In a ruling supporting common sense, the Idaho Supreme Court ruled that a county could not avoid the application of a broad force majeure clause in its development agreement with a developer based on the county’s denial of the rezoning required for the very development.
The key facts in Burns Concrete, Inc. v. Teton County, No. 43527-2015, 2016 WL 6462138 (Idaho Nov. 1, 2016) are fairly simple: The County and a developer entered into a development agreement whereby the developer was to build a certain facility, of a certain type and size, subject to the County’s rezoning approval for the land. The development agreement included a fairly common force majeure clause, with language that stated that extensions of time would be given for “delays resulting from weather, strikes, shortage of steel or manufacturing equipment or any other act of force majeure or action beyond Developer’s control.” (Emphasis added.)
Although the development agreement was approved and executed and the property rezoned, the nature of the request by the developer got caught in a procedural delay with the County, in essence, as to the type of permit or rezone required. Ultimately, the developer could not comply with the development agreement timeline to construct the permanent facility within the required deadline. On that basis the County revoked the authority it had previously provided to the developer. The developer sued to enforce the development agreement and the force majeure clause.
While the County maintained that the clause limited the excusable events to the nature and type in the list and to those not reasonably foreseeable by the developer, the Idaho Supreme Court looked to the plain language of the agreement and its terms, emphasizing that the phrase “or any other act of force majeure” was broad enough to include the County’s own inconsistent conduct: “[t]he failure of the County to give zoning approval for building the 75-foot-high permanent facility was not reasonably foreseeable because the development agreement required the Developer to construct a permanent facility that was 75 feet high.” Moreover, the Court also emphasized the conjunction and last clause in that force majeure provision (“or action beyond Developer’s control”) to point out the obvious here: “[t]hus, to comply with the agreement, the Developer would be required to build a facility that was 75 feet in height. It would not be foreseeable that the County would require the Developer to build a facility 75 feet in height and then prevent the Developer from doing so.” The County’s inconsistency was patently outside of the developer’s control.
This decision should help in disputes between parties to read the plain language as written. And, while every intent and future potential anomaly cannot be eliminated when drafting agreements, clients should take time to evaluate even the “standard” clauses to reflect the circumstances at hand. Here it is plain that the developer was in a Catch-22 if it could not have relied on events outside of its control, and yet, despite that plain language the County was intent on reading the provision to its own advantage, resulting in almost four years of litigation for the developer and taxpayers of the County. And the costs will be more so to the taxpayers under the prevailing party fee provision in the development agreement, as well as the likely Idaho attorney fees statutes, given that the County will be liable for the reasonable fees of the developer.