Is Covid-19 a Force Majeure Affecting Event Contracts?
Many Events As Previously Planned Are Made Impossible Due to Statutory Mandates Limiting the Number of Attendees. Furthermore, Other Legal Issues May Disrupt Planned Events That Frustrate Various Contracts. Return of Deposit Monies Is Likely Required.
Similar Questions About Cancelled Events Include:
- Are My Deposit Monies Lost If My Wedding Is Cancelled Because of Covid-19?
- Does a Banquet Hall Have to Refund My Deposit If My Wedding Gets Cancelled?
- My Wedding Is Cancelled. Do I Get My Deposits Back?
- What Happens If My Wedding Gets Cancelled Because of Covid?
- If My Wedding Gets Cancelled Do I Get My Deposit Money Back?
A Helpful Guide On How to Determine and Understand the Laws Applicable to Events Cancelled Due to Covid-19
Disappointingly, Covid-19 is affecting many events, large and small. Conferences, trade shows, home shows, among other major events are now cancelled and small events such as weddings, jack and jill parties, bar/bat mitzvahs, retirement parties, and more, are similarly affected. In some circumstances, such as where the events were organized and planned for more than five (5) attendees, the statutory law prohibits such events whereas, per O. Reg. 52/20, as a regulation to the Emergency Management and Civil Protection Act, R.S.O. 1990, c. E.9, an Order pursuant to section 7.0.2 (4) was issued on March 18 2020 and then subsequently amended on March 27 2020. The original Order restricted events to a maximum of fifty (50) people which was reduced to five (5) people within the amendment. Specifically, the Order, and amended Order, stated:
WHEREAS an emergency was declared on March 17th, 2020 pursuant to Order in Council 518/2020 (Ontario Regulation 50/20);
AND WHEREAS the criteria set out in subsection 7.0.2 (2) of the Emergency Management and Civil Protection Act have been satisfied;
NOW THEREFORE, pursuant to subsection 7.0.2 (4), paragraph 14 of the Act, all organized public events of over fifty people are hereby prohibited including parades and events and communal services within places of worship.
This Order shall be in effect until March 31st, 2020 unless this Order is terminated earlier.
1. (1) Subject to subsection (3), no person shall attend,
(a) an organized public event of more than five people, including a parade;
(b) a social gathering of more than five people; or
(c) a gathering of more than five people for the purposes of conducting religious services, rites or ceremonies.
(2) For greater certainty, subsection (1) applies to an event or gathering even if it is held at a private dwelling.
(3) Subsection (1) does not apply to the following:
1. A gathering of members of a single household.
2. A gathering for the purposes of a funeral service that is attended by not more than 10 persons.
The timelines and conditions within the Order, and amended Order, were subsequently further amended many times.
as amended by O. Reg. 106/20 and Schedule 1 thereto, imposed a revised expiry date of April 13 2020 and was subsequently further amended.
Furthermore, while some events may be prohibited by Order, other events may be made impossible. Where an event involves contracts that are rendered impossible to perform due to the Covid-19 circumstances, it may be quite likely that such contracts will be deemed in law as frustrated and therefore any further obligations within the contract nullified. When this happens, the parties are without a right to treat failure to further perform any of the contractual obligations, or failure of further payments per the contractual obligations, as a breach of the contract. Simply speaking, where the law nullifies the obligations within a contract, it becomes legally impossible to breach such a contract. A failure to act in accordance to nullified obligations is legally excused. The nullification of obligations within impossible contracts is provided for within the Frustrated Contracts Act, R.S.O. 1990, c. F.34 which states, among other things:
Application of Act
2 (1) This Act applies to any contract that is governed by the law of Ontario and that has become impossible of performance or been otherwise frustrated and to the parties which for that reason have been discharged.
(2) This Act does not apply,
(a) to a charterparty or a contract for the carriage of goods by sea, except a time charterparty or a charterparty by way of demise;
(b) to a contract of insurance; or
(c) to a contract for the sale of specific goods where the goods, without the knowledge of the seller, have perished at the time the contract was made, or where the goods, without any fault on the part of the seller or buyer, perished before the risk passed to the buyer.
Adjustment of Rights and Liabilities
3 (1) The sums paid or payable to a party in pursuance of a contract before the parties were discharged,
(a) in the case of sums paid, are recoverable from the party as money received for the use of the party by whom the sums were paid; and
(b) in the case of sums payable, cease to be payable.
(2) If, before the parties were discharged, the party to whom the sums were paid or payable incurred expenses in connection with the performance of the contract, the court, if it considers it just to do so having regard to all the circumstances, may allow the party to retain or to recover, as the case may be, the whole or any part of the sums paid or payable not exceeding the amount of the expenses, and, without restricting the generality of the foregoing, the court, in estimating the amount of the expenses, may include such sum as appears to be reasonable in respect of overhead expenses and in respect of any work or services performed personally by the party incurring the expenses.
(3) If, before the parties were discharged, any of them has, by reason of anything done by any other party in connection with the performance of the contract, obtained a valuable benefit other than a payment of money, the court, if it considers it just to do so having regard to all the circumstances, may allow the other party to recover from the party benefitted the whole or any part of the value of the benefit.
(4) Where a party has assumed an obligation under the contract in consideration of the conferring of a benefit by any other party to the contract upon any other person, whether a party to the contract or not, the court, if it considers it just to do so having regard to all the circumstances, may, for the purposes of subsection (3), treat any benefit so conferred as a benefit obtained by the party who has assumed the obligation.
Involves Business-to-Consumer Contracts
For many events, being those in which the contract was entered into prior to the date of the event and where the contracted value of the service hired is more than fifty ($50.00) dollars and thus constitutes as a Future Performance Agreement per the Consumer Protection Act, 2002, S.O. 2002, Chapter 30, Schedule A at sections 21 to 26, the consumer is prescribed a statutory right to cancel the event. The statutory right, is absent exceptions for pandemic, government ordered shutdowns, or any other condition. The right is present regardless of why the event is unable to proceed.
Essentially, where a contract is with a venue, or other supplier, and the goods or services contracted for are delayed by thirty (30) days or more, the consumer is entitled to cancel the agreement. This is stated clearly in section 26 of the Consumer Protection Act, 2002 wherein it is stated:
26 (1) A consumer may cancel a future performance agreement at any time before delivery under the agreement or the commencement of performance under the agreement if the supplier,
(a) does not make delivery within 30 days after the delivery date specified in the agreement or an amended delivery date agreed to by the consumer in writing; or
(b) does not begin performance of his, her or its obligations within 30 days after the commencement date specified in the agreement or an amended commencement date agreed to by the consumer in writing.
Upon a consumer exercising statutory cancellation rights, per the case of Sawh v Par-Tek Construction Services Inc., 2017 CanLII 53634, says that upon cancellation of a future performance agreement, a deposit should be returned; however, Sawh also says that a quantum meruit should be provided where the supplier incurred expenses or contributed value.
Furthermore, for events that qualify for the protection within the Consumer Protection Act, 2002, any contractual force majeure and doctrine of frustration clause, that may attempt to negate the right to cancel the agreement and obtain a refund is void per section 7 of the Consumer Protection Act, 2002 which renders any attempt to contract out of the Consumer Protection Act, 2002 as void and inapplicable whereas section 7 states:
7 (1) The substantive and procedural rights given under this Act apply despite any agreement or waiver to the contrary.
Refund Required For Deposit Monies
Very difficult for many businesses, especially small businesses, will be the requirement to return deposit monies for events that are cancelled due to the statutory prohibition and frustrated contracts; however, such appears as a clear mandate within the Frustrated Contracts Act. As above, if a contract becomes impossible to perform, due to reasons out of the control of the parties to the contract, such as due to a statutory prohibition or another Covid-19 circumstance causing frustration of contract, then the contract obligations are nullified and the parties are exempt from performance of the contract and must be put back into a position as if the contract was without existence, including return of deposits.
Partially Performed Services
Concernedly, some businesses may have incurred expenses to-date in the preparation to perform contracts now frustrated and deemed nullified. Where this occurs, and despite that the parties are likely exempt from the contractual obligations, the law applicable to unjust enrichment and quantum meruit may apply and thereby result in some monies being payable to the party that incurred expenses or otherwise provided value to-date to another party within the nullified contract obligations. In law, the principle of quantum meruit, which is a Latin term, essentially means, what it is worth.
Many events are now unlawful or impossible; and accordingly, the contracts related to such events are likely deemed frustrated and the obligations within such contracts nullified. Where a contract is frustrated and the obligations are nullified, the parties to the contract should be placed back into the same financial position as if the contract was without existence, including the refund of deposits; however, monies may remain due for services partially rendered or other value already received.