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Thousands of wedding and event suppliers from venues to caterers and photographers to music bands are feeling the commercial impact of the COVID-19 Government restrictions. For the foreseeable future, weddings and events are cancelled which has prompted both suppliers and consumers to carefully review their legal position. If you have spent much of the current lockdown managing the consequences of cancelled events, the below questions may assist your business to navigate murky legal waters.

  1. Do you have a force majeure clause in your supplier contract?

Force majeure clauses are contractual clauses which alter the parties’ obligations under the contract when an event occurs which is beyond the control of the parties and prevents one or all of them from fulfilling their contractual obligations. Whether the COVID-19 outbreak will constitute a force majeure very much depends on how the clause is drafted within the contract.

Is the force majeure clause drafted widely enough to cover the pandemic, acts of Government or events or circumstances beyond the parties “reasonable control”?

The COVID-19 pandemic is unprecedented, and it is arguable that the courts will be generous in their interpretation of such clauses when parties have encountered difficulties in performing their contractual obligations.

Wedding or events suppliers seeking to rely on a force majeure clause must also take care in ensuring they comply with any other procedural requirements that may be set out in their contract. For example, there may be a notice clause that dictates how a party is to give property notice and/or require a party to give prompt notification of its intention to rely upon a specific clause.

The usual remedy if a force majeure clause is triggered is for the parties to be excused from their obligations and/or liability under the contract without being in breach of the contract and thereby being liable for damages to the other party.

  1. What if your contract does not contain a force majeure clause?

If your contract does not contain a force majeure clause, it may be possible to rely on the doctrine of Frustration. It is very difficult to demonstrate that a contract has been frustrated. It must be shown that an event, outside the control of either party, has made the contract impossible to perform or has transformed the performance of the obligations under the contract into something radically different from that which the parties intended.

Whilst, each case will turn on their individual facts, case law has shown that contracts have previously been frustrated where there has been a Government ban or lockdown. Where a contract has been frustrated, the parties’ obligations under the contract come to an end.

  1. Is it possible to postpone the event?

The party claiming force majeure is obligated to show that they have taken reasonable steps to avoid the effects of the force majeure event (for example, the event being an act of Government). As a supplier, you may consider alternative methods to avoid cancellations such as postponing the event to a later date, allowing the event to be downscaled to accommodate the current restrictions or providing a virtual means to broadcast the event.

  1. Is a non-refundable deposit non-refundable?

Given the imbalance of negotiating power between suppliers and consumers, the law protects consumers who contract with businesses. Where a contractual term has not been individually negotiated it may be considered an unfair term if it causes a significant imbalance in the rights and obligations to the detriment of the consumer.

An unfair term may include a disproportionately high sum to be paid in compensation in the event of cancellation by a consumer. This may include high deposit which could be regarded as a penalty.

Therefore, where a consumer cancels a booking, irrespective of the contractual terms, your business may not be able to retain all the monies paid by the consumer in advance. However, a supplier is entitled to hold back an amount that has reasonably been incurred to cover its net costs or the net loss of profit resulting directly from the cancellation.

  1. Have you got a reputation protection plan in place?

In a world dominated by social media and online press, damage to reputation has the potential to do more lasting damage compared to a one-off legal claim against your business. With some individuals having access to vast social media audiences combined with the stress of cancelled weddings or events, suppliers serving the wedding and events industry ought to consider what impact their business decisions may have on their reputation. After all, the consequences of cancellation or postponement of an event is more than just financial. Think carefully about drafting your responses to common questions that are likely to be asked by your clients and what steps you intend to take if you are threatened with not only legal action, but a press release ready for circulation.

  1. My supplier contract is very vague, is this a problem?

Times such as these highlight the huge importance of a clear and well drafted contract. Ambiguous terms leave scope for argument and disagreement which can lead to a dispute. Should an application to the court be required, the court will usually resolve any uncertainty or doubt surrounding the term against the party who would benefit from the suggested interpretation.

If your contract is vague or lacking in detail, a court would look at the document as a whole and consider the natural and ordinary meaning of each clause, other relevant provisions of the contract, the overall purpose of the clause and the contract as well as the facts and circumstances known or assumed by the parties at the time of entering into the contract. Court proceedings can be lengthy and costly to both parties and often can be avoided by having a well drafted contract in place.

  1. What are the financial implications for your business?

Cancelled weddings and events are inevitably going to impact your cash flow and the overall financial performance of your business.

The Government are currently offering grants to businesses that are suffering as a result of COVID-19; you may be eligible for assistance and whether this is something worth considering in the short term.

If you are a director of a company it is critical that you are clear on your statutory and fiduciary duties as set out in the Companies Act 2006 when dealing with the cancellation of an event. This is of extreme importance if you believe your business may go insolvent and you are entering the “twilight zone” to avoid any personal liability.

Contact us if you have any queries.

The Government have banned my wedding:

A three-step plan for couples

With Coronavirus being described as the biggest threat the UK has faced for decades, the Government have imposed a ban on all social events including weddings. This means all weddings and parties booked in the coming weeks will be cancelled. Whilst this news can be devastating for couples, it is important to be commercially and legally minded when dealing with your wedding suppliers.

Step 1 – Commence discussions with your wedding supplier

If you are concerned about the impact of the wedding ban, you are advised to speak with your wedding supplier in the first instance to see if you can try and negotiate an agreeable and amicable way forward.  This will certainly be the more efficient and cost-effective method of dealing with matters.

Step 2 – What does your contract say?

Is there a Cancellation/Termination clause?

It is important to carefully review the terms of your contract to see what happens in the event of cancellation. If a party seeks to cancel or terminate a contract when there is no right to do so, the cancelling party could be in breach of contract and liable to the other party in damages.

It is important to note that by law, deposits cannot be “non-refundable”, if a company keeps your money ask, for a breakdown of why it cannot be refunded.

Is there a Force Majeure clause?

Check whether the contract contains a force majeure clause which typically excuses one or both parties from performance of the contract in some way following the occurrence of certain events.

In English law, force majeure is only recognised if it is specifically provided for in the contract. Check whether the pandemic is specifically covered within the force majeure clause? If so, does the contract excuse you from performance and/or exclude/limit your liability in the circumstances?

It may be the case that a pandemic is not specifically covered as a force majeure event, however, on the basis that the Government have now banned weddings, it may be possible to rely on wording which covers a government decision or administrative action preventing performance that meets the political interference language commonly included in definitions of force majeure.

Has the contract been Frustration?

Where contracts do not include a force majeure clause, the parties may have recourse to the legal doctrine of “frustration”. This provides that a party is discharged from its contractual obligations if a change in circumstance makes it physically or commercially impossible to perform the contract or would render performance radically different.

On the basis, that weddings and parties are banned, one could argue that it is impossible to perform the contract and therefore, the contract is frustrated. The consequences of this is that it allows the recovery of monies paid under the contract before it was discharged, subject to expenses incurred by the other party.

Step 3 – Do you have insurance?

In the event of a cancellation or termination which leaves you at a loss, it is worth checking whether you have wedding insurance in place and if so whether the insurance policy will cover any losses sustained as a result of the cancellation.

It is important that contracts are interpreted carefully. For any more information, contact pbhanot@meaby.co.uk or use the chat bot on The Wedding Lawyer website.