Our clients are having holidays and events cancelled last minute due to the worldwide pandemic and restrictions imposed by the government. Can they do anything about it? Can they get a refund?
What does the contract say?
- Are there any rights to cancel the event and if so, what happens?
- What about “force majeure”? Does the contract have such a clause? The aim is to try and protect the parties when an event occurs that is outside their control and results in a party being unable to perform specific obligations under the contract. The clause permits the party affected by the “force majeure event” to suspend its performance of the relevant obligations until the “force majeure event” is over.
Some will allow you to be refunded your fees if it is triggered. In others it won’t. In certain circumstances it will allow you to extend the contract so that you could reschedule the event or it might only allow the party to terminate the contract without a refund. We have advised a number of clients about this and most companies are offering flexibility and credit notes to avoid depleting all cash from a business.
- If there isn’t a force majeure provision in the contract you might be able to rely on the doctrine of “frustration” but it only arises in exceptional circumstances if:
- the underlying event occurred after the contract was entered into;
- the underlying event is not the fault of any party to the contract;
- the event or circumstance occurs after the formation of the contract and was not foreseen by the parties; and
- the contract becomes impossible for the affected party to perform or is otherwise “frustrated”.
“Frustration” results in the contract automatically coming to an end by operation of law without further action of the parties. The parties to the contract will no longer be bound to perform their future obligations.
The Government has imposed a lockdown banning non-essential gatherings or meetings of more than two people. If your event was due to take place during this period of lockdown then the event simply cannot go ahead as planned. If the contract is frustrated, you’d be entitled to your fees back less any expenses that the venue has incurred in preparing for the event.
COVID-19 is now a known risk so be aware that if you do re-negotiate terms it will be difficult to argue the contract has been frustrated.
Check all contracts carefully in particular insurance policies which should now offer cover in the future just like they do for Ebola, SARS, and other identified diseases.
