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Route 6 Outparcels, LLC v. Ruby Tuesday, Inc. - 2011 NY Slip Op 7556, 88 A.D.3d 1224, 931 N.Y.S.2d 436 (App. Div. 3rd Dept.)

Rule:

In order to use a force majeure clause as an excuse for non-performance, the event alleged as an excuse must have been beyond the party's control and not due to any fault or negligence by the non-performing party.

Facts:

Pursuant to a 2006 ground lease agreement, defendant Ruby Tuesday, Inc. agreed to construct and open a restaurant on real property owned by plaintiff Route 6 Parcels, LLC by March 2009. The real property was located in Pennsylvania, and Ruby Tuesday agreed to pay Route 6 Parcels an annual fixed rent in addition to a percentage of the restaurant's gross sales. Although defendant Ruby Tuesday consistently paid the fixed rent on the property, it did not construct the anticipated restaurant, which prompted plaintiff Route 6 Parcels to commence the present breach of action. Route 6 Parcels successfully moved for partial summary judgment on the issue of liability, and defendant Ruby Tuesday appealed, arguing that its non-performance was excused under the agreement’s force majeure provision. Defendant Ruby Tuesday argued that the global economic downturn that took hold in 2008 prevented its performance under the contract and, thus, its non-performance was excused under the force majeure provision.

Issue:

Could the economic factors, which caused defendant’s non-compliance with its obligations under a lease, be considered as force majeure, thereby excusing defendant’s non-performance under the Agreement? 

Answer:

No.

Conclusion:

The appellate court held that the economic factors that led defendant to breach its obligations under the Agreement cannot, as a matter of law, excuse its nonperformance. Here, although the parties did, after identifying particular force majeure events, agree on a fairly broad clause by including the language "any other cause, whether similar or dissimilar to the foregoing," they still expressly limited the contemplated force majeure events to those beyond the control of the nonperforming party. While defendant, of course, had no control over the world economy, the decisions it made with respect to how to cope with the financial downturn--notwithstanding that its options may have been limited--remained within defendant's power and control. Defendant made a calculated choice to allocate funds to the payment of its debts rather than to perform under the subject lease. Economic factors were an inherent part of all sophisticated business transactions and, as such, while not predictable, were never completely unforeseeable. Thus, the Court concluded that defendant's non-performance was not excused under the agreement's force majeure clause and plaintiff was properly granted partial summary judgment.

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