As COVID 19 continues to spread, efforts to limit exposure have had huge impacts on our daily lives. Many popular holiday destinations have announced that all sporting venues, museums, ski resorts and other such public venues are closed until further notice. Here in Britain we are no longer able to attend public parks, weddings or non-essential shops. Indeed we are on what many have coined “lockdown”.
Generally, when you enter into a contract for the provision of goods and services and one party cancels, there would be a cancellation clause that states what should happen. Similarly, some contracts may have a force majeure clause, which states what might happen if unforeseeable circumstances prevent someone fulfilling their obligations under the contract. However, if there is no force majeure clause and the contract cannot be fulfilled or implemented because of an unforeseeable event out with either parties’ control, the contract is deemed to be “frustrated”.
Under the legal doctrine of frustration a contract may be discharged when something occurs after the formation of the contract which renders it physically or commercially impossible to fulfil; in this case Coronavirus and the resultant restrictions on events and movement across the country.
So, what happens if you have had to cancel a party and have already paid for the venue? Or if you cant use your gym membership, but are still paying? Or if you’ve paid a deposit for a meal or night out and can no longer go? Or if a conference you were due to attend cant go ahead? What are the chances of getting your money back?
Firstly, most companies are offering to reschedule if your planned event can’t go ahead. However, do they have to do this? Under the doctrine of frustration, the future performance of the contract by both parties is automatically prevented (i.e., you don’t have to pay any more, and the venue don’t have to provide the room for your event). However, a lot of companies will be balancing their own accounts with the impact negative press might have, and will most likely offer you something to lighten the blow.
So, what happens to the money you have already paid?
This is where things get slightly more complicated. When a contract has been frustrated, neither party to the contract should be left unjustifiably enriched. This means that neither party can make a profit out of the situation. If they do, you may be able to seek some of your money back. This means that the person paying for the services may be entitled to their money back, but, the provider of the services is entitled to deduct from that sum their costs.
In some cases however your insurance may exclude an act of god, force majeure or otherwise specifically exclude cover for frustration of contract in which case you may, unfortunately, be left out of pocket. Where you have not taken insurance at all in relation to an event like a wedding, it’s likely you are going to have to resign yourself to the fact you may have lost at least some of your money.
If you have been affected by frustration of contract and would like advice on your legal position and ability to seek compensation either from the other side or from your insurance provider please contact a member of the disputes resolution team
Insight from Scott Milne, Dispute Resolution & Claims Solicitor. For more information contact Scott or any member of the team on 03330 430350
