With most events being cancelled as a result of government social distancing measures, those involved are now looking to the terms of their contracts to see whether, as an event organiser, you can cancel without liability to your customers, or as a customer, if you are entitled to a refund.
Where your contract does not include other express cancellation provisions, event organisers will check if there is a ‘force majeure’ or ‘impossibility’ clause in their contract to protect them from liability. This clause will generally release those involved (normally the event organiser) from their obligations because of an event outside that party’s control.
This means, in most cases, that an event cancellation because of social distancing requirements are a force majeure event.
However, this will not necessarily be a ‘get out of jail free’ card for event organisers.
These clauses can be challenged under the Unfair Contract Terms Act 1977 (UCTA) in the case of B2B contracts, or the Consumer Rights Act 2015 (CRA) in B2C contracts.
In B2B contracts, where one party to a contract deals on the other party’s standard terms, a force majeure clause may be challenged under UCTA. Section 3(2) states that the party whose terms the contract is on cannot, unless it is reasonable to do so:
- exclude or restrict its liability in respect of its own breach;
- claim to be entitled to:
- render performance substantially different from that reasonably expected; or
- render no performance at all in respect of the whole or any part of its contractual obligations.
Force majeure clauses are generally regarded as reasonable (because they relate to a matter outside a party’s control), but may be deemed unfair when they are drafted so widely as to cover increased costs or matters which are within the control of the parties.
But the situation is different when dealing with a consumer or customer.
Under the CRA, a force majeure provision may be deemed to be unfair if “contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer”. Terms which do not satisfy this test will be unenforceable against consumers.
According to guidance published by the Competition and Markets Authority, a term which requires a customer to go on paying when services are not provided as agreed, simply at the discretion of the event organiser, is particularly objectionable. However, terms which allow businesses some flexibility in the performance of their duties are more likely to be ‘fair’ when they specify the circumstances beyond the business’ control.
What should event organisers do in practice?
For business customers, event organisers will be able to use the protection afforded by a force majeure clause more safely. But the organiser must comply in full with all the requirements of the force majeure clause and do whatever it can to mitigate the effects of force majeure event on its customer.
For individual customers, even if your contract contains a clear force majeure clause, organisers should consider what they can offer the consumer so that they are not disproportionately affected by the cancelled event – this could be a partial refund or a rebooking for a future event.
Event organisers should check their insurance to assess whether they have any cover for these events, as this may assist in taking a balanced approach with their customers. See our separate guidance on this here.