitled to judgment as a matter of law. In this case, the court held that the issues involved could be resolved as a matter of law since neither a decline in demand, nor an inability to sell gas at or above the contract price, constituted a force majeure event.