Understanding the Rights, Remedies and Obligations of Businesses Pertaining to Partners, Customers, Vendors and Others.
As the fallout from the ongoing spread of the Coronavirus continues to impact and disrupt our everyday lives, it is up to business and community leaders to be bold and proactive in combating further, preventable spread.
As a result of this disruption, many businesses are trying to understand their rights, remedies and obligations with respect to their business partners, customers, vendors, clients and others.
These past few months I have been on the phone with my clients trying to navigate these uncharted waters, deciding what to do in the short term regarding ongoing contractual obligations, putting into place policies and procedures to deal with this pandemic, and to be better prepared for similar global events in the future.
The biggest questions that my clients have been asking me are:
What do I do with my agreements with meeting venues and all the vendors that I have engaged for my up-coming event?
What leverage do I have to postpone or cancel?
What legal tricks to you have up your sleeve?
There are no easy answers and there are no tricks. But …
Almost every contract contains a provision which addresses acts of God, strikes, war and natural disasters – “force majeure.” Now is the time to locate and review the force majeure provision in your relevant contracts. Contractual provisions to review include any breach, termination, cancellation, or repudiation terms that may be applicable under the circumstances.
Even if the contract does not include a force majeure provision, a force majeure concept (such as the doctrine of impossibility or frustration) could be implied under applicable state contract law.
You should assess whether the outbreak of the coronavirus, or the efforts to contain it, constitute a force majeure event under the contract allowing cancellation or postponement.
A contract may either explicitly list all qualifying events, or generally define a force majeure event as an event beyond the parties’ control, leaving more room for interpretation. Broad, catch-all language may be interpreted differently depending on the circumstances.
One venue’s agreement included the following:
> The performance of this Agreement is subject to those limited circumstances making it illegal or impossible to provide or use the facilities, such as Acts of God, war, natural disaster, government regulations, terrorism, and strikes of others than those employed by the parties, civil disaster or the complete curtailment of transportation.
As you can see, there are several provisions from this clause which are relevant to the current crisis which support postponement or cancellation. I’m sure that this is the case in other variations. Check your agreements to see what your options are.
Ultimately, whether a party can exercise its rights under a force majeure clause must be determined on a case-by-case basis.
In the last few months, we have had event venues charge change fees, allow complete cancellation and agree to postponements. The only consistency in result is inconsistency.
When an event is involved you should also consider and address the ability of your attendees to cancel/postpone guest rooms as well.
It is my sincere hope that common sense prevails and that we all work together to mitigate the major impacts of this global disruption.
Thanks to Dan Wagowski for his contributions to this post.