The events industry is one that has been badly hit by the COVID-19 pandemic. Social distancing measures have resulted in event cancellations and postponements, while there’s also uncertainty around when lockdown will end, and whether there’ll be restrictions on gatherings over a certain size once it is lifted.
Here, Sara Beaumont explores how the terms of a contract can help shed light on your business’s legal position on event cancellations and postponements.
Force majeure clauses
If a contract is broken, the party unable to fulfil the contract would be in breach and usually liable to pay the other party for losses suffered, so the importance of a properly drafted contract cannot be understated.
A force majeure clause makes provision for an interrupting event that is outside the control of the contract holders. This would typically include a chance occurrence or unavoidable incident.
The clause is one that will be welcomed by business owners at this time, as it essentially relieves liability and protects those unable to meet their contractable obligations from breach of contract claims.
The triggering of force majeure
Whether or not the current coronavirus pandemic will trigger a force majeure clause will depend on the wording of the clause itself.
The World Health Organisation identified the COVID-19 outbreak as a pandemic on March 11, 2020, so reference in the clause to a pandemic should be sufficient. However, any definition should also be considered in the wider context of the contract, as this may affect its interpretation.
What happens if a force majeure clause is triggered?
What happens once the clause is triggered will be outlined in your contract. Force majeure would typically suspend, postpone or cancel the event, with contract holders excused from any liability while the pandemic continues.
Some clauses may also extend beyond this and allow one or both parties to terminate the contract, or provide other alternative remedies.
What if your contract does not contain this clause?
If force majeure is not included in your contract, there may be other options available such as frustration and illegality.
Frustration may apply, if, as a result of COVID-19, performance of the contract has become legally or physically impossible through no fault of the parties. A frustrated contract ends automatically and immediately, without any requirement for notice to be given by the parties, although it is usually sensible to give notice anyway.
If a contract is frustrated, then neither party has any further obligations under it. Do keep in mind that any sums relating to the contract that have already been paid are repayable, although the court does have a discretion to give credit for expenses incurred and benefits provided by the contracting party.
Other alternatives could also lie within the terms of your contract in the form of variation or termination provisions. Consideration should be given to these as they may allow you to achieve a more desirable outcome as an alternative to force majeure or frustration.
Particular care should be taken for any consumer contracts covered by the Consumer Rights Act 2015 (CRA), where a force majeure clause may not be deemed fair and transparent. Consumers covered by the CRA may also have additional rights in relation to refunds for services not performed under a contract.
For more information on force majeure and frustrated contracts, contact Sara Beaumont on 0161 761 4611 or email her at sara.beaumont@whnsolicitors.co.uk
