Kel Kim Corp. v. Central Markets, Inc.
Court of Appeals of New York, 1987.
70 N.Y.2d 900, 524 N.Y.S.2d 384, 519 N.E.2d 295.
Kel Kim leased property from Central. The agreement contained a provision that required Kel Kim to have an insurance policy, and also specified the amounts. The required policy was obtained and everything was fine until the insurer failed to renew it. Because of a liability crisis at the time, Kel Kim was unable find an alternative, and notified Central about it. Nonetheless, they told Kel Kim to either fix the problem in 30 days or vacate.
- Kel Kim then brought this action to be excused from the provision either because performance was impossible, or because it was within the force majeure clause.
Force majeure clause: A contractual provision allocating the risk of loss if performance becomes impossible or impracticable, esp. as a result of an event or effect that the parties could not have anticipated or controlled.
The lower courts ruled in favor of Central.
- Was performance impossible?
- Was this type of problem included in the force majeure clause?
- In this case, performance was NOT impossible, and the inability to maintain insurance could have been foreseen.
- Lastly, a force majeure clause must SPECIFICALLY include the event that prevents a party’s performance.
- Here, failure to obtain insurance was not included.
Doctrine of supervening impracticability:
(1) the party’s performance is made impracticable
(2) without his fault
(3) by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, and
(4) the language or the circumstances do not indicate that the parties intended the duty to remain despite the event making performance impracticable.
Prof: It’s more difficult to satisfy element three when the event is economical, as was the case here.