18 January 2019

Must the show go on? Cancellation rights in contracts for events and venues

Does your business operate events for consumers or hires out venue space to them? If so, this article is for you. I’ll cover the consumer’s general cancellation rights and your possible exemption from them before finishing with a reminder on how not to get caught out by unfair terms in your contracts.

Statutory cancellation rights for consumers

Consumers have a statutory right to cancel certain ‘distance’ or ‘off-premises’ contracts within 14 days, often referred to as the ‘cooling-off period’. There are no specific cancellation rights for ‘on-premises’ contracts which can only be ended if:

• both parties agree
• the trader has a returns policy, or
• goods are provided in breach of contract.

It’s worth noting that the regulations here apply only to consumers (people acting wholly or mainly outside their trade, business, craft or profession). Unless the contract provides one, business customers do not have a comparative ‘cooling-off period’.

Exclusions and exempt contracts

Some contracts are excluded entirely from this, including gambling, banking, credit, insurance and residential lettings amongst others.

Others are exempt from statutory cancellation rights, including ‘the supply of accommodation, transport of goods, vehicle rental services, catering or services related to leisure activities, if the contract provides for a specific date or period of performance.’ Event related contracts fall within this exemption.

The reasoning behind this is that cancellation rights may be inappropriate where a trader has to set aside capacity which they could not then fill if the consumer withdrew – such as booking a hotel room, a holiday cottage or buying a ticket to a football match or concert.

Don’t forget ‘unfair’ terms

But traders must still avoid unfair terms in the contract – these are covered by statutory restrictions. A term may be unfair if it causes a significant imbalance in the parties’ obligations and rights under the contract to the detriment of the consumer, contrary to the requirement of good faith. If it’s unfair, it’s not binding.

Common areas where event operators are vulnerable are deposits, advance payments (refundable or otherwise) and cancellation charges. The Competitions and Markets Authority (CMA) issued guidance in March 2016, specifically to wedding and event venue providers, on consumer law compliance. The headlines for event operators are that terms are more likely to be fair when:

• Deposits are a small percentage of the total price, acting as a reservation fee
• Advance payments and instalment schedules reflect only the business’ actual costs, leaving consumers with a final amount to pay when services are provided
• Non-refundable advance payments and cancellation charges reflect the business’ net costs or net loss of profit resulting directly from the cancellation
• Sliding scale cancellation charges reflect a genuine pre-estimate of loss resulting directly from the cancellation.

Summary

Consumer protection laws are complex and nuanced. We can guide you through the legislation to ensure compliance and we can help you avoid enforcement action by making sure your terms are fair to consumers.

If you have any questions relating to this article or any business-to-consumer contract issue please contact me on kmahoney@hcrlaw.com or 01242 246 426.

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About the Author
Kevin Mahoney, Solicitor
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