Bayou Place Limited Partnership v. Alleppo’s Grill, Inc. (Maryland U.S.D.C.)

Filed: March 13, 2020

Opinion By:  Richard D. Bennett

Holding:  Under Texas law, while Hurricane Harvey has been recognized as an Act of God, Hurricane Harvey is not a legal excuse for failure to perform under a contract when the terms of the contract do not contain a force majeure clause.   

Facts:  Landlord, a Maryland limited partnership, brought suit against tenant, a Texas corporation, alleging continuing violations of a commercial lease agreement governing a property in Houston, Texas.  Tenant began to miss rent payments due under the lease beginning July 2017.  Hurricane Harvey made landfall in Houston in August 2017.  Harvey caused substantial damage to the property and the nearby theater district. 

Landlord provided notices of default from late 2017 through February 2018 and filed its complaint on September 14, 2018.  Tenant admitted receiving notice and failure to pay the entirety of its rent, while asserting several affirmative defenses and requesting declaratory judgement that “they be excused from certain obligations to pay rent due to Acts of God.”  Tenant argued that Hurricane Harvey was an Act of God that caused substantial damage and interference to the property and should excuse Tenant’s performance under the lease.  The Landlord moved for summary judgment. 

Analysis:

The Court applied Texas law to govern the breach of contract claim pursuant to the lease’s choice of law provision.  “An occurrence is caused by an act of God if it is caused directly and exclusively by the violence of nature, without human intervention or cause, and could not have been prevented with reasonable foresight.”  The Court recognized that Texas courts have found Hurricane Harvey to be an Act of God. 

The Court then discussed the interplay between an Act of God and a contract. “[A]n [A]ct of God does not relieve the parties of their [contractual] obligations unless the parties expressly provide otherwise.”  Further, “the scope and applicability of a force majeure clause depend on the terms provided in the contract.” 

“In other words, when the parties have themselves defined the contours of force majeure in their agreement, those contours dictate the application, effect, and scope of force majeure.”  The Court summarized, “[i]f the contract does not contain a force majeure clause, ‘Act of God is not a legal excuse for failure to perform.’”  Because the lease did not include a force majeure clause, the Court found that Hurricane Harvey is not a legal excuse for Tenant’s failure to perform the contract.  Further, Tenant began to miss payments prior to Harvey. 

The Court also reviewed the following additional affirmative defenses raised by Tenant:  offset of payments, unconscionability of late fees and frustration of purpose. 

The opinion is available in PDF.