The outbreak of coronavirus (COVID-19) is an unprecedented and rapidly evolving challenge that has impacted upon every aspect of life. The restrictions on non-essential travel and the mandatory closure of most business premises has disrupted many weddings due to take place this year, placing huge financial pressures on wedding venue operators and ancillary wedding businesses. As a result of these complications, we are now offering this advice and guidance to businesses.
The regulations forcing the closure of many businesses and restricting consumers’ ability to travel has made many weddings during lockdown impossible to perform (also called ‘frustrated’). In this event, consumers may be legally entitled to a refund depending on the type of contract agreed. Therefore, best advice is to engage with the consumer. There have been many examples of customers and businesses working constructively together to avoid the need to cancel completely, either by agreeing a revised booking date or by securing some other arrangement i.e. deposit/monies held pending the lifting of restrictions and the reopening of bookings.
These arrangements are voluntary but prove most customers are keen to have their special day to look forward to, once the current restrictions are lifted. In return it has helped those businesses that may otherwise struggle due to the financial impact of the current situation.
There still may be some couples who are unable to postpone to an alternative date for whatever reason. In those cases, we offer the following advice to businesses:
Any terms and conditions used by a business must be fair and brought to the attention of the consumer before they enter into any contract. The Competition and Markets Authority (CMA) provided the following guidance in 2016 and confirmed that venues that require large deposits and excessive cancellation charges could be in breach of consumer law: GOV.UK – Wedding venues advised to play fair.
Their guidance is:
- Any deposit taken just to reserve goods / services should be no more than a small percentage of the total price.
- Advance payments should reflect the business’ expenses, and leave customers with a reasonable amount still to pay on completion or close to the actual wedding.
- Customers should not lose large advance payments if they cancel, in all circumstances.
- Businesses should set a sliding scale of cancellation charges, so they cover their likely losses directly from the cancellation.
However, many smaller businesses (e.g. florists, car hire, photographers, marquee providers and entertainers) may not have extensive written terms and conditions that cover such scenarios. In these extraordinary times, legislation that was introduced during the Second World War may assist consumers in situations where a satisfactory solution cannot be reached.
The Government’s restrictions in response to COVID-19 may bring into effect the rights and obligations contained within the Law Reform (Frustrated Contracts) Act 1943. Although this old legislation contains a statutory entitlement to a refund for any contract that has “become impossible to perform or been otherwise frustrated” (e.g. as a result of the current restrictions where the government has ordered the closure of venues and other non-essential travel). A business may deduct any reasonable, unavoidable costs they have incurred in performing their part of the contract, up until the date of the frustrated event.
This entitlement will only apply while the restrictions are in place, therefore weddings beyond the period of restrictions will not become ‘frustrated’ until the actual date has passed. Consumers will not be able to insist on a refund in advance in this situation.
Ultimately claims under the 1943 Act would have to be enforced through the County Court, but hopefully most cases will be resolved between couples and the various service providers without needing to get to that stage.
If it is not possible to rearrange the date of the wedding, below are some practical steps to resolving any cancellation issues.
Check the dates
It’s important to remember the current official lockdown period began on 23 March 2020 and is reviewed on a regular basis. At this moment in time it may be possible to hold weddings later in the year, however be mindful that a hirer and their guests may not be able to make a booking later in the year. Every situation will be different depending on the date of the wedding and date of cancellation.
Check your insurance
Check your business insurance policy and determine whether your policy contains a business interruption clause. If this clause covers closure due to Government restrictions or public health emergency or a pandemic you are likely to have a claim and you will need to contact your insurance company. We are however aware of valid claims that have been refused and, in this case, you must contact the Financial Ombudsman Service.
Communicate with your client
Nothing in the legal provisions prevents a business and consumer coming to alternative arrangements (i.e. a rearranged date or change of supplier). Remember, these are voluntary arrangements and must be agreed by both parties.
Your booking terms and conditions may apply where they included a specific term to cover such events, sometimes referred to as a ‘force majeure’ clause. This will bind consumers if it is a “fair” and “reasonable” contract term and brought to the consumer’s attention before they contracted with your business.
If you do not have standard terms and conditions, or they do not cover the situation, the Law Reform (Frustrated Contracts) Act 1943 may apply. This grants consumers a statutory entitlement to a refund less a deduction of reasonable costs. Consumers may pursue failure to comply with these legal provisions through the County Court.
Any cancellation process should be fair to both parties and should not be complicated.
Review the fairness of your terms and conditions
How can you tell if your terms and conditions are fair? The Competition and Markets Authority takes a dim view of any business that seeks to avoid its customers’ legal rights. Read their guidance on writing business contracts at GOV.UK – How to write fair contracts: information for businesses.
If you need further assistance, contact us.
For further information and explanation about how this applies to different scenarios you can read the full CMA guidance Wedding services: coronavirus (COVID-19), cancellations and refunds.
Further business support
For business resilience support and guidance about coronavirus, visit Heart of the South West Growth Hub COVID-19 support for business.