Upper East Side Gallery Argues Force Majeure To Get Its Deposit Back

NEW YORK CITY—The Venus Over Manhattan gallery on the Upper East Side is arguing that when Gov. Andrew M. Cuomo ordered nonessential businesses to close by March 22 that provided a  basis to end its lease, according to a report in the New York Times. 

The gallery is suing its landlord to not only get out of the lease, but also to recover a $365,000 deposit, according to the paper. 

The landlord is RFR Holding LLC, 

“As a result of the Covid-19 pandemic, Governor Cuomo issued a number of executive orders, which by March 29, 2020, completely frustrated the very purpose of the lease,” the complaint, which was filed in the Federal District Court in Manhattan, said. The gallery therefore “considers the lease terminated.”

The gallery’s suit is just one example of the numerous strategies retailers are taking as they seek relief from the pandemic.

In many cases, retailers, especially small, local ones, are negotiating with landlords in order to stay open when the shutdowns end, as they are starting to do. 

Some landlords, though, are reporting that their national tenants, many of which are still financially viable, are asking for relief when they don’t need it. 

And, of course, many retailers are using force majeure provisions to either seek concessions  or get out of their leases entirely. 

Venus Over Manhattan is basing its argument on two arcane legal concepts, the Times reports: “frustration of purpose” and “impossibility of performance.” 

As with other force majeure provisions, the gallery likely has a long slog ahead of it to prove its case. 

The New York courts have interpreted force majeure provisions sparingly: a party’s nonperformance will be excused “only if the force majeure clause specifically includes the event that actually prevents a party’s performance,” write James M. Carolan, Chris Paparella, Jefferson Klocke of Steptoe, in a client note. 

Contract language is crucial obviously as many force majeure clauses omit illness, pandemic or epidemic from the triggering events, and some force majeure clauses specifically state that even a qualifying event does not excuse payment obligations, they write. “A court may also require that the clause explicitly refer to government action before the new restrictions can trigger relief. A well-drafted clause will permit nonperformance only for the duration of the crisis. These factors may render most force majeure clauses of little help in the current crisis.”

The authors also note that some force majeure provisions contain catchall language, such as ‘or any other event beyond the parties’ control making it impossible to perform their obligations under the contract. “However, the New York courts have generally interpreted such catchall provisions to include only events of ‘the same general kind or class as those specifically mentioned.”