California Developer Invokes Act Of God Clause Due To Virus Pandemic To Delay A Deal

A retail developer in California, United States, has approached the court seeking direction to prevent Exxon Mobil Corp from selling a piece of property to any other buyers, arguing that the developer was unable to complete the $4.2 million property acquisition because of the lockdown in the state because of the coronavirus pandemic which was an act of God.

According to a suit filed in Los Angeles County Superior Court, the retail developer Pacific Collective LLC approached the court and appealed for force majeure as it attempted to delay its acquisition of a property owned by Exxon. The force majeure legal clause that was invoked by the retailing company in court refers to an unexpected event that result in one of the parties of a contract not being able to meet the obligations of the contract.

In the energy industry too, majeure is also being invoked and this legal clause is sometimes referred to as the act of God clause. The legal clause of force majeure was cited in court by BP earlier this month in order to delay a natural gas project by a period of one year. On the other hand, the same legal clause has been cited by three Indian refiners while they have refused to completion of previously agreed crude oil imports.

There were no comments available from Exxon as well as Pacific Collective in the media over the court case.

In the court, the retail property developer has approached the court to rule on a $7.9 million damages claim from Exxon for alleged breach of contract while also demanding the court issue an injunction that will prevent Exxon from selling the property to any other company or individual.

The force majeure was invoked in court by Pacific Collective on March 30, just a day prior to the closure of the acquisition of the Exxon property. According to the lawsuit, the retail developing company was informed by Exxon three days later that it would be cancelling the sale of the property to the company and would also be forfeiting the deposit money paid by the developer.

The complaint filed by Pacific Collective said that Exxon’s insistence on the scheduled closing required “acts that would qualify as crimes under the current California and County of LA Stay-at-Home Orders”.

According to legal experts, a legally acceptable force majeure can be caused by the coronavirus pandemic if companies are able to conclusively show in court that the pandemic and the related lockdowns had made it effectively impossible for the companies to perform contractual duties.

The case is Pacific Collective LLC V Exxon Mobil, Los Angeles County Superior Court, No. 20-STCV-13294.

(Adapted from Reuters.com)

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