Case Studies on Force Majeure and Frustration

Thomson Snell & Passmore has been asked to support a number of clients in the events and hospitality industry with contractual queries relating to the COVID-19 outbreak. The queries relate to the applicability of force majeure clauses and the doctrine of frustration where events are unable to go ahead due to the recent social distancing measures.

Force majeure clauses are specific clauses included in contracts to deal with circumstances beyond the control of the parties.

The doctrine of frustration and the Law Reform (Frustrated Contracts) Act 1943 implies terms on the parties where there is no force majeure clause but the contract cannot be fulfilled because to do so would now be impossible or illegal.

Force majeure – event is cancelled and supplier’s services are no longer required

Our client supplies exhibition stands to events around Europe. During the early stages of the COVID-19 outbreak, the event was cancelled because business travellers were no longer able to attend. Our client was told his stands were no longer required but he had already incurred the costs of producing the stands.

In this case, there was a relevant force majeure clause. However, the party affected by the clause was the event organiser and not our client. The question then was whether the force majeure event was stopping the event organiser from meeting their responsibilities under the contract. The event organiser’s responsibility was to pay our client and the force majeure event was not stopping this.

Understandably the event organiser did not want to pay, but they were not stopped from doing so, by the force majeure event. We advised our client to press for payment and to suggest the event organiser should check their insurance position.

Force majeure – our client wants to cancel but the venue still wants to be paid in full

Our client runs conferences around Europe. Our client approached the venue to arrange a postponement of the event due to the COVID-19 outbreak. The venue did not agree to the postponement, leaving our client only the option of cancellation, and losing their substantial deposit.

On this occasion, we advised the client they could not rely on the force majeure clause because the force majeure event was not stopping them paying the venue, and they should mitigate their loss by utilising the cancellation option, rather than risking making a force majeure argument, and then approach their insurer about cover for the lost deposit.

Frustration – our client is the venue provider and has been forced to close

Our client provides a wedding venue. Due to the latest social distancing measures imposed by the Government, the client cannot provide the venue for weddings. Our client has limited terms and conditions in place that do not refer to force majeure events of this sort. Our client wanted to understand whether they must refund the payments made for weddings that are cancelled.

We advised that the Law Reform (Frustration) Act will apply to the contracts. The venue must return the payments to the customers, and cannot demand any further payments. However, the venue can withhold a sum for the expenses incurred by the venue in relation to the cancelled wedding, for example for perishable food and flowers already purchased in anticipation of upcoming weddings.

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