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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,

and only to such extent. pipeline repairs and pipeline connections. provides: 9. 8. 1992 at Calgary. 5. were outside the control of ATCOR and were not. resulting in the partial curtailment by NOVA of firm transportation service provided to ATCOR and other firm service shippers at Empress (collectively. 10. by the exercise of due diligence. FORCE MAJEURE: . ATCOR first reduced and ceased deliveries under its interruptible supply contracts. Paragraph 9 of the Agreement. events which ATCOR would have been able to overcome. In each case. During the Term. 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. to the extent possible. various compressor breakdowns. ATCOR curtailed a portion of its firm service obligations at Empress. as soon as possible after the NOVA service problems were remedied. Such contractual rate is 11 % per annum. Pursuant to paragraph 6 of the Agreement. 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. and only thereafter reduced or ceased deliveries to Continental under the Agreement. ATCOR gave to Continental pursuant to paragraph 9 of the Agreement both a "force majeure" notice and. 9. Instead. ATCOR reduced deliveries to its customers. By reason of the NOVA curtailments. Continental has claimed setoff of a damages claim described in paragraph 14 hereof. ATCOR did not reduce deliveries to its other firm supply customers on a pro rate basis or any other basis … 11. In the case of each of such periods of reduction or cessation of deliveries to Continental. The said compressor breakdowns. To the extent that its deliveries were curtailed by NOVA.96 per GJ. NOVA is entitled to curtail firm service. under its Gas Transportation Tariff. partially or entirely. without making such a declaration. a notice of resumption of supply … 12. In no case did NOVA formally declare force majeure. and by how much. 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. at prices in excess of $0. 4. ATCOR was advised by NOVA that its firm capacity would be curtailed.inclusive of Goods and Services Tax but exclusive of interest. which is in issue. Continental elected to contract for alternative deliveries of gas to such purchasers. Alberta plus 2% until payment. which resulted in the NOVA Curtailments. pipeline repairs and pipeline connections occurred on the NOVA system. the "NOVA Curtailments").

civil disturbances. 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. 9 preclude Atcor from claiming force majeure? 2. epidemics. freezings of wells or delivery facilities. 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. but without restricting the generality thereof. insurrections.Subject to the other provisions of this paragraph. was there an event of force majeure as defined within cl. earthquakes and storms and in addition shall mean any strikes. was this event within Atcor's control and which Atcor could have overcome with the exercise of due diligence? 4. 9(a)? 3. (a) For the purposes of this Agreement. acts of the Queen's enemies. the force majeure clause provides in cl. the orders of any court or governmental authority. 9(b)? . breakages of or accidents to plant. Further. pipeline connections. the invoking of force majeure pursuant to any gas purchase contracts. landslides. riots. 9(b). washouts. such party is unable to overcome. pipeline tie-ins. craterings. including therein. fires. lightning. pipeline repairs and reconditioning. Finally. hydrate obstructions of lines of pipe. or any other causes. machinery or lines of pipe. as hereinafter defined. 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. explosions. blockades. lockouts or other industrial disturbances. and to resume the performance of such covenants or obligations with reasonable dispatch. or in consequence of force majeure. ISSUES [3] In order to claim the benefit of the force majeure clause. III. the term "force majeure" shall mean any acts of God. well blowouts. If "yes". whether of the kind herein enumerated or otherwise. not within the control of the party claiming suspension and which. sabotage. by the exercise of due diligence. Does the operative clause of para. If "no". Atcor must conduct a four-step analysis: 1. If "no". floods. 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. 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. wars. such failure shall be deemed not to be a breach of such covenants or obligations. arrests and restraints.

(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.or in consequence of force majeure. [5] There has been little judicial consideration.Frustration . Sweet & Maxwell. The author of Chitty on Contracts. 1993). Canada Law Book Inc. 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. (Toronto. 9(a)? Frequently the analysis will end here depending on the wording employed by the parties. 161 at 162. in Canada.Non-Availability of Market" (1976). Waddams in The Law of Contracts. This is recognized by S. THE LAW [4] Force Majeure is a concept which derives from the law merchant.Force Majeure Clauses . requires a four-step analysis as set out in the issue section above. I would suggest. . IV. to conceal from the promisee the potentially far-reaching effect of the excuse the clause may afford. 3rd ed.as hereinafter defined. 372 where he asks. such failure shall be deemed not to be a breach of such covenants or obligations. if Atcor succeeds on all of the above questions. at p. [My emphasis] That is. as it appears in gas sales contracts. (London. was Atcor's "failure" to deliver gas to Continental "occasioned by or in consequence of force majeure" as defined in subpara. and of force majeure clauses in situations as that set out in this case in particular. 1989). of force majeure clauses in general. in the face of a force majeure event. It is still in common use in contract formation. "Contracts . 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 a footnote: Why does such archaic language survive for such clauses? Perhaps. at para.M. 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 whole or in part. E. An analysis of a force majeure clause. Unfortunately. if any. upon the happening of a specified event or events beyond his control.Finally. the remaining question pertains to its obligation to supply gas. the clause in question in this case is in the typical archaic fashion and attempts at all cost to circumvent clarity. 26th ed.. especially in gas supply contracts as that in this case. See. 54 Can. Bar Rev.

It is the operative clause which determines whether there is a duty on the seller to purchase replacement gas or allocate supply. 9(a) in the instant case]. 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). the force majeure provision is typically worded as follows: Subject to the provisions of this Article and this Agreement. Due diligence does not enter the analysis here. Producers entering into these contracts believing that they can claim force majeure relief any time a force majeure . If a defined force majeure event occurs with respect to the production or gathering facilities of the seller. The words "unable" and "inability" greatly affect the manner in which the provision is to be interpreted. 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. (Mississauga. 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. 9. the parties can change this and impose the obligation anywhere in the contract.the courts could well disallow any force majeure relief under the typical direct sales contract.[7] Continental argues Atcor. 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. [My emphasis] See.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 14.02 [cl. With careful wording. It comes into play in considering the force majeure definition section. 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. [My emphasis] Later at p. Insight Press.there is no suspension of the delivery obligation by reason of force majeure? At a market-clearing price. By way of example.02 becomes operative.therefore. 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. could have overcome the Nova curtailments of Atcor's gas supply by purchasing replacement gas or allocating its available supply. 1991). Mcintosh in "Certain Issues Arising in the Gas Sales Contract" in Gas Marketing Producer Issues in The 1990’s. Mcintosh at p. However. Hugh N.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. by the exercise of due diligence. [8] In many gas supply contracts.

AnneNackawic Pulp & Paper Co. Northern & Central Gas Corp. 56 D. reflex. Continental says it was Atcor's business decision to allocate its supply. 9(a) which defines "force majeure" is drearily lengthy. the words in the operative clause are "fail" and "failure" not "unable" or "inability". C. This type of attitude could prove to be very costly in the long term. It is clear that cases dealing with force majeure clauses turn on the proper interpretation of the clauses themselves: TransCanada Pipelines Ltd.. 146 D. To determine this question. as a general rule. Terrance M. 296: Trite as it may be.A. 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.L. It is unfortunate that parties do not spend more time properly drafting these provisions to provide for the exigencies which they have in mind.R. 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. [9] In the case at bar.R. (3d) 409. 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. [My emphasis] I agree with these comments. it is clear from the available jurisprudence that force majeure clauses will be construed strictly: Atlantic Paper Stock Ltd. (1975). in Gas Marketing:Current Issues for Producers (1990). vary. stated the traditional principle in TransCanada at p. v. Cory J. This is consistent with the clause. St. In fact Hughes at p. as he then was. This is sound advice. v. [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. (B) Event of Force Majeure [11] At the outset I mention that cl. it would be open to Continental to argue that although Nova has curtailed supply to Atcor. or subtract from or contradict the terms of the written instrument. (3d) 293 at 296 (Ont. 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. extrinsic evidence is not admissible to add to. It is 184 words in length and lacks clarity.event occurs with respect to their production facilities. Further.C. Hughes states in "Selected Non-Pricing Issues in Negotiating the Gas Sales Contract". (1983). Atcor has "failed" to provide gas.).A. 580. 1975 170 (SCC).R. there is still "spot gas" to be bought and therefore Atcor is not "unable" to supply gas as according to its firm supply commitment. one must first determine whether an event of force majeure has occurred. may be surprised to find that they have undertaken a firmer delivery commitment than they first realized. If the operative clause said "unable". [1976] 1 S. at pp.L. 39 states: .

which parties should specifically address when drafting force majeure provisions. with due diligence.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. which are by no means exhaustive. It is clear from the Agreed Statement of Facts that the compressor breakdowns. Atcor must show an event of force majeure. [12] In the case at bar. royalties. as enumerated in the definition clause. pipeline repairs and pipeline connections resulted in the Nova curtailments. If they are clear and unambiguous. Hughes outlines seven matters. Further. the words the parties use in their provisions are of paramount importance. (iii) failure of Buyer's market to require gas and whether or not such failure has to arise because of another force majeure event.. unnecessary litigation can be avoided. pipeline repairs and connections). occurred and show the event was beyond its control and could not be overcome with the exercise of due diligence. to fall within the definition clause. (vi) regulatory interference in the terms of the gas sales contract. He states at pp. Was this event within Atcor's control and which Atcor could. [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.e. (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. etc. I cannot over-emphasize. breakages of or accidents to plant. 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. machinery or lines of pipe. overcome? (C) Due Diligence . and (vii) the imposition of new taxes. (ii) insufficiency of Seller's gas supply and whether or not such insufficiency has to arise because of another force majeure event. 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. (v) curtailment of firm capacity on NOVA or TransCanada.

That is not the situation in this case. they allowed you to make up your gas. [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. as demonstrated by the Applicant's read-in from Examination for Discovery of Mr. Sorensen's evidence. Yes. in excess of the Continental Contract price in order to fulfil its daily delivery obligations under the ANE Contract and the Continental Contract. This assertion is contradicted by the vice-president of Continental.50 per G. I reproduce the relevant portion of that read-in beginning at p. That is the compressor breakdown. In fact both parties have acknowledged this in para. 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. Clearly. At some point. In this situation. at least in June. but not for the period prior to that. Continental asserts in its argument: The evidence is clear that Atcor could have. Alfred Sorensen. the month of June.. It is the operative clause which would require Atcor to purchase replacement gas if the word "unable" was contained therein. is the matter which is enumerated in the definition. You indicated earlier that. 34. This indicates the event which Atcor must not be able to overcome.[14] It is the event enumerated in the definition clause which the party must attempt to overcome with the exercise of due diligence. 9 of the Statement of Agreed Facts and Exhibits. pipeline repair. within its control and which can be overcome with the exercise of due diligence. Once they found out how much you . 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. it can be said that the seller has not overcome the event which is both. 35. it would meet that onus for the period following 1 August 1992. line 24 to p. etc. [16] Finally. performing its contract or purchasing substitute supplies in the market. 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.J. for example. However. Q. 9(a) contains the conjunction "and" after "not within the control of the party claiming suspension". cl. line 14: Q. had it so chosen. purchased additional gas and transportation throughout the entire period at prices approximately $. which resulted in the Nova curtailments and hence the failure of a transporter to deliver gas. did that change? A. with the exercise of due diligence. In the past like. you were utilizing the full transportation capacity available to you under that contract? A.

It is clear from the Agreed Statement of Facts that Atcor could not remedy the problems experienced by Nova. was with the change in rules with TransCanada where once curtailment was announced. From the 1st of August on. Further. in turn.you could no longer replace supply. you were not allowed to replace your supply anymore. stem the flood. extinguish the fire. and to resume the performance of such covenants or obligations with reasonable dispatch. Did you attempt to replace the other 948 units? A. – 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. there was this excess capacity at Empress they could find. 9 upon which a party could seek to rely as being force majeure. . but chose not to do so. or by purchasing replacement gas and transportation to deliver full volumes. I agree. So in that case.you had to reduce market. which I find they do. Yes. we could not replace anyone. That is not the case. So they changed the rules so that if a curtailment occurred.3 103M3 of which 1. NOVA was trying to reduce volume at Empress and people just kept replacing and replacing so that the volume never reduced.364. A party could not expect to obtain relief under para. as soon as Nova resumed supply. resumed its supply in full to Continental. (D) Exception Clause [17] Continental argues that if the Nova curtailments amount to force majeure.your option was changed to reduce market? That was in order to prevent -what was happening is. [My emphasis] And further at p. once the curtailment was announced. they gave you an opportunity to find replacement gas. [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.3 was replaced. And that was like what I was saying earlier. Atcor. For the month of August. 9(b) which provides an exception to relying on the force majeure event does not apply. clear the obstruction of pipe or remedy any other condition which amounted to force majeure. 9(b) failed to remedy the condition by either allocating its available supply to Continental. you only had one choice.we had to reduce our deliveries at Empress one way or the other. Atcor submits cl. and that was to reduce market.were being cut. 9 if it had within its power the ability to quell the riot. Atcor under cl. you show a shortfall from Atcor of 2. It was sort of a onesided type of change from the 1st of August on. 38 from lines 6 to 24: Q.416.

Therefore. It is not open to Continental to argue now that Atcor must demonstrate the Nova curtailments "prevented" it from performing its obligation. Operative Clause . Upon reading the clause. Atcor submits that because of this. "hindered" or "delayed". 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. Continental cites Chitty on Contracts. That is. there is no indication that the "failure" to supply gas to Continental was caused by a lack of funds.A. 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). Continental cannot now argue that in the language of para. [23] Continental says it is not enough for Atcor to prove that a force majeure event has occurred. These will govern. being failure to deliver. or in consequence of force majeure".. [21] I return to the question. 495 (H. 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".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. and Intertradex S. It says if Atcor could have avoided or mitigated the consequences of the event. at para. It is not a model of plain language drafting. I am unable to read them in. it cannot claim force majeure protection as contained within the operative clause. 1037 [p.L. the courts will allow suppliers of goods to allocate available supply to other contracts. C.[19] Secondly. The parties have used the words "occasioned by" and "in consequence of.Cause of Failure to Supply [22] I note that para. Wilson & Co. it will fail in its defence for non-performance. . It cites Tennants (Lancashire)Ltd. it is apparent that producing a redundancy is not beyond the scope of the clause.S. [24] The force majeure clause in the instant case does not use the words "prevented". Continental says since Atcor was not "prevented" from performing. as to whether the failure by Atcor to supply gas was occasioned by or in consequence of force majeure. which draws a distinction between a party relying upon a force majeure clause showing he or she has been prevented. Both clauses are not necessary. the reduced deliveries were not "occasioned by. 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. [1917] A.). 9 of the Agreement. v. 627]. hindered or delayed from performing the contract. numerous times. raised by the operative clause. neither of the exceptions apply to preclude Atcor from relying upon the force majeure definition. In fact. On this basis. That is. I agree. [20] I recognize the redundancy which appears as a result of the exceptions clause.

[1960] 2 All E. fire. in support of this position. the party relying on the clause must demonstrate that performance has been rendered physically or legally impossible by circumstances beyond its control. Van Der Zijden Wildhandel NV v. that must be expressly stated within the contract.l. the force majeure clause in this action does not use prevention language. 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. Giuseppe & Figli Soc. [1978] 1 Lloyd's Rep. at p. on the language of the clause. flood. even though there may have also operated another cause … But. Hong Guan & Co. they are distinguishable. on the language of the particular clause. where the relevant force majeure provision included the phrase. 100 (P. v. 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". storm. As stated earlier. In this case the admission was made. the applicable clause made no reference to failure of the vendors' source of supply. Continental cites P. fire. Ct. It spoke of "war.a. it cites Exportelisa S. [26] In Wildhandel. 7 of its brief: Regarding "prevented" force majeure clauses..). as in the case at bar.R. Denning L. yet it is interesting to note in Intertradex.A.).J. storm and heavy snow were inapplicable..C. Coll. the sellers failed. supra. if the breakdown of machinery would not by itself have prevented delivery … [My emphasis] On the other hand. 509 (C. but the sellers failed to show it.A. [27] Although the court in Hong Guan interpreted the phrase "subject to force majeure and shipment" as being a prevented force majeure clause.. the sellers would be protected by the force majeure clause.). "should the fulfilment of this contract be rendered impossible by …" The sellers were unable to demonstrate that fulfilment of the contract was impossible.Lesieur-Tourteaux S. 433 (C. that case is distinguishable because it was incumbent on the party relying on the clause to show both force majeure and inability to ship. War. if the parties include the words "unable" and "inability" in the operative clause of the force majeure . [28] Continental says at p. No admission was made by the buyers as to why non-delivery occurred. as being an event of force majeure. and therefore I find the "preventative" cases of little assistance. Total unavailability of the product would have sufficed. not the words that might be used. flood. Continental argues. one must look at the words used. I reiterate. R. Further. The clause in this case is quite different.). In support of this proposition. and not merely difficult or unprofitable. the court will not look at the seller's other commitments. heavy snow or any other causes beyond their control". where the force majeure clause is a "prevented" clause. [1975] 2 Lloyd's Rep. [1978] 2 Lloyd's Rep. The court held. In support of this proposition.A. Accordingly.r.. Tucker & Cross Ltd. As stated in TransCanada. 240 (Com. v. Jumabhoy & Sons Ltd. [29] If impossibility is to be imposed on a party as the condition before force majeure may be claimed.J.

A. I agree.. It provides: To the extent that Seller is required to curtail deliveries as a result of a force majeure event as defined herein. [30] The question one must ask. ATCOR'S OBLIGATIONS AFTER FORCE MAJEURE OCCURS [31] The effect of successfully declaring force majeure is a suspension of obligations. 437. V.J.). 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. one of the gas supply contracts entered as an exhibit in the instant action is instructive. Andre. In this respect. and Intertradex. The words used within the specific clause determine whether the party claiming force majeure will succeed. 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. In fact in Exportelisa at p. 109 (H. [1976] 1 Lloyd's Rep.V. If a seller requires pro-rata distribution in the case of a force majeure event. Continental says Atcor should have pro-rated its available gas supply or purchased replacement gas. in light of the words of the operative clause here. virtual impossibility will be required before excusing performance. would Atcor have curtailed deliveries of gas to Continental? I do not think so. is: had the Nova curtailment not occurred. even if one accepts. it can be said that Atcor's "failure" to deliver was "occasioned by" or "in consequence of force majeure". and secondly.provision. 269 (C. she or he must say so in the contract. Continental refers to Bremer Handelsgesellschaft mbH 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. The Court of Appeal states at p.L. the decision of this Court in Tradax v. 416. as correct. [1983] 1 Lloyd's Rep. That is not the situation in this case. Continental Grain Corp. including this contract.). Roskill L. The parties themselves stated Atcor's reduced deliveries were a result of the Nova curtailments. [32] Atcor relies on Bremer Handelsgesellschaft mbH v.A. [1978] 2 Lloyd's Rep. Seller will firstly curtail deliveries under interruptible gas sales contracts. Vanden-Avenne Izegem P. Therefore. on a prorata basis in the proportion of the respective firm daily obligations under Seller's firm gas sales contracts. as one must in this Court. .. unless the particular clause explicitly so requires.B. 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. supra. states: In my judgment.

VI. Hallgarten this instance: Suppose SEPOM had entered into 15 equal contracts and they had only enough groundnuts to fulfil one of these contracts. would they be liable in damages on all the other 14? Mr. when a supplier has contracts to fulfil. Wilson. Order accordingly. they fulfilled two or three other contracts . COSTS [35] The Applicant is entitled to its costs.whether the basis of appropriation is pro rata. sufficient to fulfil this contract.which were earlier in point of date. Therefore. there is little guidance. 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. . if he reasonably appropriates what he has to that one. I put to Mr. All parties should do so. [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. If they fulfilled one of them. chronological order of contracts or some other basis .the effective cause is not the seller's appropriation. in the absence of any contractual requirement to do so. he said. the comments of Lord Denning in Intertradex. but instead of fulfilling it. They had. Hallgarten submitted that the defence of force majeure was not available: because SEPOM had some groundnuts available. Hallgarten submitted that they would be. then. he can rely on force majeure as to the others. Setting out one's contractual obligations in full is a precondition to avoiding unnecessary litigation. VII. 513: Next." [My emphasis] In the case at bar. but whatever caused the shortage. supra. My own view is that if the seller appropriates the goods in a way which the trade would consider to be proper and reasonable . Atcor validly claimed force majeure and resumed deliveries promptly when its deliveries were no longer curtailed. It seems to me that. On this point the Judge referred to Tennants v. DISPOSITION [34] I find there was no obligation on Atcor to pro-rate its deliveries. no evidence was submitted indicating what the "trade" with respect to gas sales would consider proper and reasonable. [1917] A. I cannot agree with that at all. but only has enough of the goods to fulfil one of them.This clause demonstrates that the parties have taken time to think ahead and provide for a force majeure declaration. This is a question which has often been discussed. so far as I know. are helpful. and said: "… It is a difficult point on which. Mr. 496.C. He states at p.