Contracting for Coronavirus: Your Top Questions, Answered
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WeddingPro partnered with Caroline Fox from The Engaged Legal Collective for a webinar focused on addressing your legal concerns to help you navigate this unprecedented time. Do you have questions about what’s covered within your contract? Are your couples asking for refunds? Is COVID-19 impacting your payment schedules? Is force majeure relevant to a pandemic, and what exactly does that legal term mean? See how Caroline has answered these questions below and check out the recording for her answers to even more questions.Let’s dig in!
Question: What can I do when a couple wants a refund on their non-refundable deposit if they had to postpone or cancel their wedding because of COVID-19?
ANSWER FROM CAROLINE FOX: First, you need to look at your contract. That’s the first stop. What does it say? Evaluate this from a perspective of “what does it actually say, not ‘what do I want it to say’”. Whatever is in writing governs.
Second, you need to take a realistic look at the clarity of the non-refundable deposit/retainer/ reservation fee clause, and how you’ve spelled out whether the payment is compensation for your services or a penalty for cancelling the contract. The best and most effective way to do this is by explaining that the nonrefundable deposit/ retainer/ reservation fee is “liquidated damages.” Liquidated damages are the amount of damages (i.e. money) that the parties agreed would be their remedy for a specific breach when they entered into the contract.This is something that will perk up the ears of any lawyer or judge because we know what that means— that you and your client had already agreed that the non-refundable amount would be your remedy if your client canceled. If it wasn’t as clear that amounts paid were non-refundable deposits or reservation fees, then you may need to look into whether the payment was compensating you for work you’ve already done.
To do this, look at the structure and breakdown of your payment. If they paid 50% up front and you haven’t done any work– for example, a photographer who doesn’t do engagement sessions and does most of the work on the day-of and post-production side– you’re going to have a much harder time keeping a 50% amount paid than would someone like a planner, whose work is mostly done before the event.
As a note, I really like to split up payments into 4 payments of 25% each, with each payment becoming non-refundable as liquidated damages on the due date. I’ve found that it helps my clients keep more in the long run, and more accurately depicts the workload and the hardship of rebooking an event date. I know it’s annoying to send out more invoices/ payment reminders, but….. Is it worth hundreds or thousands of dollars? I believe so.
Question: What can I do when a couple is overdue on their invoice because they are unable to pay due to COVID-19?
ANSWER FROM CAROLINE FOX: You have a few options here. First, see if your contract has a force majeure clause. If it’s got the force majeure clause, determine the specific events covered by your force majeure clause and figure out if the delay is caused by a force majeure event, AND if it was unforeseeable. Were your customers in default before the force majeure event occured? Then it doesn’t matter; you still are owed money. A force majeure event isn’t a “free-for-all” pass; it’s going to be very fact- and detail- specific. Some force majeure clauses will cover a pandemic and/or government restrictions, while some won’t. In addition, some will excuse performing on the contract but not the payments due under the contract. Look at your specific clause to see what it covers, and consult with a lawyer if it seems unclear.
Second, you’re going to need to look at when their payment went into default, and if that even is affected by the force majeure clause. If they went into default (non-payment) before the force majeure clause was “in play,” they don’t necessarily have an excuse. They’re just trying to jump on the force majeure train.
Third, if their payment was delayed during the force majeure event, you need to tell them that a force majeure clause generally only kicks in if performance is impossible— and usually, paying a bill is not impossible. The banks are still working. Checks are still being mailed. Therefore, it’s going to be very rare to find a situation where payment is actually impossible.
Finally— and this is where you have to start making less “legal “ decisions and more “business” decisions— you need to consider that as a luxury service (because yes, events are a luxury!) you may need to be a bit more flexible with clients right now. The easiest client to get is one you already have, so it might make sense to work with your clients through this really tricky time. Referrals are the greatest source of clients with the lowest ROI— and this might be a time to really dig in and show your ability to “take care of things”.
….just get it all in writing. 🙂
Question: How do I draft a force majeure clause in my contracts to cover pandemics?
ANSWER FROM CAROLINE FOX: First off, let’s talk about what force majeure IS and what it DOES. A good force majeure clause is a contractual provision that excuses or delays performance for a specifically categorized event beyond the control of the parties, which was unforeseeable at the time of the contract and that makes it impossible (or reasonably impossible depending on your wording) to perform.
You’ve got to hit all those underlined pieces for your force majeure clause to kick in. They are narrow, and only “count” when the underlying contract says they count. Force majeure isn’t part of a contract unless it’s written in.
Most people are familiar with force majeure terms like “fire, flood, or other Acts of God.” But this is really a weak force majeure clause that doesn’t give you a lot of leeway. Instead, think of the possible issues you’ve seen in your locality— hurricanes for the southeast, tornadoes for the plains, civil insurrections, strikes, and protests for large cities. These are all things we don’t expect to happen, but sometimes blindside us. But also consider things that may pop up for your industry— for example, drought, or fungal disease for florists, embargos or food borne diseases causing food shortage for caterers, or labor strikes for rentals.
As someone who works with brands on an international stage, I typically draft force majeure clauses to include “fire, flood, hurricane, blizzard, tornadic activity, or other severe weather event (not including rain, snow, and/ or thunderstorms), riots, civil insurrection, labor strike, action or inaction of Government, or other unforeseeable event preventing performance” to allow delay on the part of the parties”.
I think we’ll start seeing “pandemic” included in these clauses, but really, the “action or inaction of Government” may cover us here— because it’s really the government mandates that are the issues prohibiting performance. But I am getting a bit down in the details. I think including pandemic may just make everyone feel better, and that you’ll get client requests for it. But also consider including that language about government action or inaction, which is what I am more concerned about.
If you don’t have a force majeure clause, you might have heard the terms “frustration” or “impossibility” as another way to get out of your obligations in a contract. These are concepts that aren’t written down but that could potentially get you out of your contract if it went before a court. However, these legal concepts are super limited and hard to prove. The best way to protect yourself is through specifically providing for these situations in writing in your contracts.
Question: If my couples are postponing, should I terminate their existing contract and send a new one or amend their existing contract?
ANSWER FROM CAROLINE FOX: Again, this is going to be a case-by-case determination, but what I’ve told people is this: If you are confident that only the date is changing— meaning the decor, the venue, and all major pieces of the contract are staying the same— it might be best to simply amend the contract (make a date change).
If there are a lot of undetermined or “moving pieces,” i.e. you don’t know what vendors are available, you may need to redo the color palate from spring to fall, or you need to substitute in florals, it’s time to terminate the former contract and get a new one in place— or at least a heavily edited amended contract. The same thing goes for if you are unsure of the terms in your original contract, or if you haven’t addressed some “key terms”. It’s better to build with a strong foundation than work on wobbly stilts.
Question: If I’m sending a new contract or an amendment to couples postponing their events, what clauses can I add at this time to protect against further reschedules or cancellations?
ANSWER FROM CAROLINE FOX: It’s going to be advisable to have a lawyer help you with this, but I know that’s not always possible. If you can’t get help right now, start by thinking through every situation that you can.
In the words of Brene Brown, “clear is kind” so be clear on each situation that your couples may be dealing with in the future. Address where fees go. Address what gets refunded and what doesn’t. Talk about what postponement fees look like, and when they apply. Let them know what happens if you’re available for postponements and if you’re already booked.
In practice, I’ve had some clients ask for COVID-19-specific terms; others want blanket terms about second postponements incurring additional fees. No matter what terms you put in place, look at them from both perspectives to make sure that you aren’t putting yourself in a place where you’re stuck showing up at an illegal/ prohibited event.
Question: How can I update my contracts going forward to protect me if there’s another outbreak or social distancing period? For example, should I add a pandemic clause, rescheduling fee or a provision to make sure I get paid for any work I already completed even if the event does not happen?
ANSWER FROM CAROLINE FOX: I think one of the most common misconceptions about contracts is that simply adding one section or modifying one clause is going to protect you in most situations especially complex ones like COVID-19 postponements and cancellations.
In reality, there’s not a one-and-done clause that’s going to be your patch here. You’re going to need to make sure your entire contract is up-to-snuff. We need to look at the way (i) non-refundable retainers/ “liquidated damages,” and pro-rata refunds, (ii) cancellation clauses, (iii) postponement clauses, and (iv) force majeure clauses all work together to protect you. You need to try and poke holes in the fabric of your contract to see where there are gaps.
For example: there is a force majeure event. Your client postpones. Then, they decide to postpone again. You’re now out three dates. What would your contract say here? And not “what would I WANT my contract to say here” it’s what does my contract ACTUALLY say?
The fastest way to figure this out is to get a lawyer to draft it. This is our job. We are trained to look at, twist, and wring-out words. We can-— and likely have— spent hours debating about what a comma means. I bet that most of us don’t know the correct way to bustle a wedding dress or when a chiavari chair is better suited for a venue than a ghost chair, but that’s where we rely on YOU. We all have strengths.
Question: Will wedding insurance cover postponements and cancellations, and if so, will coverage extend to if the wedding is postponed past the government mandated social distancing period?
ANSWER FROM CAROLINE FOX: You’ll need to consult the individual policy to determine if there are carve outs to the policy that will exclude COVID. Look for language including SARS, COVID, pandemic, or epidemic. Be aware that insurance agencies will most likely push back against coverage, and be prepared to fight them on it. It may be helpful to go see a personal injury attorney who can help you deal with insurance companies, who will use almost any excuse not to cover a claim.
In regards to any insurance policies issued after COVID-19 was “a thing”— those policies likely specifically exclude COVID-related refunds, so always read the terms and riders.
Question: My couples are threatening to sue me for not allowing them to postpone or reschedule for free, or for not refunding their deposit. What should I do?
ANSWER FROM CAROLINE FOX: Every situation is different, as is every couple. It’s hard to make a blanket call on “what should I do?” because we’re looking at (i) the money in dispute, (ii) the strength or weakness of your contract, (iii) the circumstances surrounding the cancellation/ postponement/ refund, (iv) the general disposition of the couple and their likelihood of suit.
The best thing to do is always to contact a local attorney who can look at all the above and give you a good overview of your situation. They will be able to consult with and advise you on what to say, what to do, and how to put yourself in the best position IF the couple attempts to take you to court.
Having a local attorney “on call” if need be is really valuable for a small business owner. You might not need to put one “on retainer,” so to speak, but just knowing someone you can call in an emergency lifts so much pressure off of you in a legal emergency. You’ll already have someone you know, like, and trust, and won’t get stuck just working with any old Joe-schmoe who answers the phone.
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As Caroline Fox told us during the webinar, “Clarity is kindness.” Being clear with your clients is illustrative of being a professional in difficult situations. In the interest of maintaining relationships and building your brand, weigh your options before responding to your couples’ requests. Try to strike a balance between enforcing contractual obligations and being flexible during a global pandemic. Events is a luxury market, so there are business and PR implications to your decisions and, therefore, reasons to prioritize client service. As people serving people, compassion and empathy can go a long way.
If you weren’t able to join us live for the webinar, or if you want to brush up on the content again, you can view the recording at any time.
***Caroline mentioned her Flowchart for Wedding & Event Pros here: https://blog.engagedlegal.com/blog/wedding-event-coronavirus-flowchart
Photo Credit: Rawpixel.com/Shutterstock.com
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