contract

With a judgement of 24 May 2022, delivered in the case of 55 Oak Street LLC v. RDR Enterprises Inc., the Supreme Judicial Court of Maine weighed in on a controversial legal issue related to the applicability of a force majeure clause in the context of emergency pandemic orders.

The parties of the dispute were RDR Enterprises, the Defendant, which operated a restaurant in a place owned by 55 Oak Street, the Plaintiff. In 2017 they had entered into a five-year lease agreement which included a force majeure clause. On 18 March 2020, the Governor issued an executive order designed to reduce the spread of COVID-19, which forced RDR to close until 31 March 2020. The order was later extended to preclude only indoor dining through 31 May 2020. It was then further amended to allow indoor dining on a restricted basis. Even though under the revised terms of the order RDR was allowed to reopen at a limited capacity of guests, it deliberately decided not to do so because of its concerns about the economic feasibility of such operations. After RDR failed to pay its rent, Oak Street filed a forcible entry and detainer action to evict RDR.

On 15 December 2020, the District Court issued a judgment determining that “RDR Enterprises was excused from its contractual obligation to pay any rent between 18 March 2020 and 31 May 2020, because the Governor’s executive orders completely prohibiting indoor dining constituted a ‘governmental restriction’ force majeure event within the meaning of the lease’s force majeure clause”. As for the period after 31 May 2020, the District Court concluded that the “pandemic itself constitutes a force majeure event and, therefore, would excuse RDR's performance under the lease agreement, at least in part”. The decision had then been affirmed by the Superior Court.

However, the Supreme Judicial Court disagreed. The Supreme Court held that the District Court’s partial-excuse ruling could not be sustained because nothing in the language of the clause indicated that events affecting economic viability constitute force majeure events. In the absence of express contractual language – the Court said – it is not possible to read into a force majeure clause the concept of a “partial” excuse for non-performance based on events such as the issuance of executive orders that reduce seating capacity. Accordingly, the Court vacated the judgment and remanded the case for entry of a judgment issuing a writ of possession to 55 Oak Street LLC.

Full text of the decision available at courts.maine.gov en