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In a recent decision, causation proved to be a determinative factor in the viability of multiple claims subject to the same force majeure clause. District judge rules that broad.
Highlights
Applying New York law, the U.S. District Court for the Southern District of New York rules that a party can invoke a contractual
force majeure provision to terminate a contract on the ground that the COVID-19 pandemic and resulting government-imposed restrictions on business operations fit within the meaning of a natural disaster.
The court s ruling joins the growing list of jurisdictions that have interpreted natural disaster to extend beyond weather-related and environmental disasters. It cannot be seriously disputed that the COVID-19 pandemic is a natural disaster. This seemingly straightforward conclusion has only been reached in a small number of reported court decisions since the start of the pandemic. In
Properly Invoked to Terminate Auction Consignment Contract
On December 16, 2020, Judge Denise Cote of the United States
District Court for the Southern District of New York issued an
Opinion and Order holding, as a matter of first impression, that
the Covid-19 pandemic was a “natural disaster” within
the meaning of a
force majeure clause.
Therefore, the Court held, an auction house was excused from
performing a consignment contract. See
JN Contemporary
Art LLC v. Phillips Auctioneers LLC, 2020 WL
7405262 (S.D.N.Y. 2020).
Background
In June 2019, JN Contemporary
Act LLC (“JN”) and Phillips
Auctioneers LLC (“Phillips”) entered into a
consignment agreement, in which Phillips agreed to auction a
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The coronavirus (COVID-19) pandemic constituted a “natural disaster” under a contract’s force majeure provision, Judge Denise Cote of the US District Court for the Southern District of New York recently ruled in
JN Contemporary Art LLC v. Phillips Auctioneers LLC, No. 20-cv-4370, 2020 WL 7405262 (SDNY Dec. 16, 2020). This decision appears to be one of the first by a federal judge concerning such contractual language. Other courts may look to Judge Cote’s lengthy analysis of the meaning of the phrase “natural disaster” in this context when interpreting similar contractual language.