Article contributed by Ilan Weiser, Ellenoff Grossman & Schole LLP
No caterer, event hall, or venue could have foreseen the duration of the pandemic and the extent it would interrupt its operations. Luckily, some of those hospitality businesses required their clients to enter into contracts that forecasted, to a degree, both their own and their client’s obligations should disaster strike and the event not take place as planned.
Unfortunately, other operators were unprepared for this prolonged disruption to the private event business. Those businesses are urged to consult with legal counsel and revise their existing event contracts, so that they will be better able to withstand the next infectious disease or force of nature that could shut down large gatherings for another extended period of time, thereby minimizing future cancellations and lost revenue.
Event operators must understand that the language in their contracts will ultimately control in most situations and should draft specific clear and unambiguous contractual provisions that best suit their individual needs. To accomplish that end, the business should identify the largest potential disruptions to their services and implement specific workarounds and contingencies to combat unknown causes that would prevent putting on an event with the level of quality their clients expect.
Most of the weddings the general public is now attending are rescheduled events that were originally set to take place at some point in the last nineteen months, and thus event operators should consider whether they want to provide future clients with the ability to reschedule if the event cannot take place on the original contracted date, in the original manner intended. For example, the business can certainly mandate that the event take place on the originally selected date, and that date only. Alternatively, if the event needs to be moved to another date, the business can force the client to pay a higher price, forfeit their deposit, or apply the deposit to the increased fee for the new date, or neither. In short, the event operator can choose what works best for itself as it relates to cancellations, suspensions or postponements.
Occasionally, an intervening factor that is beyond the contracting parties’ control is the reason an event cannot go forward as originally agreed-to. That force of nature is legally referred to as a force majeure event. Since the onset of the pandemic, more and more parties to event contracts have attempted to cite to force majeure clauses in connection with COVID-19 as a basis to avoid liability for failing to perform their respective contractual obligations., e.g. a client that did not want to proceed with a 50 person wedding with everyone wearing masks, outdoors in the winter, when they originally contracted for a 500 person black-tie affair in the venue’s grand ballroom.
Certain factors are relevant in determining whether COVID-19 would be deemed a force majeure event under your event contract and potentially be a valid and legal basis for non-performance.
The first is whether the contract explicitly mentions COVID-19 as a force majeure event, or not. When the parties themselves define the contours of force majeure in their agreement, the contractual language will generally dictate the application, effect and scope of that force majeure provision. That is because courts generally avoid altering the terms expressly agreed to by the parties, and imposing obligations not provided for in-writing. Second, assuming the force majeure reason can be relied upon, event operators are urged to build-in to the contract explicit language about what happens, should it be invoked:
- Is performance excused for the original agreed-upon date, or for one year, or forever?
- Does one party need to provide specific notice, by a specific time and/or in a specific manner to invoke their force majeure reason for not performing their contractual obligations?
- Is there another provision that would mandate performance elsewhere or in some other manner?
Your event contract should ideally define all exigencies, to the extent they can be forecasted, to guarantee the greatest level of certainty concerning both your and your client’s obligations.
Luckily, courts are still upholding basic contractual principles, in that the specific language of a contract is paramount to how it will ultimately be enforced. For example, in deciding against a New York hospitality establishment that wanted to continue delaying hosting an event at its space until large gatherings could resume, when its clients wanted to cancel the event and receive a full refund, the court looked to the unambiguous terms of the contract, which clearly required the business to issue a refund to the client:
“…notwithstanding the deleterious economic impact of the COVID-19 emergency on [the event venue’s] business, in light of the unambiguous agreement, the court does not have authority to exercise its equitable powers to rewrite the agreement to temporarily suspend performance until the event is permitted to occur.”
My resulting advice to event operators is quite simple: you have the power to decide what happens in most situations, so take advantage of it, with a well-defined and transparent event contract, because the courts will, for the most part, honor its terms. Without one, your obligations and those of your clients will be unclear, which will undoubtedly lead to uncertainty for all parties, and potentially costly litigation.
Ilan Weiser is a Partner in the Labor & Employment practice group at Ellenoff Grossman & Schole LLP in New York City. Mr. Weiser exclusively represents businesses of all sizes and sectors on how best to comply with the federal, state and local labor laws that govern their operations. Mr. Weiser’s principal area of expertise is employment law litigation and has vigorously defended hundreds of his clients in federal and state court and before various governmental agencies against claims of employment discrimination and unfair pay practices. Mr. Weiser has particularly in-depth knowledge of wage and hour law and regularly defends and counsels his clients in class and collective lawsuits concerning claims for unpaid wages. Ilan Weiser can be reached at firstname.lastname@example.org or via phone at 212-370-1300.