Could the cancellation of King Edward VII’s coronation over a century ago, provide businesses in the events industry with a way of avoiding liability under contracts for events cancelled or postponed because of coronavirus?
In the world of commercial contracts, recent focus has been on how force majeure provisions can assist parties avoid liability for failure to perform their obligations due to Covid-19.
For businesses unable to perform their contractual obligations due to coronavirus and without a force majeure clause to fall back on, it can seem like they are doomed to be liable to the other party for any costs and losses the other party incurs as a result.
There has been some limited discussion of the doctrine of frustration, which can also help to relieve a party from their obligations in the absence of a force majeure clause, where an event:
- occurs after the contract has been entered into which is not due to the fault of either party; and
- renders performance of the contract impossible, illegal or radically different from what was contemplated when the contract was entered into.
However, commentators are often quick to dismiss frustration as too difficult a test to satisfy to be worthy of contemplation.
Whilst it is true that there are few cases where a party has successfully argued that frustration applies, but one of these cases could have a direct impact on the events industry today and allow parties to avoid liability in respect of their contractual obligations towards events cancelled or postponed because of coronavirus.
In 1902, Mr Henry had hired a flat on Pall Mall for the day, in order to watch the coronation of King Edward VII, after being informed by the landlord that the flat would give an excellent view of the procession. Unfortunately, the coronation had to be postponed due to the King’s ill health.
Mr Henry and the landlord went to court to determine whether Mr Henry should have to pay the remainder of the fee for hiring the flat or whether the landlord should refund Mr Henry’s deposit.
The court held that as the King’s coronation had been postponed, the contract was frustrated as it was impossible to perform, given that the only reason Mr Henry had hired the flat on that particular day was to watch the coronation.
Flash forward 118 years later, and we are again in a situation where national and international events are being postponed and cancelled due to unforeseen circumstances.
The events industry is not always one in which contracts are meticulously negotiated and/or documented. This means that many businesses in this sector can find themselves operating under a contract that does not contain a force majeure clause which excuses them from any liability should the coronavirus (or any other event beyond its reasonable control).
The coronation case demonstrates that the doctrine of frustration could assist in those circumstances where force majeure cannot, enabling businesses to:
- be discharged from their obligations in relation to contracts concerning cancelled/postponed events;
- avoid incurring liability to other parties as a result of their inability to perform their contractual obligations under such contracts;
- potentially recover sums paid to the other party prior to the frustrating event occurring
- bring such contracts to an end.
For the events industry today, this means that businesses could be relieved from fulfilling contractual obligations in relation to postponed events such as the Tokyo Olympics or Euro 2020 and avoid being sued for any losses arising out of their failure to perform such obligations. Similarly, corporate event sponsors may be able to recoup sponsorship payments in respect of events that will never go ahead as well as avoid making further payments for events that have been postponed.
If you are in the events industry and want to know your options in relation to a contract concerning a cancelled/postponed event or are concerned over what protection your terms and conditions afford you, please contact the author.
