Love in the Time of Corona: Wedding Venues and Contractual Disputes due to Covid-19
The onset of the covid-19 pandemic brought nearly all social gatherings – particularly large-scale events like weddings and ceremonies – to an abrupt halt. But what about the contracts behind them? Courts around the country will be, and have already been, called on to resolve contractual disputes due to covid-19 related cancellations. Whether the dispute is regarding a large down-payment that has become non-refundable, or a venue suing the consumer for breach of contract, nobody is pleased about the current situation; the least of which is not the courts themselves.
How can a consumer protect themselves in contractual disputes and what steps can be taken to remedy an ongoing dispute? The following will provide information pertaining to both the consumer and the venue regarding this burgeoning dilemma.
Non-Breaching Party: The Venue
The non-breaching party is the party that wishes to uphold the contract. In the case of a wedding reception or a large-scale event held in a banquet hall, typically this party will be the venue. Needless to say, the venue does not want to surrender down payments, deposits, and would prefer that the event proceed with full payment. The breaching party will typically be the client or customer who is renting the venue. It is understandable why this party would seek relief from the contract, as surely the event will not be able to proceed under ideal circumstances, if at all. Additionally, if the event is unable to proceed, the breaching party will want deposited funds returned.
In order to resolve these types of conflicts, the first place to start is with the contract itself.
Force Majeure Clause
The non-breaching party will attempt to uphold the contract through the implementation of a force majeure clause. Force majeure literally translates to “greater force” and is a commonly used term in contracts. Generally speaking, a force majeure clause will stipulate that the contract will be upheld even in the event that unforeseen circumstances present complications or impossibilities.
Although this may appear unfair to the other party to the agreement, the law requires that a force majeure clause be clearly identified as a term or condition within the contract. Essentially, a force majeure clause should not come as a surprise to the other party, unless they did not read the contract. This is why it is always important to seek legal advice when signing important contracts.
What is an unforeseen circumstance?
This is the golden question. As previously mentioned, a force majeure clause will be required in writing as part of the contract. To provide contractual certainty and further protection, it is common for force majeure clauses to explicitly list examples of circumstances that will be included. Some common examples are strikes, flooding, fires, war, or an “act of God.” This practice provides certainty and protection for both parties; the consumer and venue know exactly what type of circumstances will or will not allow for a breach in contract. For example, if the clause merely indicated “unforeseen circumstances,” the door is now wide open for either party to argue that a flood or fire is outside or inside of that definition.
Interpreting the list
An additional consideration is the common-law doctrine known as ejusdem generis. This rule applies to force majeure clauses that indicate a list of circumstances and will require that the list represent the entirety of the applicable circumstances and no cause outside of the list will be included. Essentially, if it is not on the list, then it will not included.
Matters become complicated when courts are faced with interpreting a circumstance like an “act of God.” What is an “act of God?” Generally speaking, courts have previously interpreted an act of God to be “an unforeseen natural occurrence” or “an operation of nature by which no human contributed.” It remains to be seen how courts will interpret broad force Majeure clauses, like an “act of God” or “unforeseen force of nature”, in relation to covid-19. As one can imagine, there are arguments on both sides: is the virus an act of God by which no human contributed? Is the virus itself the reason the contract has been breached, or did the breach occur as a result of the government mandated protocols? In the coming months and years, the courts will be bombarded with answering these difficult questions.
There will not be one clear answer
Not all force majeure clauses are the same. Therefore, the applicability of a force majeure clause will depend on the specific language in each contract. If a list of unforeseen circumstances includes a pandemic or a global health crisis, this clause will likely hold up. But if a list of unforeseen circumstances only includes fire, flood, strike, or war, then the clause will not hold up.
If you have become tangled in a contractual dispute due to covid-19 and the opposing party is attempting to use a force majeure clause against you, it is crucial to seek legal advice immediately.
Breaching Party: The Consumer
The breaching party is the party that no longer wants to proceed with the contract and will most likely be the consumer. The consumer may have already provided a sizeable down payment and may be at risk of losing all of it, or the venue may be attempting to hold the customer to the contract and proceed under updated and revised terms. What options do consumers have to protect themselves?
The common-law doctrine known as “frustration” exists as an option in all contracts. The Frustrated Contracts Act in Ontario provides guidance for the use of this doctrine. According to the act, if the performance of the contract becomes impossible or otherwise frustrated, the parties may be released from their contractual obligations, sums previously paid may become recoverable, and sums payable may cease to be payable. This would include deposits, down payments, and future installments.
Unlike force majeure, frustration does not require explicit inclusion into the contract as a term or condition. Rather, it will be available if unforeseen circumstances that were not indicated in the contract occur and prevent the agreement from being fulfilled. The party who wishes to invoke the doctrine must prove that frustration has occurred. It is important to note that if the agreement has only slightly been altered due to the unforeseen circumstance, this may not rise to the level of frustration. The contract must have become impossible to fulfill or “a thing radically different from that which was undertaken by the contract.”
A thing radically different?
Although frustration is always available in contract law, it is rarely successfully used because of the high threshold of the definition. For example, suppose a person rents a venue for a wedding and the contract does not include a force majeure clause. If a flood occurs and the wedding is unable to proceed, does this mean that the consumer is entitled to receive a full refund and cancel the contract? The contract is not impossible to perform; it is merely impossible to perform that day. What will likely happen is the venue will make arrangements to reschedule the wedding as soon as possible, and perhaps other accommodations to please the consumer. If this dispute were to end up in court, a judge would be required to determine if the new contractual agreement is radically different than the previous one. A shift of dates will likely not reach the level of radical difference to trigger frustration and allow for a lawful breach of contract.
Consumers must be careful with how they approach contractual disputes due to covid-19. The effects of the pandemic do not give consumers a free licence to terminate a contract and escape contractual obligations as long as there is no effective force majeure clause. If contractual disputes are not handled with legal advice, a consumer might be liable for breach of contract.
The effects of covid-19 on wedding venue contracts
As previously discussed, if a consumer wishes to invoke the doctrine of frustration due to covid-19, the contract must have become something radically different than what was agreed upon. A re-scheduled date may not trigger frustration because the contract has not been altered enough. However, as we have seen the effects of covid-19 regulations on society, it is unlikely that a temporarily postponed date would be the only difference between the two contracts. For example, it is likely that the banquet hall would have strict limitations on the number of guests, the date may have been postponed for a year or longer, and the cost of the event would likely increase due to the requirement of additional health security measures. Considering these severe changes, it is possible that the contract could become “radically different” than the original. It remains to be seen how courts across the country will handle these types of disputes.
But in the meantime, if you have terminated a contract due to covid-19, or you believe you have cause to terminate a contract, it is crucial to seek legal advice immediately.