LIQUIDATED DAMAGES AND FORCE MAJEURE

In Tandrin Aviation Holdings Ltd v Aero Toy Store LLC [2010] EWHC 40 (Comm), [2010] All ER (D) 111 (Jan) Mr Justice Hamblen rejected a challenge to the validity of a clause on the ground that it amounted to a penalty clause. He held that the clause was a liquidated damages clause and, as such, was valid and enforceable. He also rejected the submission by the first defendant that a change in economic circumstances fell within the scope of a force majeure clause. He concluded that it is well established under English law that a change in economic or market circumstances, affecting the profitability of a contract or the ease with which the parties’ obligations can be performed, is not regarded as amounting to a force majeure event. It is important to note that this conclusion was reached as a matter of interpretation of the clause. Thus it is possible to include an event of this nature within a force majeure clause but clear words will be required in order to achieve this effect.