The Summer of Armageddon

 (and "arma geddin outta here")

Matt Crouch, Crouch Legal

The awful fires, damaging storms, power/internet outages, floors and the growing concerns about the coronavirus (COVID-19) have hurt the events sector more than most. Cancellations and postponements are occurring and will continue.

Whether you are a PCO or an event manager, or supplier to the events sector, it is essential for you to know what can trigger cancellation of your event and what the consequences would be if that occurs.

As we shall see, the secret to managing all this lies mostly with your contracts.

One situation giving rise to cancellation would be if the event is not tracking well financially, perhaps because pf lack of interest. Cancellation for that reason would be a form of "voluntary" cancellation and that should also be properly covered in your contacts.

But I am not really focussing on that here - cancellation because of external forces such as fires, floods, viruses, wars etc, is rather different matter altogether.

Many contracts do not mention such matters - and if yours fall into that basket, the law may provide a partial answer. There is a legal principle known as "frustration of contract". In essence, if unforeseen circumstances make it impossible for the contract to be performed, the contract is ended and the parties have no further obligation to continue performing their obligations.

In addition, there is legislation in some states - New South Wales, Victoria and South Australia. Each statute is different, but the general intent is to generate less harsh outcomes, for example so that deposits paid must be refunded. You may be able to "contract-out" of the legislation but that may differ from state to state.

The legal principle of frustration will often not provide a suitable answer as it only ends the contract for future performance. The legislation I mentioned, if it applies, is prescriptive and may not provide you with a suitable outcome. It is almost always
preferable to contract-out of those laws where possible.

You will need to decide on a range of matters - and those matters may vary from case to case. For example, you may have done some work for which you have been paid an instalment. In that situation, normally I would say that the payment should not
have to be refunded, as the work has been done. On the other hand, if deposits, “flag-falls” and other payments have been made before any work is done (or services provided), there may be a compelling case for those payments to be returned.

It is much better to rely on clear provisions in your contracts than on general legal principles that might have to be debated in court. Such clauses are usually called “force majeure” clauses. Such clauses are difficult to write well, but without delving into technicalities, they need to cover what the triggers for cancellation are - and what the consequences will be if cancellation is triggered.

The triggers might list such things as fire, flood, storms, power or internet outages, wars, major health scares/epidemics, strikes and the like. The consequences to consider will vary from case to case and may also depend on the timing of the external, “force majeure” triggers. Preparing for events can be a long-term thing! Will money need to be refunded and property returned? What happens to intellectual property and confidential information? Will the contract cease entirely or is there other paid work that needs to be done as a consequence of cancellation?

Sometimes I am asked whether there is a difference in the legal effect between cancellation and postponement. The moving of an event from one date to another (usually later) date means that the original event has been cancelled. By agreement with
the host, suppliers and attendees you can, of course, simply agree to hold the event on another day. You may still have to pay fees to the venue and other suppliers – some may be accommodating and other may be unable or unwilling. You would also likely have to refund monies paid by those who cannot attend on the substitute day. Again, it all depends on your contracts and, if applicable, the legislation I mentioned.

Finally, don’t forget insurance. Insurance will not normally cover you for an event that is cancelled for lack of interest, but it may be possible to obtain insurance against the consequences of such overwhelming external forces as we have witnessed these past months. I suspect, however, that premiums will be on the rise.

As always, be careful that you are aware of the coverage of such policies and particularly the exclusions from cover. You will often be surprised to discover that what you thought was included, is not. In conclusion, in any particular case, the outcome of cancellation depends on:
• what your contracts say; and
• whether there is legislation in your state dealing with
frustration of contracts that applies to your circumstances
and whether you can “contract-out”.

So… you should get your contracts in order! In the meantime, if you are faced with a “force majeure situation, you will need to seek legal advice, as it can be complex, as you can see.

Finally, a big hello to my MEA friends and let’s hope that 2020 is an annus mirabilis!