A lesson in force majeure

Author: | Published: 1 Nov 2009

The Hong Kong Court of Final Appeal responded with a resounding 'yes' to this question in the recent decision in Regent National Enterprises Limited v Goldlion Holdings Limited and Ors, bringing an end to an eight-year controversy.

The decision turned on the true construction of a force majeure clause that allowed the vendor company to exit the sale "should the vendor become unable or fail to complete...due to any matter (including...third party action) which in the reasonable opinion of the vendor materially hinders, prevents or obstructs the completion".

The case highlights the importance of carefully drafting the force majeure clause to ensure that it incorporates an appropriate exit formula, and where the exit formula is tied to the "vendor's opinion", the organ or agent of a corporate vendor who is to give the opinion is identified. It also highlights the desirability of obtaining legal advice from an appropriate...