Is Covid-19 a Force Majeure Affecting Event Contracts?
Events Planned For More Than 50 Attendees Are Statutorily Prohibited Until March 31st. This Date May Be Extended. Additionally, Beyond This Statutory Prohibition Other Mandates or Legal Reasons May Preclude Events From Going Forward. Where Contracts Are Affected, Refunds Likely Apply.
Similar Questions About Cancelled Events Include:
- Do I Have to Pay the Caterer If My Wedding Gets Cancelled?
- If My Wedding Gets Cancelled Do I Get My Deposit Money Back?
- Does a Banquet Hall Have to Refund My Deposit If My Wedding Gets Cancelled?
- What Happens If My Wedding Gets Cancelled Because of Covid?
- If a Business Conference Is Cancelled, Do I Get My 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 mitzvahs, retirement parties, and more, are similarly affected. In some circumstances, such as where the events were organized and planned for more than fifty (50) 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. Specifically, the Order states:
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.
Accordingly, this Order affects every public event organized and planned for more than fifty (50) people until March 31st, and it is possible, perhaps very likely, that the Order will extended beyond such a date.
Furthermore, while events of over fifty people may be statutorily prohibited, other events may be made impractical or 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 nullified as if the contracts were without existence and the parties to those contracts are to treat the the contracts as without existence. When this happens, the parties are without a right to treat failure to perform the contractual obligation, or failure of payment 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 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.
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 is 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.
Of extra concern to businesspeople will be the potential for personal liability arising from the failure to return deposits. Whereas sole-proprietors are always personally responsible for the liabilities arising from the business operations, the directors and officers of incorporated businesses who oversee or manage the business finances, including handling of monies received as deposits for contracts requiring future performance of services, may now be in an awkward spot should the business be unable to return the deposits. This concern for potential personal liability arises due to the common law doctrine of constructive trusts, and sometimes the statute law such as, for example, contracts governed by the Construction Act, R.S.O. 1990, c. C.30, which require the holding of deposits in trust. If a business spent deposit monies, in advance of the events (or projects) for which the deposits were provided, and did so to fund events (or projects) other than the events (or projects) that the deposits were provided for, then the directors and officers of the incorporated business may be personally liable on a joint basis with the corporation for the improper conduct that permitted the misdirected spending of deposit monies.
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. 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.