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Facto v. Pantagis

390 N.J. Super. 227, 915 A.2d 59 (App. Div. 2007)

CONTRACTS; FORCE MAJEURE — Where one party to a contract is excused from performance due to an unforeseen event covered by a force majeure provision, the other party is also generally excused from performance and therefore not required to pay the full contract price, but only for the value of the services provided prior to the force majeure event.

A customer entered into a contract with a banquet hall for a large reception to take place from 6 p.m. to 11 p.m. on a summer evening. The customer agreed to pay the total contract price in advance. The contract included a force majeure clause, which stated that the banquet hall would be excused from performing the contract if it was prevented from performing “by an act of God (e.g. flood, power failure, etc.), or other unforeseen events or circumstances.”

On the night of the reception, less than forty-five minutes after the party began, there was a power failure in the area where the banquet hall was located. The lights and air conditioning went off. It was hot and humid, and the customer and her guests quickly became uncomfortable. Additionally, the band, photographer, and videographer could not perform their duties without lighting and electricity. When it became clear that the electricity would not be restored quickly, the manager of the hall offered to reschedule the reception. Since many of the customer’s guests had traveled substantial distances and would not be able to return at another time, the customer declined the manager’s offer. As the evening progressed, the hall got darker, as candelabras were the only source of lighting. Therefore, at around 9:30, the manager had all guests evacuated from the hall.

The customer brought an action against the banquet hall for breach of contract, seeking recovery of the full amount paid for the reception, plus the amounts it had paid to the band and other vendors. The lower court dismissed the customer’s complaint, concluding that the claim was barred by the contract’s force majeure clause because the power failure was an unusual and unexpected circumstance that could not have been avoided by reasonable foresight.

On appeal, the Appellate Division reversed the lower court’s judgment dismissing the customer’s complaint. The Court agreed with the lower court’s finding that the power failure relieved the banquet hall of its obligation to perform, but additionally found that the hall’s inability to perform the contract relieved the customer of her obligation to pay the contract price. Therefore, the Court concluded that the customer was entitled to recovery of the contract price, less the value of the services she received.

The Court explained that even when a contract does not expressly state that a party will be relieved of its duty to perform if an unforeseen event occurs that makes performance impracticable, a court may relieve the party of that duty if an unexpected condition arises that in fact makes performance impracticable. In the present case, the contract did provide for the hall’s excusal from performance in the event of a prohibitive, unforeseen occurrence or circumstance. The force majeure clause specifically included “power failure” as a circumstance that would excuse the hall’s performance. The Court further explained that even though a power failure is not absolutely unforeseeable during the summer months, such foreseeability did not preclude excusing the catering hall from its obligation to perform. It stated that even in the absence of a force majeure clause, absolute unforeseeability of a condition is not necessary to make performance impracticable.

The Court also found that the banquet hall had been “prevented from” substantially performing the contract because the power failure began shortly after the reception began and continued until after it was scheduled to end. The lack of lighting made it difficult for guests to see and the lack of air conditioning made it uncomfortably hot inside the hall. Since the power failure was a widespread event and was beyond the hall’s control, the Court found that the power failure presented the exact kind of circumstances contemplated by the contract’s force majeure clause, which relieved the hall of its obligation to perform under such circumstances. Therefore, the Court agreed with the lower court’s conclusion that the banquet hall did not breach the contract.

However, the Court also found that the lower court had erred in concluding that the customer was not entitled to recover the prepaid cost of the reception because the hall did not breach the contract. The Court explained that when one party to a contract is excused from performance due to an unforeseen event, the other party is also generally excused from performance. Therefore, the power failure that relieved the banquet hall of its obligation to provide the customer with a reception also relieved the customer of its obligation to pay the contract price. But, because the hall partially performed the contract before the power failure occurred, the Court found that it was entitled to the value of the services it provided. Therefore, the Court reversed the lower court’s judgment dismissing the complaint, and remanded the case for a determination of the value of the services the banquet hall provided to its customer.


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