I am seeing many unique ways that the force majeure clause is being applied and ruled upon by the courts. The following is one of those more interesting cases I have come across.

 

On June 3rd, the United States Bankruptcy Court for the Northern District of Illinois issued a ruling in favor of Hitz Restaurant Group which may have far-reaching consequences for indebted tenants who have struggled to pay rent in the wake of government-issued shut downs. Hitz Restaurant Group, which had owed its creditor, Kass Management Services, 3 months of rental payments, argued that the force majeur clause in their contract protected the tenant from meeting their obligations.

 

A force majeure clause essentially protects either party from fulfilling the obligations set out in their shared contract in the event of an unexpected natural hazard. Citation of the clause is typically reserved for natural disasters outside of the control of either party, often referred to as an act of God. The effectiveness of claiming force majeure due to business loss triggered by a government shutdown has remained unclear since the beginning of the COVID-19 pandemic in the United States.

 

 Hitz Restaurant Group argued that their force majeure clause came into effect on March 16, 2020, the day Illinois Governor J. B. Pritzker issued an executive order stating: “…all businesses in the State of Illinois that offer food or beverages for on-premises consumption— including restaurants, bars, grocery stores, and food halls—must suspend service for and may not permit on-premises consumption…”

 

Finding that Kass Management Services failed to properly argue against Hitz Restaurant Group’s claims, the court ultimately ruled in favor of the tenant, albeit conditionally. Citing that  Governor Pritzker’s order allowed for Illinois restaurants to provide takeout services and curbside pickup, Judge Donald R. Cassing determined that Hitz Restaurant Group still owed 25% percent of missing rent to Kass Management for the months of March, April, and June.

 

Considering the unique specifications of Judge Cassing’s ruling, I’d advise that both property owners and tenants study this case carefully before taking their claims to court.  

 

Please contact me should you need a review of any of your contracts before a dispute like this arises.  

 

If you find this post of value please sign up for my content series May The Force Majeure Be With You for frequent information about how to use contracts and clauses to your advantage.

 

About Liff, Walsh & Simmons

Liff, Walsh & Simmons is a full-service business law firm serving the legal needs of small businesses and privately held companies, their owners and operators, and individuals throughout their business and family life cycles.  From helping entrepreneurs bring their business visions to market, to representing middle-market companies in business transactions and disputes, to preserving the wealth that a family business has worked so hard to earn, we take pride in providing value-driven solutions and great results.  Our responsive service is focused on general and transactional business advice, commercial and civil litigation, real estate, land use, finance, and estate planning and administration.  At Liff, Walsh & Simmons, we are Experienced, Innovative, and Entrepreneurial.

 

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James Crossan

James Crossan

Jim is a civil litigator and business lawyer who serves as the Director of the firm’s Litigation Practice Group. He applies an in-depth knowledge of litigation and critical decision-making skills to foster and create effective working relationships with his clients. Jim’s practice focuses on contract disputes and he works directly with individuals and corporate entities in a wide range of civil matters including construction, real estate, estates and trusts, and banking and finance. Contact Jim at jcrossan@liffwalsh.com or (443) 569-7264.

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