notice and full particulars of such force majeure...the obligations of the Party giving such notice so far as they are affected by such force majeure, shall be suspended during the continuance of any inability so caused but for no longer period, and such cause shall as far as possible be remedied with all reasonable dispatch. employed herein shall mean acts of God...hurricanes...or partial or entire failure of wells. construction of the contract turned on the meaning of the term "remedied with all reasonable dispatch" and that a party to the contract was only entitled to invoke force majeure if that party "remedied with all reasonable dispatch" the force majeure event. was latently ambiguous and instead found that what was reasonable was "a question of fact that must be answered by looking to the circumstances of the case, including `the nature of the proposed contract, the purposes of the parties, the course of dealing between them, and any relevant usages of trade.'" it is standard practice in the natural gas industry for a seller to simply pass on force majeure if its upstream suppliers have declared force majeure, the Fifth Circuit found that it was reasonable for the district court, as the trier of fact, to conclude that Seller's responses to Hurricanes Katrina and Rita were enough to satisfy the reasonable dispatch requirement in the Buyer 1 contract. the Buyer 2 contract differed from the Buyer 1 provision. Like its counterpart in the Buyer 1 contract, it enumerated certain force majeure events, including ended with a catch-all category: "and any other causes, whether of the kind herein or otherwise, not within the control of the party claiming suspension and which by the exercise of due diligence such party is unable to prevent or overcome." The Fifth Circuit held that because Seller stipulated that it could have purchased some gas on the open market at some price after its suppliers declared force majeure, the case turned on whether the final clause modified only the "other causes" or whether it modified each of the enumerated force majeure events as well. other, unenumerated causes, and so the provision did not require a party to use due diligence, such as attempting to buy replacement gas on the open market, to overcome an enumerated cause, such as a hurricane. Buyer 2 argued that the due diligence clause applied to all force majeure events. possibilities were reasonable and had support in Texas case law (which governed per both contracts). reasonable interpretations of the force majeure provision, the Court found the contract to be ambiguous and held that the district court should have considered the same extrinsic evidence that it relied on to illuminate the Buyer 1 contract to clarify the Buyer 2 contract. contracts. From a practitioner's standpoint, the lesson to be learned from the Dynegy decision is an obvious one: Be very clear in drafting a contract about what is required of a party in the event of a force majeure event. Counsel for a buyer should consider including language that provides that the seller's duty to deliver the goods is not excused even where an enumerated potential force majeure event occurs when the seller can obtain replacement goods at a comparable is "comparable," counsel likewise might want to establish a maximum percentage over the price currently being paid by the seller that the seller is obligated to pay (e.g., "seller's performance is not excused where replacement goods can be obtained at a price not exceeding X% over the price currently being paid by the seller to obtain said goods..."). Conversely, counsel for a seller will want to make clear that the seller has no duty to procure replacement goods if a force majeure event disrupts whatever source the seller has chosen to supply the goods. Language should be included indicating that the contract is a single source agreement, and the source should be identified by name. The potential force majeure events should be broad and all-encompassing. As the Fifth Circuit noted, there is case law supporting both a duty to find replacement goods and a non-duty where the force majeure language is less than clear on the issue. Careful and precise drafting is therefore a necessity to ensure that "boilerplate" force majeure provisions adequately reflect the intention of the contracting parties. 4 Id. 5 Id. at 425-26. 6 Id. (Comparing Va. Power Energy Mktg., Inc. v. Apache [14th Dist.] 2009, pet. denied) (noting that the Texas trial court ruled that the gas buyer was not obligated to purchase gas on the open market after a force majeure event and citing Tejas Power Corp. v. Amerada Hess Corp., No. 149800346, 1999 WL 605550, at *3 (Tex. App.-Houston [14th Dist.] Aug. 12, 1999, no pet.), in support of its conclusion), with Tractebel Energy Mktg., Inc. v. E.I. Du Pont De Nemours & Co., 118 S.W.3d 60, 68 (Tex.App.-Houston [14th Dist.] 2003, pet. denied) ("[O]ne party's assumption about the source of supply--and [even] the other party's knowledge of that assumption--is not enough to excuse performance if alternative sources of supply are still available to fulfill the contract.")) |