Important decision on force majeure in commercial leases

Co-authored by Rafaella Arapovic.

On July 16th, 2020, Judge Peter Kalichman of the Superior Court of Québec ruled on a force majeure clause in a commercial lease in the context of the COVID-19 pandemic (Hengyun International Investment Commerce Inc. v. 9368-7614 Québec inc., 2020 QCCS 2251).

The landlord sued the tenant for unpaid rent since 2018, including rent for the months of March through June 2020.

The Court ruled that no rent could be claimed for the months for which the gym was closed due to a government decree. Specifically, the Court held that the criteria of superior force (force majeure) were fulfilled.

Superior force is defined at article 1470 of the Civil Code of Quebec:

“A person may free himself from his liability for injury caused to another by proving that the injury results from superior force, unless he has undertaken to make reparation for it.

Superior force is an unforeseeable and irresistible event, including external causes with the same characteristics.”

The Court first stated that COVID-19 was an unforeseeable event at the time the lease was contracted.

The Court underlined that an obligation which become more onerous or difficult does not satisfy the criteria of irresistibility, thus rejecting the tenant’s argument that it did not need to pay for rent due to its inability to generate revenue for the period of the decree.

However, the Court held that the irresistibility criteria was satisfied by the landlord’s inability to provide peaceful enjoyment of the premises, as required by article 1694 of the Civil Code of Québec, due to a superior force. While the tenant had access to the gym, the lease provided that the premises were to be used “solely as gym”, which was impossible during the period of time where the decree prohibited all gyms in Quebec from operating.

The Court also stated that “the parties to a lease can agree to limit the impact of a landlord’s failure to provide peaceable enjoyment but cannot agree to exclude it altogether”, a view expressed in doctrine and endorsed by the Court of Appeal of Québec.

Consequently, the Court reduced the tenant’s rent for the months of March through June 2020 from the landlord’s claim.

To fully understand the consequences of this decision in the context of commercial leases, we invite you to contact us.