Atcor Ltd. v. Continental Energy Marketing Ltd., 1994 9041 (AB QB) 1994-09-27 Alberta Court of Queen’s Bench Atcor Ltd. v. Continental Energy Marketing Ltd. Date: 1994-09-27 B.C. Yorke-Slader, for plaintiff (respondent by counterclaim). J.P. Peacock,Q.C., for respondent (plaintiff by counterclaim). (Doc. Calgary 9301-04326) September 27, 1994. I. INTRODUCTION [1] DEYELL J.: – The Applicant, Atcor Ltd. ("Atcor"), seeks determination of potential liability pursuant to a contractual provision contained in a letter agreement ("Agreement") it entered with the Respondent, Continental Energy Marketing Ltd. ("Continental"), dated 28 April 1992. The Applicant claims it is entitled to rely upon the force majeure clause contained within the Agreement and therefore is not liable in damages for failure to supply gas. Continental argues Atcor cannot rely on the force majeure clause, is in breach of its obligations and is liable for damages. II. FACTS [2] The parties filed a "Statement of Agreed Facts and Exhibits". Relevant portions thereof necessary for the disposition of this application are: 1. … By the Agreement, ATCOR agreed to supply and Continental agreed to purchase certain volumes of natural gas during the term May 1, 1992 to October 31, 1992 (the "Term")… 2. Pursuant to paragraph 1 of the Agreement, and subject to the terms and conditions of the Agreement, ATCOR agreed to deliver daily at certain TransCanada Pipelines Limited ("TCPL") facilities near Burstall, Saskatchewan (the "Delivery Point") a volume of gas nominated by Continental, equal to 210 103m3/d. The Delivery Point is immediately downstream of Empress, Alberta. 3. Over the term, ATCOR supplied to Continental 1,322,673 GJ of gas pursuant to the Agreement at an agreed price of $0.96 per GJ. Continental paid ATCOR for 1,212,148 GJ of such gas, but since November 25, 1992 has refused to pay ATCOR a balance of $121,930.43, various compressor breakdowns. a notice of resumption of supply … 12. 10. 5. NOVA is entitled to curtail firm service. ATCOR reduced deliveries to its customers. events which ATCOR would have been able to overcome. Continental has claimed setoff of a damages claim described in paragraph 14 hereof. which resulted in the NOVA Curtailments. The said compressor breakdowns. To the extent that its deliveries were curtailed by NOVA. During the Term. 9. 8.96 per GJ. resulting in the partial curtailment by NOVA of firm transportation service provided to ATCOR and other firm service shippers at Empress (collectively. at prices in excess of $0. Pursuant to paragraph 6 of the Agreement. the "NOVA Curtailments"). partially or entirely. Continental elected to contract for alternative deliveries of gas to such purchasers. ATCOR curtailed a portion of its firm service obligations at Empress. Alberta plus 2% until payment. In each case. In no case did NOVA formally declare force majeure. In the case of each of such periods of reduction or cessation of deliveries to Continental. ATCOR did not reduce deliveries to its other firm supply customers on a pro rate basis or any other basis … 11. 1992 at Calgary. as soon as possible after the NOVA service problems were remedied. and by how much. and only to such extent. pipeline repairs and pipeline connections. interest has accrued and will continue to accrue on any outstanding balance at a rate equal to the annual prime lending rate of the Bank of Montreal in effect as of November 25. under its Gas Transportation Tariff. The deliveries of natural gas were required to be delivered by ATCOR off the NOVA Corporation of Alberta ("NOVA") pipeline system at the Delivery Point and then transported by Continental on the TCPL pipeline system to destinations downstream of the Delivery Point. which is in issue. By reason of the NOVA curtailments. 4. by the exercise of due diligence. FORCE MAJEURE: . ATCOR first reduced and ceased deliveries under its interruptible supply contracts. Instead. Such contractual rate is 11 % per annum. ATCOR was advised by NOVA that its firm capacity would be curtailed.inclusive of Goods and Services Tax but exclusive of interest. to the extent possible. pipeline repairs and pipeline connections occurred on the NOVA system. without making such a declaration. Paragraph 9 of the Agreement. provides: 9. Continental did not curtail or claim force majeure to its purchasers of gas in response to ATCOR 's force majeure notices and consequent reductions in deliveries described in paragraph 10 hereof. ATCOR gave to Continental pursuant to paragraph 9 of the Agreement both a "force majeure" notice and. were outside the control of ATCOR and were not. and only thereafter reduced or ceased deliveries to Continental under the Agreement. acts of the Queen's enemies. craterings. was this event within Atcor's control and which Atcor could have overcome with the exercise of due diligence? 4. arrests and restraints. riots. the term "force majeure" shall mean any acts of God. If "no". Further. and to resume the performance of such covenants or obligations with reasonable dispatch. Does the operative clause of para.Subject to the other provisions of this paragraph. washouts. the invoking of force majeure pursuant to any gas purchase contracts. explosions. ISSUES [3] In order to claim the benefit of the force majeure clause. such party is unable to overcome. 9 preclude Atcor from claiming force majeure? 2. breakages of or accidents to plant. whether of the kind herein enumerated or otherwise. as hereinafter defined. the orders of any court or governmental authority. blockades. or in consequence of force majeure. If "no". fires. insurrections. floods. was there an event of force majeure as defined within cl. 9(b)? . that neither party shall be entitled to force majeure benefits: … to the extent that the failure was caused by the party claiming suspension having failed to remedy the condition. there is also a requirement that the party claiming suspension give to the other party notice of force majeure as soon as possible after the happening of the event and likewise once the force majeure condition has been remedied. epidemics. if either party to this Agreement fails to observe or perform any of the covenants or obligations herein imposed upon it and such failure shall have been occasioned by. pipeline tie-ins. Finally. not within the control of the party claiming suspension and which. If "yes". but without restricting the generality thereof. including therein. the force majeure clause provides in cl. such failure shall be deemed not to be a breach of such covenants or obligations. civil disturbances. pipeline repairs and reconditioning. Atcor must conduct a four-step analysis: 1. earthquakes and storms and in addition shall mean any strikes. wars. is Atcor precluded from relying on the defence of force majeure because it failed to remedy the condition and resume performance with reasonable dispatch as contained within cl. pipeline connections. hydrate obstructions of lines of pipe. (a) For the purposes of this Agreement. sabotage. any acts or omissions (including failure to take gas) of a transporter of gas to or for Seller which is excused by any event or occurrence of the character herein defined as constituting force majeure. freezings of wells or delivery facilities. or any other causes. 9(a)? 3. well blowouts. 9(b). by the exercise of due diligence. III. landslides. machinery or lines of pipe. lockouts or other industrial disturbances. lightning. .as hereinafter defined. This is recognized by S. Sweet & Maxwell. It is still in common use in contract formation. if Atcor succeeds on all of the above questions. if any. Unfortunately. (A) The Operative Clause [6] What obligation does the operative clause of the force majeure provision impose on the parties? For the sake of convenience I set out the operative clause again: Subject to the other provisions of this paragraph. Veitch. IV. the remaining question pertains to its obligation to supply gas. 161 at 162. of force majeure clauses in general. at para. 9(a)? Frequently the analysis will end here depending on the wording employed by the parties. Waddams in The Law of Contracts.. as it appears in gas sales contracts. 1989).or in consequence of force majeure. in whole or in part. and of force majeure clauses in situations as that set out in this case in particular. The problem with these clauses is they are usually drafted in archaic terms and are used as standard boilerplate provisions without much thought given as to the extent of their use. in Canada. "Contracts . was Atcor's "failure" to deliver gas to Continental "occasioned by or in consequence of force majeure" as defined in subpara.Force Majeure Clauses . especially in gas supply contracts as that in this case. Canada Law Book Inc. Bar Rev. See. requires a four-step analysis as set out in the issue section above. 372 where he asks. 626 defines force majeure: The expression "force majeure clause" is normally used to describe a contractual term by which one (or both) of the parties is excused from performance of the contract. in the face of a force majeure event. THE LAW [4] Force Majeure is a concept which derives from the law merchant. the clause in question in this case is in the typical archaic fashion and attempts at all cost to circumvent clarity. such failure shall be deemed not to be a breach of such covenants or obligations. The author of Chitty on Contracts. 54 Can. at p.Non-Availability of Market" (1976). (London.Frustration . 1993).Finally. 3rd ed. I would suggest. [My emphasis] That is. if either party to this Agreement fails to observe or perform any of the covenants or obligations herein imposed upon it and such failure shall have been occasioned by. [5] There has been little judicial consideration.M. to conceal from the promisee the potentially far-reaching effect of the excuse the clause may afford. in a footnote: Why does such archaic language survive for such clauses? Perhaps. 26th ed. E. An analysis of a force majeure clause. upon the happening of a specified event or events beyond his control. (Toronto. It comes into play in considering the force majeure definition section. 9. [My emphasis] Later at p. assume that the delivery point is Empress and that the seller has given [a firm delivery obligation] … Assume that the seller is free under the terms of the contract to supply gas from any source it chooses. [8] In many gas supply contracts. By way of example. It is the operative clause which determines whether there is a duty on the seller to purchase replacement gas or allocate supply. Mcintosh at p. by the exercise of due diligence.the seller must first be able to demonstrate on the facts that the seller is unable to deliver the gas before the definition in Section 14.the courts could well disallow any force majeure relief under the typical direct sales contract.could it not be successfully argued by the buyer that the seller is still able to deliver gas to Empress by purchasing it on the open market from an available third-party source and. the parties can change this and impose the obligation anywhere in the contract. The events of force majeure are spelled out in the lengthy list in Section 14. such covenant and obligation shall be suspended during the continuance of such inability except the obligation of a party hereto to make payment of any amounts due hereunder prior to the force majeure. (Mississauga.there is no suspension of the delivery obligation by reason of force majeure? At a market-clearing price. Insight Press. With careful wording. The words "unable" and "inability" greatly affect the manner in which the provision is to be interpreted. Producers entering into these contracts believing that they can claim force majeure relief any time a force majeure .[7] Continental argues Atcor.02 becomes operative.02 [cl. could have overcome the Nova curtailments of Atcor's gas supply by purchasing replacement gas or allocating its available supply. the force majeure provision is typically worded as follows: Subject to the provisions of this Article and this Agreement. Mcintosh continues: Short of there being no alternative gas supply available at Empress at any price (which would likely only happen if there was a major curtailment of mainline Nova capacity). However. Hugh N. 6 looks at this precise situation and states: The problem with the typical force majeure article is that it leaves the parties in considerable doubt with respect to what specific events will actually excuse the seller from honoring its firm delivery obligation. If a defined force majeure event occurs with respect to the production or gathering facilities of the seller. 9(a) in the instant case]. [My emphasis] See. there is always uncontracted gas supply available which the seller can purchase to fulfil its delivery obligation at Empress should a force majeure event occur with respect to the seller's own lands and facilities. Mcintosh in "Certain Issues Arising in the Gas Sales Contract" in Gas Marketing Producer Issues in The 1990’s. Due diligence does not enter the analysis here. if either party to this Agreement is unable by reason of force majeure to observe or perform any covenant or obligation herein imposed upon it.therefore. 1991). it is clear from the available jurisprudence that force majeure clauses will be construed strictly: Atlantic Paper Stock Ltd. It is 184 words in length and lacks clarity. in Gas Marketing:Current Issues for Producers (1990). It is clear that cases dealing with force majeure clauses turn on the proper interpretation of the clauses themselves: TransCanada Pipelines Ltd. Further. Terrance M.event occurs with respect to their production facilities. Parties may find that provisions which were agreed upon only after long and difficult negotiations such as the rate of take provisions end up to be of little value because they are ultimately impacted by the wide scope of a force majeure clause. v. This is consistent with the clause. (3d) 293 at 296 (Ont. stated the traditional principle in TransCanada at p. (B) Event of Force Majeure [11] At the outset I mention that cl. vary.R.L. In fact Hughes at p. This is sound advice.R. [10] The question becomes: was such failure "in consequence of force majeure"? Is this what "caused" the reduced deliveries to Continental? Continental argues it was not. as he then was. To determine this question. Hughes states in "Selected Non-Pricing Issues in Negotiating the Gas Sales Contract". (1983). There is a tendency for parties to view force majeure provisions as simply "contractual boiler plate" and not the type of thing which should be dealt [sic] when negotiating the gas sales contract. one must first determine whether an event of force majeure has occurred. 56 D. reflex. [1976] 1 S. at pp. Northern & Central Gas Corp. or subtract from or contradict the terms of the written instrument. v. 39 states: . it is appropriate to begin by repeating the well-known rule that where parties have set out the terms of their contract in a written document.C. 38-39: The force majeure provisions in a gas sales contract are usually contained in an article which is buried away at the back of the contract. may be surprised to find that they have undertaken a firmer delivery commitment than they first realized. it would be open to Continental to argue that although Nova has curtailed supply to Atcor. It is unfortunate that parties do not spend more time properly drafting these provisions to provide for the exigencies which they have in mind.L. there is still "spot gas" to be bought and therefore Atcor is not "unable" to supply gas as according to its firm supply commitment. 9(a) which defines "force majeure" is drearily lengthy. If the operative clause said "unable". Continental says it was Atcor's business decision to allocate its supply. 146 D. (1975). AnneNackawic Pulp & Paper Co. [9] In the case at bar. St. Cory J.). Atcor has "failed" to provide gas. [My emphasis] I agree with these comments. 296: Trite as it may be. the words in the operative clause are "fail" and "failure" not "unable" or "inability". 1975 170 (SCC). 580. This type of attitude could prove to be very costly in the long term.A.. (3d) 409. extrinsic evidence is not admissible to add to.R.A. as a general rule. C. machinery or lines of pipe. etc. to fall within the definition clause. (vi) regulatory interference in the terms of the gas sales contract. In negotiating the gas sales contract it is preferable that the parties specifically address whether events like the following should or should not constitute an event of force majeure: (i) lack of finances. Atcor must show an event of force majeure. which are by no means exhaustive. I cannot over-emphasize. occurred and show the event was beyond its control and could not be overcome with the exercise of due diligence. (ii) insufficiency of Seller's gas supply and whether or not such insufficiency has to arise because of another force majeure event. (iii) failure of Buyer's market to require gas and whether or not such failure has to arise because of another force majeure event. He states at pp.e. overcome? (C) Due Diligence . royalties. as enumerated in the definition clause.. [12] In the case at bar. pipeline repairs and connections).If the parties specifically addressed their minds to these events [in the force majeure clause] it is unlikely that they would easily agree as to whether they should or should not constitute a force majeure event. with due diligence. the words the parties use in their provisions are of paramount importance. If they are clear and unambiguous. and (vii) the imposition of new taxes. (v) curtailment of firm capacity on NOVA or TransCanada. 40-41: In order to place some limit on the potentially wide scope of the usual force majeure provisions the parties often set out certain events which shall be deemed to not constitute events of force majeure. It is clear from the Agreed Statement of Facts that the compressor breakdowns. breakages of or accidents to plant. unnecessary litigation can be avoided. Further. [13] The event of force majeure applicable in this case is the act of a transporter of gas (Nova) to the seller (Atcor) which is excused by an event or occurrence of the character defined as constituting force majeure (i. pipeline repairs and pipeline connections resulted in the Nova curtailments. Was this event within Atcor's control and which Atcor could. which parties should specifically address when drafting force majeure provisions. (iv) failure of a transporter to transport gas for the Buyer or Seller and whether or not such failure has to arise because of another force majeure event. Hughes outlines seven matters. which resulted in the Nova curtailments and hence the failure of a transporter to deliver gas. did that change? A. However. for example. Alfred Sorensen. 34. [15] It would seem the due diligence requirement is included in these standard boilerplate provisions to provide for the situation where one is dealing with a producer/seller who experiences machinery breakdown or any of the events enumerated in the force majeure definition and who decides to delay or not to fix it. Clearly. as demonstrated by the Applicant's read-in from Examination for Discovery of Mr. at least in June..J. they allowed you to make up your gas. etc. with the exercise of due diligence. In the past like. line 24 to p. it would meet that onus for the period following 1 August 1992. 9(a) contains the conjunction "and" after "not within the control of the party claiming suspension".50 per G. Once they found out how much you . is the matter which is enumerated in the definition. line 14: Q. purchased additional gas and transportation throughout the entire period at prices approximately $. In fact both parties have acknowledged this in para. in excess of the Continental Contract price in order to fulfil its daily delivery obligations under the ANE Contract and the Continental Contract. At some point. Sorensen's evidence. Q. had it so chosen. That is the compressor breakdown. cl. I note that even if the due diligence requirement compels Atcor to demonstrate that supplying gas was a virtual impossibility and that it was unable to overcome its delivery obligations by purchasing replacement gas.[14] It is the event enumerated in the definition clause which the party must attempt to overcome with the exercise of due diligence. the month of June. This assertion is contradicted by the vice-president of Continental. This indicates the event which Atcor must not be able to overcome. but not for the period prior to that. In this situation. it can be said that the seller has not overcome the event which is both. [16] Finally. performing its contract or purchasing substitute supplies in the market. It is the operative clause which would require Atcor to purchase replacement gas if the word "unable" was contained therein. you were utilizing the full transportation capacity available to you under that contract? A. within its control and which can be overcome with the exercise of due diligence. 35. Continental asserts in its argument: The evidence is clear that Atcor could have. You indicated earlier that. Atcor could not have overcome any of these matters with the exercise of due diligence. The only time it changed was in the months of August and September where TransCanada's rules changed as to how they were going to handle these outages. Yes. Continental argues the Nova curtailments of Atcor's gas supply could have been overcome by Atcor by the exercise of due diligence by allocating its available supply. pipeline repair. 9 of the Statement of Agreed Facts and Exhibits. I reproduce the relevant portion of that read-in beginning at p. That is not the situation in this case. clear the obstruction of pipe or remedy any other condition which amounted to force majeure.3 was replaced. And that was like what I was saying earlier.we had to reduce our deliveries at Empress one way or the other.were being cut.your option was changed to reduce market? That was in order to prevent -what was happening is. and to resume the performance of such covenants or obligations with reasonable dispatch. in turn. Atcor submits cl. It is clear from the Agreed Statement of Facts that Atcor could not remedy the problems experienced by Nova.364. 9(b) failed to remedy the condition by either allocating its available supply to Continental. and that was to reduce market.you could no longer replace supply. which I find they do. you show a shortfall from Atcor of 2. as soon as Nova resumed supply. For the month of August. I agree. NOVA was trying to reduce volume at Empress and people just kept replacing and replacing so that the volume never reduced. – if the failure was caused by lack of funds or with respect to the failure of payment of any amount or amounts then due hereunder … The "condition" in the above clause refers to a condition described in para. . stem the flood. they gave you an opportunity to find replacement gas. (D) Exception Clause [17] Continental argues that if the Nova curtailments amount to force majeure. there was this excess capacity at Empress they could find. was with the change in rules with TransCanada where once curtailment was announced. Did you attempt to replace the other 948 units? A. So they changed the rules so that if a curtailment occurred.you had to reduce market. Yes. or by purchasing replacement gas and transportation to deliver full volumes. once the curtailment was announced.416. From the 1st of August on. you only had one choice. Further. It was sort of a onesided type of change from the 1st of August on.3 103M3 of which 1. A party could not expect to obtain relief under para. [18] The relevant portion of the paragraph provides: 9(b) Neither party shall be entitled to the benefit of the provisions of paragraph 9 hereof under any or all of the following circumstances: – to the extent that the failure was caused by the party claiming suspension having failed to remedy the condition. extinguish the fire. 9 upon which a party could seek to rely as being force majeure. resumed its supply in full to Continental. 9(b) which provides an exception to relying on the force majeure event does not apply. we could not replace anyone. but chose not to do so. 9 if it had within its power the ability to quell the riot. That is not the case. [My emphasis] And further at p. So in that case. Atcor. 38 from lines 6 to 24: Q. you were not allowed to replace your supply anymore. Atcor under cl. It cites Tennants (Lancashire)Ltd. it will fail in its defence for non-performance. at para. or in consequence of force majeure".[19] Secondly. Therefore. I agree. In fact. 627]. v. the courts will allow suppliers of goods to allocate available supply to other contracts. [21] I return to the question. The parties have used the words "occasioned by" and "in consequence of. 9 of the Agreement. Upon reading the clause. hindered or delayed from performing the contract.C. [25] Continental cites a number of cases which deal with "hindered" or "prevented" clauses and attempts to demonstrate that where one is confronted with a "hindered" clause.L. 10 of the Statement of Agreed Facts and Exhibits provides that Atcor curtailed a portion of its firm service obligations at Empress "by reason of the NOVA curtailments". Atcor submits that because of this. "hindered" or "delayed". Continental says since Atcor was not "prevented" from performing.). Operative Clause . [1917] A. It is not a model of plain language drafting. Continental cites Chitty on Contracts. Continental cannot now argue that in the language of para. That is. which draws a distinction between a party relying upon a force majeure clause showing he or she has been prevented. it cannot claim force majeure protection as contained within the operative clause.Cause of Failure to Supply [22] I note that para.S. numerous times. and Intertradex S. [23] Continental says it is not enough for Atcor to prove that a force majeure event has occurred. [20] I recognize the redundancy which appears as a result of the exceptions clause. as to whether the failure by Atcor to supply gas was occasioned by or in consequence of force majeure. there is no indication that the "failure" to supply gas to Continental was caused by a lack of funds. 1037 [p. It is not open to Continental to argue now that Atcor must demonstrate the Nova curtailments "prevented" it from performing its obligation. Atcor was not "prevented" from delivering full contract volumes as it either had the available supply and chose to allocate it elsewhere or it could have obtained alternative gas supply sources. raised by the operative clause. Both clauses are not necessary. [24] The force majeure clause in the instant case does not use the words "prevented". It says if Atcor could have avoided or mitigated the consequences of the event. neither of the exceptions apply to preclude Atcor from relying upon the force majeure definition. . v. Continental argues that the cause of the reduced deliveries was Atcor's business decision to allocate its available supply or failure to avail itself of alternative gas supplies. These will govern. On this basis. 495 (H..A. I am unable to read them in. That is. Wilson & Co. the exceptions clause requires the seller to remedy the condition (which refers to one of the enumerated events in the definition clause) if they can and the requirement to use due diligence in the definition section also requires the seller to overcome the event (which refers to one of the enumerated events in the definition clause). the reduced deliveries were not "occasioned by. it is apparent that producing a redundancy is not beyond the scope of the clause. C. being failure to deliver. . Van Der Zijden Wildhandel NV v.l.R. storm.A. As stated in TransCanada. that case is distinguishable because it was incumbent on the party relying on the clause to show both force majeure and inability to ship. [26] In Wildhandel. [27] Although the court in Hong Guan interpreted the phrase "subject to force majeure and shipment" as being a prevented force majeure clause. Hong Guan & Co. In this case the admission was made. The court held. [1960] 2 All E. in support of this position. 509 (C. even though there may have also operated another cause … But. In support of this proposition.A. if the breakdown of machinery would not by itself have prevented delivery … [My emphasis] On the other hand. Jumabhoy & Sons Ltd.). as being an event of force majeure.J. v.. [1978] 1 Lloyd's Rep. [1975] 2 Lloyd's Rep. 7 of its brief: Regarding "prevented" force majeure clauses. [1978] 2 Lloyd's Rep. 514 uses "prevention" language in arriving at his decision: So it comes to this: If the breakdown of machinery would by itself have been sufficient to prevent delivery. the vendors could not claim force majeure unless they could "show that they were prevented from fulfilling their contract by a cause beyond their control". the force majeure clause in this action does not use prevention language. not the words that might be used. I reiterate..). yet it is interesting to note in Intertradex. fire. where the force majeure clause is a "prevented" clause. Continental cites P. on the language of the particular clause. one must look at the words used.). if the parties include the words "unable" and "inability" in the operative clause of the force majeure . Continental argues.A.r. fire. they are distinguishable. Ct. R. Further. it cites Exportelisa S. the sellers would be protected by the force majeure clause. and not merely difficult or unprofitable. Giuseppe & Figli Soc. It spoke of "war. flood. and therefore I find the "preventative" cases of little assistance. heavy snow or any other causes beyond their control". supra. flood. 240 (Com..a. "should the fulfilment of this contract be rendered impossible by …" The sellers were unable to demonstrate that fulfilment of the contract was impossible. Total unavailability of the product would have sufficed. the party relying on the clause must demonstrate that performance has been rendered physically or legally impossible by circumstances beyond its control. The clause in this case is quite different. Accordingly. Coll. 100 (P. [29] If impossibility is to be imposed on a party as the condition before force majeure may be claimed. Denning L. as in the case at bar. the court will not look at the seller's other commitments. Tucker & Cross Ltd. on the language of the clause. where the relevant force majeure provision included the phrase. As stated earlier. [28] Continental says at p. at p. that must be expressly stated within the contract. 433 (C. storm and heavy snow were inapplicable. the applicable clause made no reference to failure of the vendors' source of supply. War.C. In support of this proposition.J.). No admission was made by the buyers as to why non-delivery occurred. but the sellers failed to show it. the sellers failed.Lesieur-Tourteaux S. v. 437. The Court of Appeal states at p. for the proposition that a party coming within the language of a force majeure clause need not mitigate the consequences of the force majeure event.J. in light of the words of the operative clause here. In fact in Exportelisa at p. Vanden-Avenne Izegem P.B. 416. [32] Atcor relies on Bremer Handelsgesellschaft mbH v. on a prorata basis in the proportion of the respective firm daily obligations under Seller's firm gas sales contracts.). [30] The question one must ask. Seller will firstly curtail deliveries under interruptible gas sales contracts. supra. would Atcor have curtailed deliveries of gas to Continental? I do not think so. [1976] 1 Lloyd's Rep. even if one accepts. she or he must say so in the contract. 109 (H. If a seller requires pro-rata distribution in the case of a force majeure event. It provides: To the extent that Seller is required to curtail deliveries as a result of a force majeure event as defined herein. V. 294: … it is wrong to concentrate on this one contract and assume that all others were identical and would have been dealt with by a pro rata distribution. states: In my judgment.. unless the particular clause explicitly so requires. The parties themselves stated Atcor's reduced deliveries were a result of the Nova curtailments. is: had the Nova curtailment not occurred.. as correct. Continental Grain Corp. I agree. the decision of this Court in Tradax v. [1978] 2 Lloyd's Rep. . That is not the situation in this case. as one must in this Court. ATCOR'S OBLIGATIONS AFTER FORCE MAJEURE OCCURS [31] The effect of successfully declaring force majeure is a suspension of obligations. including this contract.).A.A. virtual impossibility will be required before excusing performance. where the court affirmed the lower court's analysis of the duty to distribute available goods in a reasonable manner having regard to all the circumstances. Continental says Atcor should have pro-rated its available gas supply or purchased replacement gas. so that the sellers would have been under no obligation to buy afloat in order to fulfil this contract … it seems to me that the sellers wholly failed in any relevant respect to get themselves within any of the terms of the relevant exemption clause. it can be said that Atcor's "failure" to deliver was "occasioned by" or "in consequence of force majeure". Therefore. In this respect. 269 (C. Continental refers to Bremer Handelsgesellschaft mbH v. Roskill L.V.provision. [1983] 1 Lloyd's Rep.L. and secondly. one of the gas supply contracts entered as an exhibit in the instant action is instructive. The words used within the specific clause determine whether the party claiming force majeure will succeed. Andre. and Intertradex. [33] If there is some duty on a seller concerning the manner in which to appropriate his or her goods in the face of a force majeure event. then. are helpful. VII. when a supplier has contracts to fulfil. I cannot agree with that at all. COSTS [35] The Applicant is entitled to its costs.the effective cause is not the seller's appropriation. Setting out one's contractual obligations in full is a precondition to avoiding unnecessary litigation. chronological order of contracts or some other basis . He states at p. he said. and said: "… It is a difficult point on which. Wilson. but instead of fulfilling it. so far as I know. I put to Mr. Therefore. All parties should do so. .This clause demonstrates that the parties have taken time to think ahead and provide for a force majeure declaration. would they be liable in damages on all the other 14? Mr. but only has enough of the goods to fulfil one of them. Atcor validly claimed force majeure and resumed deliveries promptly when its deliveries were no longer curtailed. Order accordingly. My own view is that if the seller appropriates the goods in a way which the trade would consider to be proper and reasonable . [1917] A. sufficient to fulfil this contract. Hallgarten this instance: Suppose SEPOM had entered into 15 equal contracts and they had only enough groundnuts to fulfil one of these contracts. Mr. VI. I make no comment on this point and reiterate that there is a suspension of obligations in the case of a proper force majeure declaration. 513: Next.C. They had. he can rely on force majeure as to the others. 496. in the absence of any contractual requirement to do so. Hallgarten submitted that they would be.which were earlier in point of date. supra." [My emphasis] In the case at bar.whether the basis of appropriation is pro rata. On this point the Judge referred to Tennants v. but whatever caused the shortage. if he reasonably appropriates what he has to that one. DISPOSITION [34] I find there was no obligation on Atcor to pro-rate its deliveries. there is little guidance. It seems to me that. This is a question which has often been discussed. If they fulfilled one of them. the comments of Lord Denning in Intertradex. no evidence was submitted indicating what the "trade" with respect to gas sales would consider proper and reasonable. Hallgarten submitted that the defence of force majeure was not available: because SEPOM had some groundnuts available. they fulfilled two or three other contracts .
Report "Altcor ltd v continental Energy Marketing.docx"