Attorney Gil Nadel, Attorney Omer Wagner
The US, as we know, is one of the world's most important countries, located high up in the world's economic rating. The country is famous for its motor vehicle industry, clothing apparel, computers, electronics and more. The US is the world's largest importer of products and services, and the second largest exporter. Its primary partners in trade are Canada, Mexico, China, Japan and the European Union.
The US is also well-known for its natural disasters, particularly tropical storms, tornados and hurricanes.
As we know, Hurricane Sandy has recently hampered the lives of residents, and, it would be assumed, consequently caused many significant delays to the chain of supply of products around the world or in the US itself.
The question is, can Hurricane Sandy be considered a "force majeure" thereby exempting parties from upholding their contractual obligations?
About "force majeure" clauses:
The clauses delineating a force majeure in contracts can provide the party in breach with protection against claims for compensation (and more), in circumstances where the contract could not be upheld for reasons that are beyond the power of both parties. A force majeure can be broadly determined in the contract (any event such as war, strike, weather conditions, and more) or narrowly, as the parties will decide;
It should be noted that there is no standard by which to precisely determine what is or is not considered a force majeure, and everything depends upon the circumstances of each case. Events such as a volcanic eruption, terrorist activities, biological warfare, fire or flood- may be considered a force majeure in one case, or not in another case.
If there is no specific clause referring to force majeure in a contract, clause 79 of the UN treaty for international sale of goods, covers a considerable portion of international trade, and was incorporated in Israel under the Trade Law (International Sale of Goods)- 1999 (which came into effect in the year 2000) which states that any party will be exempt from paying compensation to another party due to a breach of agreement if it is proven that this breach was caused by an obstacle that was beyond his control, and which it could not have been reasonably expected of him at the time of signing the contract to take this obstacle into consideration, or to prevent it, or to overcome it and its consequences.
Is a hurricane in the US an unforeseeable event?
As to this matter, the question is whether in the US, a country where hurricanes are not rare, could an American supplier cancel his contractual obligation to export goods to Israel on time by claiming that the hurricane is considered a "force majeure" that was unforeseeable during the signing of the contract?
Naturally, what may be considered as rare in Israel may be considered routine in the US, and vice versa.
War and terrorist activities have, unfortunately, become a foreseeable event in Israel, while these may be considered less probable in the US. On the other hand, a hurricane in Israel is unlikely, while in the US it is more probable.
It is important to further note that after looking into this matter, we found that every state in the US interprets the "force majeure" clause differently and there is no uniform approach.
The answer to this question depends, among other things, upon the contract signed by the parties, and upon the manner in which force majeure clauses were determined in the contract. Likewise, the answer depends upon the question of which judicial system the parties will chose to conduct their proceedings in.
In any case, the inability to overcome the obstacle must be proven:
Despite everything mentioned above, even if we assume that Hurricane Sandy, especially due to its great intensity, may be considered a force majeure, in order to utilize the exemption afforded by the force majeure clause, the inability to overcome this obstacle must proven.
As such, the claimant for exemption is required to prove that he had taken or attempted to take alternative steps towards minimizing the damage or overcoming the obstacle despite its unforeseeable nature.
For instance, if the Israeli importer ordered a shipmen of car parts from the US, and the American exporter claims the delay in shipment was caused by force majeure, it may by claimed that the American exporter could have exported the car parts on time as agreed by making use of a subsidiary company or an affiliated company located in another state, or to have prepared in advance by sending the shipment at an earlier date.
For example, in a verdict given in the Court of Appeals of Louisiana in 2009, it was ruled that the "Katrina" hurricane of 2005, was considered a force majeure, but due to the circumstances of the case, this did not have the power to prevent the parties from fulfilling their contractual obligations, and this was due to the fact that the party making the claim for force majeure failed in this point exactly- and was unable to prove that they could not overcome the obstacle.
In this case, the sales contract of an apartment was not signed during the appointed date and the buyer claimed that this was caused as a result of the hurricane which was a force majeure. The court ruled that while the hurricane was in fact a force majeure, it did not significantly damage the relevant residential area and so the storm did not have the power to exempt the parties from their contractual obligations.
[Melissa Baxter Ziegler V. Vicki Pansano et al. No. 2008 CA 1 495, Louisiana court of appeal, First Circuit, 6.30.2009]
And what about Israel?
Courts in Israel and overseas have shown a tendency over the years to interpret clauses such as these very diminishingly, only allowing a party of a contact to evade their contractual obligations in exceptional cases. The courts repeat the principle that contracts must be fulfilled, and that almost every event is foreseeable.
For instance, in the ruling of Israel courts it was determined that the following circumstances do not justify an exemption from contractual obligations (that is, they are not considered "a force majeure"): heavy rain that caused damage to cargo that was not properly protected; a crack that was discovered in an airplane which caused a delay in departure; problems that were discovered in the sewage and air conditioning systems on a ship during a pleasure cruise in the Mediterranean Sea; and even: a recession which led to a company's demise; in the remote past, it was even ruled that a war in Israel is a foreseeable factor that cannot be considered a force majeure;
On a different note, it was ruled that a tsunami is considered a force majeur, as opposed to other typical winter storms which can be foreseen. In this case, a construction contractor claimed that the delay in delivering the apartment to the buyer was caused due to a particularly rainy winter, but the court deferred the claimed and thoroughly differentiated between rainy weather, which is a foreseeable event, and a tsunami which is unforeseeable.
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