Do you need to break an event contract in the next few months but don't want to get sued? The following legal tips will point you in the right direction.
The COVID-19 outbreak is making a LOT of waves in the nation and the world. The status is changing daily. But many cities are being asked to completely quarantine themselves from others, and “non-essential” businesses are being asked to close, including bars, stores, and businesses with in-person services. Along with these quarantining measures, there is also the huge issue of social gatherings: events, retreats, travel, meetups, parties, meetings, and other occasions that are being canceled, postponed, or held virtually.
As a business owner, this may be impacting you greatly. Do you have a live event coming up? Are you hosting a retreat? Have you agreed to serve as a speaker at an upcoming event? These are all obligations and commitments that are now likely being canceled in order to contain the spread of the Coronavirus.
Once the initial shock or disappointment passes, you’re left with a very real question: How do I get out of my contract, or cancel an event without being sued by everyone that was supposed to come? How do I cancel a speaking engagement without breaching my contract?
If this is you – no need to panic! There are likely several viable options for how you can be excused from your contract, make amendments, or cancel it altogether.
(Note, this is not an exhaustive list, nor intended to be legal advice for how to handle your specific situation – just some helpful tips to get the conversation going.)
The implied “Impracticability” clause
This long and legal-sounding word may be your new best friend. An “Impracticability” clause is implied in many contracts (depending on the state you live in), meaning it most likely does not need to be physically written in the contract for you to be able to use it. If there’s a valid contract and your state allows this implied provision, you may be in luck.
So what does this impracticality clause mean?
Impracticability = impractical = not practical = not realistic.
An impracticability clause essentially means that whatever you and the other party agreed upon, and what you were supposed to do under the contract is now not realistic or will be so difficult that it is not practical to continue. (This likely won't work if it's just more difficult, or you changed your mind. It has to be near impossible). If that happens, this clause may excuse you of your responsibilities under the contract IF whatever is happening is something outside your control and not caused by you. The event or issue needs to be “unforeseeable” or something that was not predictable by the parties when they entered into the contract.
Essentially, it allows one person to be excused from performing under the contract, if something unforeseeable and unpredictable happened, that made performing completely unrealistic or impossible.
The COVID-19 frenzy is VERY likely something that falls within this category. Because there are now travel restrictions, bans on large gatherings or crowds, school closures, venue closures, and general requests from leaders to self-quarantine and engage in social distancing until further notice, holding a large event or retreat where attendees were expected to travel and stay in close quarters with others is now highly impracticable if not impossible/against current regulation.
To activate this clause in your contract, simply advise the person you entered into the agreement with, (whether it’s the vendor, venue, speaker, attendee, etc.) that your performance has been rendered impracticable due to COVID-19, and unfortunately you are going to need to cancel the agreement. From there, you can work out any additional issues that will arise due to your need to cancel the contract, but it should be relatively easy to work out.
If your state does not allow the “impracticability” clause, it may allow a more common implied provision of “impossibility” – which, unlike the impractical clause, requires that performance actually be impossible. This is typically applied when a necessary person to the contract has died, been quarantined, or if performance has been made illegal by governmental containment procedures. This last piece could be crucial to being able to cancel a contract or excuse performance due to the COVID-19 quarantines. Many states are now implementing strict limitations on the number of people that may gather together. Certainly, anyone who has contracted the virus or is showing symptoms must immediately be quarantined. If either of these regulations apply to you and your current situation, it would be effectively impossible to hold an event or gathering, and thus, your performance is rendered impossible.
While many business owners may not know what this phrase means, it may be in your agreement. Before you break an event contract, review the papers you signed with the person/company/venue to see if this provision is included. While it depends on how it was written, typically this paragraph says something to the effect of the parties agree that should an event beyond our control occur, sometimes called an “Act of God” – like weather issues, fire, earthquake, terrorist attack, or – in this case – a virus, one or both parties may be excused from performing under the contract.
If this paragraph IS in your contract, you’ll need to read it very carefully (and ask the attorney who wrote it for you to explain the meaning) as the wording of the paragraph is very important to whether or not you’ll be able to use it, and if it will apply to the current COVID-19 situation. Without going into too much detail – sometimes by including this paragraph and listing out all the possible “Acts of God,” you can only use the paragraph if the actual issue was something that was specifically listed. So if “global pandemic” isn't included, you may not be able to use this paragraph to cancel the contract.
Many force majeure paragraphs include more predictable acts of God, e.g. hurricanes, tornadoes, earthquakes, fires, and other similar weather-based catastrophes, and do not typically include a nationwide pandemic. So again, if this IS in your contract – reach out to the attorney who drafted it (or reach out to me at firstname.lastname@example.org for general insight) and you’ll be able to figure out if you can use this paragraph to excuse your performance under the contract.
What to do AFTER you break an event contract?
If you are able to successfully excuse performance under the contract using impossibility, impracticability, or force majeure, you’ll likely still need to address a few things:
Are you canceling an event, retreat, or gathering of some kind where you sold tickets? You will likely want to offer your guests a refund on their ticket, a free ticket to the next event you hold, or the option to choose a refund or free future ticket.
If you are also needing to cancel contractor agreements, vendor agreements, and others who were lined up to assist with an event, the specifics on what you may need or want to do to smooth things over will vary greatly. Be open and honest, and don’t be afraid to consult with an attorney (ideally the one who drafted your contract!) if you need help.
Do you have any questions about how to break an event contract? Share in the comments below!
Christy Westerfeld, Esq. is an attorney and legal resource for online entrepreneurs and coaches. She helps savvy business women cut through the confusion and overwhelm of legal and create an easy and affordable plan of action to legally protect their businesses. While legal may not be #1 on your list of exciting topics, understanding the basics is VITAL to your success as an entrepreneur, and Christy will help you learn what you need to know, in a way that is easy to understand! When she isn’t working, you’ll find Christy chasing after her toddler, binge-watching “Suits,” or signing up for the latest beach city half marathon.