Force Majeure: Developer's Excuse De Jeure

Written by Posted On Thursday, 24 September 2015 11:42

Question: I signed a contract a little over two years ago to purchase a to-be built condominium unit. I gave the developer a hefty down payment. My sales contract says that settlement must take place within two years. On a weekly basis, I inspect the building and it does not look like a lot of work has been done.

I asked the developer when I will be able to go to closing, and his response was that because of matters out of his control, he will not be able to meet the settlement deadline spelled out in the sales contract.

Based on the length of time this has taken, and my concern that interest rates are going to rise soon, I would like to cancel the contract and get my deposit back.

The developer is relying on a paragraph in the contract that excuses a builder from timely delivery based on "force majeure".

Exactly what does this mean?

Answer: It is French for "major" or "superior" force.

The Merriam-Webster Online Dictionary defines "force majeure" as "an event or effect that cannot be reasonably anticipated or controlled. Some people equate this concept with "an act of God".

Legal contracts of any kind -- including real estate -- often include a "force majeure" clause. A sample would read like this:

Contractor's failure to perform any term or condition of this Agreement as a result of force majeure conditions beyond its control such as, but not limited to, war, strikes, fires, flood, Acts of God, governmental restrictions, power failures, or damage or destruction, shall not be deemed a breach of this Agreement.

I often hear from attorneys and consumers all over the country that developers us the "force majeure" clause as their legal grounds for not refunding the earnest money deposits to unhappy contract purchasers.

The law of contracts is quite clear. A Court will only excuse a developer from performance when there is an actual impossibility, and not merely unexpected difficulties. Recently, the District of Columbia Court of Appeals addressed a case where one party to a contract attempted to void that document based on a force majeure type clause. The clause allowed termination of the contract for "any other emergency beyond the parties' control, making it inadvisable, illegal or which materially affects a party's ability to perform its obligations under this Contract."

According to the Court:

Such provisions are often called force majeure clauses, but attaching that label does not assist in our analysis. We must look to the language that the parties specifically bargained for in the contract to determine the parties intent concerning whether the event complained of excuses performance.

What does this mean?

A developer cannot merely say "I cannot deliver because of force majeure". That is a label, which is too general. The developer must justify his position, providing proof that something truly beyond his control caused the delay in completing your condominium unit.

Take this example: a few years ago, there was a serious wind and rain storm in the Washington area. Clearly, this was an "act of God". But in order to be excused from performance, it is not enough for the developer to cite to this storm. He must specifically show how and why the storm specifically impacted on his development.

One lawyer from Florida recently told me that developers in his area are often abusing the concept. Any expense due to increased building costs are all labeled "force majeure", which seems to be the "excuse de jeure".

What can you do if you signed a contract for a piece of property and the time for delivery has elapsed? Send a demand letter to the developer, in which you include a signed form release. This document states that the contract is declared null and void and the earnest money refunded in full back to you. You should sign the release and ask the developer to do the same.

Your letter should also state that if he is relying on "force majeure", he should specifically document his claim. The burden is on the developer to prove not only that there was an unanticipated event, but how this event directly impacted on the development process.

And unless the developer can justify his position, you are entitled to a refund. Hopefully, you will not have to go to Court to collect.

A Florida Judge said it all when he wrote:

Inconvenience or the cost of compliance, though they might make compliance a hardship, cannot excuse a party from the performance of an absolute and unqualified undertaking to do a thing that is possible and lawful. Parties... bind themselves by their lawful contracts, and courts cannot alter them because they work a hardship
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Benny L Kass

Author of the weekly Housing Counsel column with The Washington Post for nearly 30 years, Benny Kass is the senior partner with the Washington, DC law firm of KASS LEGAL GROUP, PLLC and a specialist in such real estate legal areas as commercial and residential financing, closings, foreclosures and workouts.

Mr. Kass is a Charter Member of the College of Community Association Attorneys, and has written extensively about community association issues. In addition, he is a life member of the National Conference of Commissioners on Uniform State Laws. In this capacity, he has been involved in the development of almost all of the Commission’s real estate laws, including the Uniform Common Interest Ownership Act which has been adopted in many states.

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