Harrison Drury’s commercial dispute resolution team considers how the government’s social distancing guidance due to the coronavirus COVID-19 pandemic affects UK businesses and how taking early legal advice can help in minimising the impact.
This article focusses on businesses that organise events and are impacted by the cancellation of events, including weddings, concerts, music performances, sports events and comedy shows.
Businesses involved in event management that are affected by the government’s current guidance on venue closures and social distancing will need to consider the terms and conditions applicable to any agreements or contracts they have in place (whether written or not) and, in the case of consumers, relevant consumer protection legislation.
Key considerations may include:
Contracts with Force Majeure clauses
Certain contracts will have Force Majeure clauses included in them. The effect of a Force Majeure clause is to provide for circumstances where performance of obligations by a party to the agreement are prevented by events outside the contracting parties’ control.
If a Force Majeure clause is engaged, this may assist a party that is unable to comply with terms of a contract due to the COVID-19 situation. It is important that contracting parties take immediate legal advice to understand their position and take any steps needed without delay to minimise risk.
When a contract has been ‘frustrated’
Where supervening circumstances outside of the parties’ control, make the execution of a contract impossible or would render execution radically different, it may be possible to demonstrate that the contract has been ‘frustrated’.
Generally, this will occur where the supervening event:
- has happened after the contract has been formed.
- is so fundamental, striking at the root of the contract and as entirely beyond what was contemplated by the parties when they entered the contract.
- is not as a result of fault of either party.
- renders further performance impossible, illegal or would make such performance radically different from that contemplated by the parties at the time of the contract.
Where a contract has been frustrated, it will automatically discharge the parties’ ongoing obligations and the contract is brought to an end forthwith. If a party incurred obligations before the time of frustration, it remains bound to perform them.
Where a contract has been frustrated, a party may be entitled to receive money back, which has been paid under a contract before the frustrating event arises. However, the payee may be, in certain circumstances, entitled to retain a portion if the party occurred expenses in the process of carrying out the contract.
Agreements with cancellation clauses
Some agreements will contain clauses providing the parties with rights to cancel or postpone an event.
Where rights to cancel are included in a contract, there may also be terms specifying the specific requirements required to give notice to cancel, the notice period and the consequences of cancellation. These should be carefully considered to ensure that any notice is properly given within the necessary time frames.
Any terms in contracts between businesses and consumers would be required to meet the fairness rule pursuant to the Consumer Rights Act 2015.
Consumer Rights Act 2015
The Consumer Rights Act 2015 provides consumers with certain rights when dealing with disputes with businesses.
The Act contains a ’grey list’ of terms that can be deemed potentially unfair in consumer contracts. This list includes terms relating to disproportionately high charges where the consumer decides not to conclude or perform the contract or for services which have not been supplied.
Reviewing insurance policies
Insurance policies will typically have very specific timescales for the notification of claims to be made; a requirement to consult the insurer before any action is taken; and a duty to mitigate loss. As a general rule, if businesses believe they may have applicable cover, they should get in contact with their insurer to discuss the next steps immediately and ensure that they do not lose any rights.
Whilst the above guidance
provides a general outline on matters which may be relevant for businesses that deal with event management, our experienced commercial dispute resolution team can assist you in relation to your specific circumstances.
We can provide tailored advice to help you protect your interests during the coronavirus crisis and offer solutions to help you and your business minimise risk into the future.
Whether or not you have written contracts or agreements regarding your events, you can discuss your options with Harrison Drury’s commercial dispute resolution team. To find out more, call 01772 258321 or e-mail the team direct at email@example.com