Kel Kim Corp. v. Central Markets, Inc.

Decision Date21 December 1987
Parties, 519 N.E.2d 295 KEL KIM CORPORATION et al., Appellants, v. CENTRAL MARKETS, INC., et al., Respondents.
CourtNew York Court of Appeals Court of Appeals
OPINION OF THE COURT MEMORANDUM.

The order of the Appellate Division, 131 A.D.2d 947, 516 N.Y.S.2d 806, should be affirmed, with costs.

In early 1980, plaintiff Kel Kim Corporation leased a vacant supermarket in Clifton Park, New York, from defendants. The lease was for an initial term of 10 years with two 5-year renewal options. The understanding of both parties was that plaintiff would use the property as a roller skating rink open to the general public, although the lease did not limit use of the premises to a roller rink.

The lease required Kel Kim to "procure and maintain in full force and effect a public liability insurance policy or policies in a solvent and responsible company or companies * * * of not less than Five Hundred Thousand Dollars * * * to any single person and in the aggregate of not less than One Million Dollars * * * on account of any single accident". Kel Kim obtained the required insurance coverage and for six years operated the facility without incident. In November 1985 its insurance carrier gave notice that the policy would expire on January 6, 1986 and would not be renewed due to uncertainty about the financial condition of the reinsurer, which was then under the management of a court-appointed administrator. Kel Kim transmitted this information to defendants and, it asserts, thereafter made every effort to procure the requisite insurance elsewhere but was unable to do so on account of the liability insurance crisis. Plaintiff ultimately succeeded in obtaining a policy in the aggregate amount of $500,000 effective March 1, 1986 and contends that no insurer would write a policy in excess of that amount on any roller skating rink. As of August 1987, plaintiff procured the requisite coverage.

On January 7, 1986, when plaintiff's initial policy expired and it remained uninsured, defendants sent a notice of default, directing that it cure within 30 days or vacate the premises. Kel Kim and the individual guarantors of the lease then began this declaratory judgment action, urging that they should be excused from compliance with the insurance provision either because performance was impossible or because the inability to procure insurance was within the lease's force majeure clause. * Special Term granted defendants' motion for summary judgment, nullified the lease, and directed Kel Kim to vacate the premises. A divided Appellate Division affirmed.

Generally, once a party to a contract has made a promise, that party must perform or respond in damages for its failure, even when unforeseen circumstances make performance burdensome; until the late nineteenth century even impossibility of performance ordinarily did not provide a defense (Calamari and Perillo, Contracts § 13-1, at 477 ). While such defenses have been recognized in the common law, they have been applied narrowly, due in part to judicial recognition that the purpose of contract law is to allocate the risks that might affect performance and that performance should be excused only in extreme circumstances (see, Wallach,...

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    ...at the time [the contract was made] was the event which prevented performance"); see also Kel Kim Corp. v. Central Markets, Inc., 70 N. Y. 2d 900, 902, 524 N. E. 2d 295, 296 (1987) ("[T]he impossibility must be produced by an unanticipated event that could not have been foreseen or guarded ......
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    ...a condition outside its control, such as a performance failure caused by a natural disaster. See Kel Kim Corp. v. Cent. Mkts., Inc., 70 N.Y.2d 900, 524 N.Y.S.2d 384, 519 N.E.2d 295, 296 (1987). The defense, however, applies “only if the force majeure clause specifically includes the event t......
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    ...matter of the contract or the means of performance makes performance objectively impossible" ( Kel Kim Corp. v. Cent. Markets, Inc. , 70 N.Y.2d 900, 902, 524 N.Y.S.2d 384, 519 N.E.2d 295 [1987] ). Indeed, "[f]inancial difficulty or economic hardship, even to the extent of insolvency or bank......
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