Contracts and Poker: Force Majeure

On Tuesday, I entered a super satellite and won an $1,100 entry into the Arizona State Poker Championship. There were three day one flights scheduled for Friday, Saturday, and Sunday. Survivors from the three flights would play on Monday, and the tournament would conclude on Tuesday. I chose Saturday for my day 1.

On Saturday morning I headed to the Talking Stick casino, only to be turned away at the entrance to the parking lot. I was told that the casino was closed because of a power outage and flooding caused by a monsoon the night before.

In contract law, there are rules that govern this situation. Normally, if you don’t do something you are obligated to do in a contract, you are in breach. An exception may arise if your performance becomes impossible or impracticable (not impossible, but really, really hard) because of an unforeseen event that is outside of your control. Then your nonperformance may be excused and you are not in breach.

Many contracts state the excusing events expressly in a force majeure clause. We often think of these events as natural “Acts of God,” but they can include other things like strikes and boycotts. With their usual thoroughness, the WSOP Rules address the issue in Rule 30:

30. If for any reason an Event is not capable of running as planned, including infection by computer virus, bugs, tampering, unauthorized intervention, fraud, technical failures, weather, or any other causes within or beyond the control of Rio that corrupt or affect the administration, security, fairness, integrity or proper conduct of the WSOP Tournament or any Event, Rio reserves the right at its sole discretion to cancel, terminate, modify or suspend the WSOP Tournament or Event.

The modern rule says you can be excused even if your contract does not include a force majeure clause. This view goes back to the 1863 English case of Taylor v. Caldwell. Caldwell promised Taylor the use of his theater for four nights, but the theater burned down prior to the performance. Caldwell asked to be excused, but Taylor argued that the contract didn’t say he would be excused if the theater burned down. The court, however, said that it would be implied, and that has been the rule since then.

Of course, not all events excuse. Sometimes it is an event that the party ought to have foreseen, like market fluctuations that cause an increase in the cost of buying the materials necessary to perform, or an event that is the fault of the party seeking excuse, like if Caldwell had burned down his own theater. You may recall that the actor River Phoenix died of a drug overdose during the filming of Interview with the Vampire. Trivia question – who replaced him? When the insurance company that had put up a completion bond sued the entity that had promised Phoenix’s services, the entity responded that it was excused from providing his services because he was dead. “And whose fault is that?” the insurer responded. The court, however, ruled that death was a good excuse for not showing up to work, and decided it didn’t want to get into the business of determining whether a person was at fault for their premature death.
Applying that law to our present facts, it seems to me the non-performance of the Talking Stick is excused. Monsoons may be foreseen in the summer in Phoenix, but probably not one with the intensity to both knock out power and flood the backup generators that the casino had available in the event of a power outage.

The tougher question, which the law has not done a good job of addressing, is what happens when there has been part performance before the unanticipated event occurs. Here, players had already played in the first flight on Friday, so the tournament was not completely made impossible by the event. And when the event occurred, the casino did not know whether it would be able to re-open in time to finish the tournament on Tuesday.

The solution the casino came up with was as follows. The event will be rescheduled. The Saturday and Sunday flights were canceled, and players with entries for those days will get their money back. If the casino can open Tuesday, the remaining day 1 players will play out the tournament. Anyone who can’t play on Tuesday will get their money back. If they can’t open Tuesday, then the prize pool will be divided among the remaining players using the Independent Chip Model. The casino subsequently determined that it would not be able to open on Tuesday, so all surviving Friday players will receive the ICM distribution.

Is this a good solution? The problem is, there is no good solution, and players will find much to complain about. The law often uses principles of reliance and restitution in trying to come up with an equitable result in these circumstances. Here, the casino is making restitution by giving back what it got from the players, and trying to do so in a fair manner.

Reliance is a tougher one, as a lot of players spent money planning for the tournament, such as booking travel and hotels. That money did not go to the casino, however, so there isn’t a strong case for asking the casino for compensation. But businesses like casinos depend on goodwill to attract and keep their customer base. So even if the law does not require it, they may find ways to try to keep that goodwill.
Trivia answer: Christian Slater. ♠

Scott J. Burnham is Professor Emeritus at Gonzaga Law School in Spokane, Washington. He can be contacted at [email protected]. This column is adapted from his article, A Transactional Lawyer Looks at the Rules of Tournament Poker, which was published in Gaming Law Review and Economics.