Ppg Industries, Inc. v. Shell Oil Company
919 F.2d 17 · Court of Appeals for the Fifth Circuit · 1990
Facts
PPG Industries and Shell Oil Co. had an ethylene delivery contract. Shell failed to perform due to an explosion and invoked a force majeure clause to excuse its non-performance. PPG challenged this, arguing the explosion was not 'beyond reasonable control' and that Texas UCC provisions imposed additional requirements on force majeure clauses.
Issue
Did the district court properly interpret the force majeure clause to excuse non-performance due to an explosion, irrespective of whether it was 'beyond reasonable control'? Do Tex.Bus. & Com.Code §§ 2.615 and 1.102(c) impose a legal requirement that all force majeure events be 'beyond reasonable control' or a non-waivable duty of good faith that precludes enforcement of such a clause?
Holding
The appellate court affirmed the district court's summary judgment for Shell, holding that the force majeure clause excused non-performance due to the explosion. The court found that Texas law does not impose a 'beyond reasonable control' requirement on force majeure clauses unless specified in the contract, nor does it preclude such clauses under good faith provisions for sophisticated parties.
Rule
Force majeure clauses in Texas contracts are interpreted according to their plain language; Texas Business & Commerce Code §§ 2.615 and 1.102(c) do not, as a matter of law, impose a 'beyond reasonable control' requirement or a non-waivable duty of good faith that would invalidate a clause agreed upon by sophisticated parties, provided it is not 'manifestly unreasonable.'
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