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Coronavirus: Lockdown – a "frustrating" time for events?

Tim Rickard
14/04/2020

Locations

United Kingdom

Below our commercial team summarise some of the most common questions, they've been asked over recent weeks regarding coronavirus and the impact on the events industry
We are all navigating uncharted waters as business and society faces up to the impact of COVID-19.  We very much hope you and your loved ones remain in good health. 

 Please be assured that Fieldfisher is continuing to work with clients to navigate COVID-19 related issues and on business as usual needs.  Do get in touch with us if you would like to chat anything through.


We are seeing a surge of queries from clients about forthcoming events affected by the spread of COVID-19.  These range from events companies who have events scheduled in the next few months, to venues who are holding such events, right through to talent who were due to perform or speak at those events.  It's fair to say the events industry is under a huge amount of pressure right now. 

We thought we would summarise our thoughts on some of the most common questions we’ve been asked over recent weeks to help everyone involved in the events industry during this difficult period.  The most important thing to note is that this is a constantly evolving area and changing on a daily basis.  

We have organised an event that was due to take place in the next month.  We're going to have to cancel it now due to the spread of COVID-19 but have already paid the security deposit for the venue.  Can we get a refund?
The short answer is that it very much depends on the contract that you have in place with the venue.

The first issue to establish is whether you are permitted under the contract to terminate the event.  Do you have cancellation rights?  If so, does the contract state that you can claim a full or partial refund, or no refund at all? 

If you have no rights to cancel the event, then the next issue to consider is "force majeure".  The chances are that your contract will contain a force majeure provision somewhere towards the end of the contract.  These clauses can vary enormously from contract to contract.  Typically such clauses 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. This is called a “force majeure event”.  Generally 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.

You will need to assess whether the force majeure clause is drafted sufficiently broadly to include COVID-19.  Check whether the definition of "force majeure event" will cover you for pandemics and/or if the clause is broad enough to cover anything beyond a party's reasonable control?  Even if COVID-19 does fall within the definition of a force event, the impact of such an event on the parties' obligations can vary widely.  In some instances the force majeure clause 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.   In others it might allow only you to terminate the contract without a refund. 

If there isn't a force majeure provision in the contract or it is incomplete (for example it doesn't deal with the consequences of force majeure adequately) then you might be able to rely on the doctrine of "frustration".   In normal times, it is very difficult to make the case for frustration as 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. Because of the dramatic consequences of contractual frustration, the threshold for proving frustration is much higher than that for most “force majeure” provisions, since it must be shown that the obligations impacted by the event or circumstance are fundamental to the contract.  In other words, due to the new circumstances the core activities agreed in the contract simply cannot now go ahead. 

At the time of writing, 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.  

2. We have paid talent to attend but given we are no longer having the event – do we still have to pay them?
Once again, this very much depends on the contract that you have entered into with the talent/their agent.  As above, you should first check the cancellation process and the timing to see what your cancellation rights are. 

Generally speaking, contractual obligations are absolute.  As mentioned at question 1 above, a contracting party is required to perform its contractual obligations and will be potentially liable to its counterparty for failure to do so.  The only exceptions to this rule are: the operation of any force majeure clause in a contract; and the common law concept of frustration. 

Even if there is a force majeure provision, if your only obligation under the contract is paying the talent, then it's unlikely that you'd be able to rely on this provision given that COVID-19 doesn't actually technically stop you from paying the fees.

That said, if the force majeure provision is inadequate in dealing with the situation, then you may also be able to rely on the doctrine of frustration if it is impossible for the event to take place and it was not foreseeable when you entered into the contract with the talent.  See the answer to Question 1 for more details regarding frustration.

3. We don't have a force majeure provision in our contract and no right to cancel the event without losing our fees.  What are the implications?  Can we still cancel the event?
Force majeure provisions are not implied into English law contracts.  In the absence of a force majeure provision then you'll only have the doctrine of frustration to fall back on. 

As answered above, it is traditionally very difficult to rely on frustration.  During this period of lockdown though, it is fair to say that the contract will be frustrated provided it was booked some time ago, given that it would be impossible to hold the event when public gatherings are prohibited due to an unforeseen event taking place after the contract has been entered into. 

4. What should we do practically if the contract is frustrated? 
The effect of frustration is that the contract comes to an end automatically (i.e. without the choice or election of either party).  There is no requirement to notify the other party although of course this is recommended and sensible.  It's important to note that it does not allow for suspension of the contract – the contract must come to an end.  

As the contract has come to an end, both parties are excused from all further performance of their future obligations. All sums paid by you to the venue will be repayable subject to the court’s discretion to give credit for expenses incurred or benefits provided by the venue.

Remember that if the event is due to take place after the lockdown finishes then it would no longer be a frustrating event so timing is crucial when looking to argue that a contract has been frustrated. 

5. We are negotiating with our venue to reschedule our event for later in the year or early next year but we are worried that the situation might be the same by then.  Is there anything we should do to protect ourselves?
Yes, absolutely.  You should ensure that you have a robust force majeure clause that enables you to suspend your obligations if the COVID-19 outbreak continues.  This means having a clear suspension provision and ideally it should state that you are able to receive a full refund of the money if this happens.

COVID-19 is a known risk so be aware that if you do re-negotiate terms it will be difficult to argue the contract has been frustrated.  So it is more important than ever that you not only include a force majeure provision but that you also specifically deal with COVID-19 and agree how each possible scenario will be dealt with. COVID-19 is now a known risk and therefore, in some ways, this makes handling a response to it easier.

Finally, it's worth having a word with your insurance provider to see if they will cover you for the rescheduled date. 

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