Oct 9, 2020

Contracting for Events During the Time of COVID

By Rebecca J. Rosen, Esq.

Over six months into the novel coronavirus-19 (COVID-19) pandemic, event planners continue to struggle with their contracts for canceled, postponed, and new events. And despite what some may have thought, the arch of the virus has not been a linear one, such that there is no way of predicting what the status of COVID-19 will be, even for events planned months in advance. At the outset, the event of COVID-19 elucidated a loophole in much contract drafting that is infrequently brought to bear—lackluster force majeure clauses. However, as the course of the virus evolved and event planners attempted to plan regardless of the status of COVID-19, attention has been drawn to less obvious provisions such as payment schedules and postponement clauses.

 

Force majeure is an incident over which neither party had any control, that causes an interruption or prevents performance by either party to a contract. Hurricanes, tornados, and fires are traditional examples of force majeure. At the onset of COVID-19 many people asserted that a force majeure event was triggered under their contracts that would excuse their performance. While reliance on the terms “epidemic” or “pandemic” to trigger the force majeure defense has been relatively untested by the courts, those with contracts containing those terms are generally more likely to be able to enforce their force majeure provisions than those without them. At the same time, regardless of whether a contract contains those terms within its definition of force majeure, those seeking to enforce their contracts, at least at the outset of the pandemic, were generally less likely to be successful based on the undeniable effect that COVID-19 had on cancelling events.

 

As the pandemic has continued, those planning events have been more insistent on bolstering their force majeure clauses, including language such as “quarantine restrictions” and “government acts” within their definitions of force majeure. However, these additions only add so much in value, as the doctrines of illegality, impossibility, and impracticability already provide protection to those seeking to excuse performance due to, for example, an executive order prohibiting such performance. Moreover, as State and local governments have shifted to allow for large gatherings regardless of the presence of COVID-19, force majeure clauses have become less relevant for those seeking to cancel or postpone their events.

 

Meanwhile, provisions such as payment clauses have become more important in practice. For example, those event contracts with small deposits and the majority of the payment due on or immediately before the event have been easier to “cancel”, as people know that it will be difficult for the event host to recoup the balance of the payment that has not been made.  Those hosting events may want to consider altering their contracts to require a greater deposit, and/or more substantial payments due sooner, to ensure they do not lose money on an event cancelled at the eleventh-hour due to COVID-19 concerns. Yet another way to plan around COVID-19 that can be mutually beneficial to both parties, is the institution of a postponement clause. This can be done by including within the force majeure provision that, if there is a triggering event, the parties will agree to hold the event at a later date. By doing this, both parties avoid ultimately losing out on the benefits of the contract.

 

While COVID-19 has certainly presented new problems in contracting for events, event planners can protect their contracts by enhancing these provisions and through other creative ways of ensuring performance.

 

For more information, contact Rebecca J. Rosen, Esq. at rjr@spsk.com or (973)539-1011.