Payne v. Hurwitz

Louisiana Court of Appeal
978 So. 2d 1000 (2008)

ELI5:

Rule of Law:

A party's contractual performance is not excused under the doctrine of force majeure or impossibility unless a fortuitous event makes performance truly impossible. Mere increased difficulty, burden, or expense caused by the event is insufficient to excuse nonperformance.

Facts:

On August 22, 2005, Wesley and Gwendolyn Payne entered into a purchase agreement with Keefe Hurwitz to buy his home for $241,500.00.
The Paynes provided a $1,000.00 deposit, and the agreement set a closing date of September 26, 2005, with an automatic 60-day extension for necessary repairs.
On August 29, 2005, Hurricane Katrina caused substantial damage to the home's roof and interior.
Hurwitz, a contractor, estimated repair costs to be approximately $60,000.00.
On September 20, 2005, Hurwitz sent an email stating the house needed major repairs and that he was no longer interested in selling for the agreed-upon price, citing the home's increasing value.
The Paynes, who were willing to extend the closing date, had difficulty contacting Hurwitz but consistently communicated their desire to complete the purchase.
Evidence presented at trial showed that the home was re-listed for sale on September 29, 2005, for a new price of $287,000.00.

Procedural Posture:

Wesley and Gwendolyn Payne (plaintiffs) filed suit against Keefe Hurwitz (defendant) in a Louisiana trial court, seeking specific performance and damages for breach of contract.
Hurwitz answered the petition, asserting the defense of impossibility of performance due to force majeure.
Following a bench trial, the trial court rendered judgment for the Paynes, awarding the return of their deposit, a contractual penalty, and attorney fees, but it denied their request for specific performance.
Hurwitz (appellant) appealed the judgment to the Court of Appeal of Louisiana, First Circuit.
The Paynes (appellees) answered the appeal, challenging the trial court's denial of specific performance.

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Issue:

Does a natural disaster that damages a property subject to a purchase agreement, but does not make its repair and eventual sale impossible, constitute a force majeure event that excuses the seller's obligation to perform under the contract?

Opinions:

Majority - Gaidry, J.

No. A natural disaster that damages property does not excuse the seller's performance under the force majeure doctrine where performance is merely made more difficult or burdensome, not truly impossible. To be relieved of liability, a fortuitous event must create an insurmountable obstacle. Here, Hurricane Katrina did not make the sale impossible, only delayed and more costly. The seller, Hurwitz, bore the risk of damage pending the sale and had a duty to restore the home. The Paynes were willing to extend the closing deadline, meaning performance was still possible. The court found that Hurwitz's refusal to perform was volitional, driven by a desire to sell at a higher price, rather than by an actual impossibility created by the hurricane.

Concurring - McDonald, J.

No. The seller breached the contract when he unilaterally and erroneously concluded that Hurricane Katrina relieved him of his obligation. This breach was evidenced by his September 20, 2005 email stating he was no longer willing to sell at the agreed price. Hurwitz failed to offer evidence that the damage was so extensive that repairs could not be completed in a timely manner, and the court correctly found his failure to repair was volitional.

Concurring - McClendon, J.

No. The seller defaulted on the purchase agreement by virtue of his email of September 20, 2005, which constituted an anticipatory repudiation of the contract. This clear default makes it unnecessary to address the application of the 60-day extension provision. Because the contract explicitly allows the buyer to seek specific performance upon the seller's default, and the buyers did so, the remedy is appropriate in this case.

Analysis:

This case clarifies the high threshold for successfully asserting the defense of impossibility or force majeure in contract law, especially in the context of natural disasters. The decision establishes that increased cost, difficulty, or a seller's desire to capitalize on a rising market post-disaster does not render performance 'impossible.' It reinforces the seller's good faith obligation to make reasonable efforts to perform, such as repairing damage, especially when the buyer is willing to accommodate delays. The ruling is significant for contract law in disaster-prone areas, underscoring that contracts remain enforceable unless an event makes performance absolutely insurmountable, not just economically inconvenient.

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