Tips for Legally Cancelling a Contract Due to COVID-19

Unless you’ve been living under a rock for the last few months, you are most likely extremely aware of the current COVID-19 situation. Thus far, it has likely caused you to stock pile a few necessary items, think twice about getting on a plane or traveling anywhere, and you may be looking at having your kids and/or husband home for the next few weeks in order to help stop the spread of the Coronavirus. 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? Booked travel or a venue for an out of town event? These are all obligations and commitments that we are now taking a second look at, which raises the 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?

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If you find yourself needing to cancel a contract, event, or other occasion, here are a few things to know about contracts, and tips on how you may be able to use them.

(Note, this is not an exhaustive list, nor intended to be legal advice for you to rely on – just some helpful tips to get the conversation going.)

  1. The implied “Impracticability” clause

This unnecessarily 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 possible or 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 possible or will be so difficult that it is not practical to continue. 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.

So what do you do? 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.

  1. Force Majeure

While many business owners may not know what this phrase means, it may be in your agreement. Review the contract 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.

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 christy@christywesterfeld.com for general insight) and you’ll be able to figure out if you can use this paragraph to excuse your performance under the contract.

  1. The Aftermath

Once you have successfully excused performance under the contract, you’ll likely still need to address a few things:

If you are 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. I am always available to email / chat about general issues and information: christy@christywesterfeld.com.

To make sure you’re prepared for next time, CLICK HERE for my Signature Event Legal Bundle.

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