When Courts Talk to Each Other

The New Hampshire Supreme Court is the final authority on the interpretation of New Hampshire law.  This and other New Hampshire state courts derive their powers either from the New Hampshire Constitution, the New Hampshire legislature (ironically called the "General Court"), or some combination of the two.

The separate federal court system derives its authority from the United States Constitution, acts of Congress, or some combination of the two.  Federal courts include districts courts, federal circuit courts of appeal, bankruptcy courts, the Supreme Court of the United States, and other specialty courts.  New Hampshire has one federal circuit court and it is called the United States District Court for the District of New Hampshire (the “District Court”).

In rendering decisions, the federal courts may apply New Hampshire state law, but sometimes the law is not clear.  When faced with an issue of New Hampshire law for which a federal districts court, federal circuit court of appeals, or the Supreme Court of the United States cannot find any controlling precedent in the decisions of the New Hampshire Supreme Court, that court may ask the New Hampshire Supreme Court to provide the answer.  This process is called “certification of questions of law.” Earlier this year, the District Court deployed the tool in the matter of Private Jet Services Group, LLC v. Tauck, Inc., 2024 N.H. 20 (April 23, 2024).

Background

In January 2018, Private Jet Services Group, LLC (“PJS”), a New Hampshire-based private aircraft booking agent, and Tauck, Inc. (“Tauck”), a Connecticut-based provider of guided tours, entered into an "Air Charter Services Blanket Purchase Agreement" for air transportation related to Tauck's New Zealand tours. Later, in May 2018, the parties signed a Statement of Work (“SOW”), which included specific provisions for the tours, such as a guarantee that Tauck would book a minimum of fifty tours per year.

The SOW included a "force majeure" clause protecting PJS from liability for delays, losses, or damages caused by events like epidemics or acts of civil or military authority.  (The French term “force majeure” literally means superior force.)  Specifically, the force majeure provision provided that “PJS is not responsible for delays, losses or damages of any kind caused in whole or in part by Force Majeure,” and the clause defined force majeure as including, among other things, “Acts of God, events of nature, epidemics, [acts of] civil or military authority, . . . [and] travel advisories of the Department of State of the United States of America.”  The contract did not contain a similar provision for Tauck.

When the COVID-19 pandemic forced Tauck to cancel its 2020 New Zealand tours due to border closures, Tauck invoked an "Adverse Economic Conditions" provision in the SOW and terminated the contracts. PJS sued Tauck, alleging breach of contract for failing to meet the minimum tour requirement. Tauck defended its actions by citing the doctrines of impossibility and frustration of purpose, arguing that the pandemic made it impossible to fulfill the contract.

Question sent to the New Hampshire Supreme Court

Under New Hampshire common law, a party to a contract may be excused from performance where unforeseen circumstances render performance impossible, impractical or cause a "frustration of commercial purpose."  Contracting parties may include a waiver of these defenses in the contract.

The District Court  asked the New Hampshire Supreme Court to determine whether a force majeure clause that protects only one party (PJS) implicitly waives the other party's (Tauck) right to invoke the common law defenses of impossibility, impracticability, and frustration of commercial purpose.

Court's Ruling

The Court ruled that common law defenses such as impossibility, impracticability, or frustration of commercial purpose are so fundamentally related to contract formation and purpose that they remain viable unless expressly waived.

The court emphasized that the defenses of impossibility, impracticability, and frustration of purpose are intended to cover unforeseen contingencies that parties may not have anticipated during contract formation. The defenses are applicable in cases where supervening events, like the COVID-19 pandemic, fundamentally alter the nature of the contract's performance, making it impossible or impracticable to fulfill the contract as originally intended.

The purpose of contract law is to allocate risks between the parties; however, when a contract does not explicitly allocate risks related to unforeseen events, these common law defenses come into play. Unless the contract explicitly waives these defenses, they remain available to the parties.

The Court concluded "that a force majeure clause that protects only one party to a contract should not be deemed, in and of itself, a relinquishment of the other party’s right to interpose those common law defenses on the theory that the clause represents the parties’ implicit allocation of the risks identified in the force majeure clause to that other (unprotected) party.  Thus, a force majeure clause protecting only one party does not automatically relinquish the other party's right to raise these defenses.

With this question of law answered, the District Court presumably finished its deliberation of the contract dispute between PJS and Tauck.

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