Economic downturn not a justification reason to invoke force majeure provisions – Tandrin Aviation v Aero Toy Store , High Court

It is official: the economic downturn is not a justification under most force majeure clauses for getting out of an unprofitable contract. That was the ruling of the High Court in this case. Here, D had agreed to buy an aircraft for US$32m. Once the aircraft had been built, T sought to ensure delivery and payment took place under the contract. However, D refused. The parties ended up in court. T applied for various declarations, including that D could not pull out of the contract on the grounds of force majeure. The High Court agreed with T’s application that D would not have a real prospect of success at the main trial, and made the various declarations, including that D could not rely on the force majeure clause in the agreement because of the ‘unanticipated, unforeseeable and cataclysmic downward spiral of the world’s financial markets’.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of www.Upload-IT.com, comments: ‘It is already well established law that economic hardship is not a cause of force majeure. This case reinforces that, and in a modern context. Parties should not get away with arguing that the economic downturn is a justification for getting out of their contracts. However, it would still be open to the parties to expressly agree to have some specific wording into their contract covering a right to get out in such a situation, even if economic hardship would not be covered by a traditional force majeure clause.’