Businesses that create and plan events of any kind, be they classes, workshops, live theatre productions or any other special event, have been hit hard during this uncertain and unprecedented time. Some businesses can pivot to virtual classes, at least for a time. Yoga classes, even dance classes, workshops, seminars and so on can be offered for a fee if you’re struggling to make ends meet. Work doesn’t have to end for you. But other businesses, large event planners, entertainment producers and managers, for example, sadly don’t have that option. So what do you do? Let’s dive into the impact of COVID-19 on your business and what you need to know when you’re cancelling an event.
So if you’re one of those businesses, how can you manage cancellations and future proof your business regardless of the uncertain climate? We have a few means of protection we suggest you keep in mind:
Protection 1 - Business Insurance
Do you have an insurance policy in place? If you do, check what level of coverage you have and whether you are protected. We will say though, in my experience, it’s unlikely you will have protection for "epidemic" or "pandemic", as frustrating as that is. This is unprecedented and we’re all learning together, very quickly. This is still a step to take, though, to be sure. Speak with your insurance company and see if they may have an option for assistance in these strange times.
Protection 2 - Contract Terms
This is where you can protect yourself, notwithstanding the terms of your insurance. How, exactly, do you do that?
- Make sure you have language in your agreements/terms & conditions that provide you with relief for circumstances that would make it commercially impractical to continue to run an event:
- For example, if there is a 40% drop in registration numbers, continuing on would be financially impractical for your business. Be clear on what the purpose of the event is, what is involved and if part of your purpose requires exhibitors/stall holders, your terms need to show that without them or a significant number of them your event would be pointless in proceeding.
- Terms for cancellation are very important. Set out clear language around your cancellation terms, be specific with what notice periods are required for cancellation and what refunds the person cancelling are entitled to, for example, if they, your customer, provides less than 30 days notice there is no refund, but if they provide more than 30 days they may be entitled to a partial refund and so on.
- Cancellation / termination by you! This is super important, regardless of COVID-19. Always include scenarios where you need to cancel or postpone and what would happen in such an event. You may need to cancel due to an unforeseeable event e.g. COVID-19, a government shutdown and other (no matter how unlikely they may seem at the time) circumstances. Make sure that in such an event you are not liable. Always be clear and always set expectations.
- If you have terms with venues/caterers and other vendors working as part of your event, make sure your terms with other vendors and venues match, if at all possible, what you do with your customers and agreements with them. For example, it would make sense that you’d want a refund for cancellations within certain periods so that you can pass these same periods onto your own customers/clients in your terms. If you provide refunds on cancellations within 30 days, but you don't have something similar with the venue, maybe they only allow refunds for cancellations on 60 days, where is that money going to come from to pay the venue? It's important to ensure your terms align to protect you and for that matter your client.
- If your contracts/terms & conditions clearly state that there will be no refunds in the event of a force majeure (which should if possible expressly exclude epidemics and pandemics) - this gives you the right to cancel. You should also have a liability clause that also expressly limits your liability in the event of a cancellation for any reason including force majeure - this limits your liability for a cancellation.
What is “force majeure”?! Just a fancy French word that literally means “greater force” and is used in contracts to deal with unforeseeable circumstances where a party cannot fulfil their obligations under a contract e.g. COVID-19!
We are living in uncertain times and no one knows what will happen next, as all of these events continue to unfold and circumstances keep changing. Now more than ever, you need to think about creative solutions to protect your business and future proof it for any uncertainty that may come our way down the track. Be smart. Stay healthy. You’ve got this.
Want to know what else you might need? Book in a consult with one of our creative-loving lawyers, and let us give you the lowdown on all things legally legit.
Checklist: Protect and Future Proof Your Business
Business Insurance
- Put an insurance policy in place, if you don’t have one already
- Check your coverage to see if you have assistance during this time
Contract Terms
- Include the right language in your contract to protect yourself
- Be clear on the event and what it entails
- Make your terms clear in order to cover you should unexpected cancellations occur
- Solidify your notice periods for cancellation (30 days, 60 days?) and when refunds may be permitted
- If you are the one doing the cancelling, give clear scenarios of what qualifies as an unforeseeable event (example, government shutdown) and in these cases you will not be held liable.
- Match terms with other vendors and venues you may be working with so you don’t end up holding the bag.
- Don’t forget your limited liability clause for Force Majeure
***Disclaimer. Please read!!***
This article is for general information purposes only and should be used solely as general guidance. It does not and is not intended to represent legal advice or other professional advice.
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