In the age of COVID-19, the Australian government have implemented strict ‘social distancing rules’ to slow the spread of COVID-19. In addition to a 100-person limit on non-essential indoor gatherings, for gatherings less than 100 people there must be 4 square metres provided per person in an enclosed space. Due to the rapid increase of infections, it is expected for these rules to become stricter in the future.
As a result of the social distancing rules, many events have to be cancelled until the spread of the virus is under control, including:
- Corporate conferences; and
- Birthday celebrations.
If an upcoming event is impacted, event holders may choose to postpone the event until a later date and provide a credit note for the payments made previously for the event. However, some may seek to rely on a no-refund and/or force majeure clause to keep the deposit paid by the customer.
A common clause found in an event contract is a force majeure clause. This clause relieves a party from performing its contractual obligation due to unforeseeable circumstances such as natural disaster, energy failure and lockout. In event contracts, it allows venues or event holders to cancel an event with no liability. Force majeure clauses are not implied contract terms. Therefore, it is important that you carefully review what the clause says. The clause may be silent as to what happens to the payments already made. This could mean that the event holder can cancel the event and keep the deposit already paid.
Event Cancellations: Australian Consumer Law – Unfair term
If your event must be cancelled or postponed due to the social distancing rules and the venue tries to rely on certain terms of the contract, such as a no-refund clause, and forfeit monies already paid by you, you can argue that the relevant clause is unfair under the Australian Consumer Law. When a contract is a standard form contract prepared by the business and the terms are one sided and was given to you on a take or leave it basis, the contract (or at least some of the terms) could be set aside.
In the case of Ferme & Ors v Kimberley Discovery Cruises Pty Ltd  FCCA 2384, the Federal Circuit Court found that a term in a cruise ship contract that disentitled passengers to any compensation or refund in circumstances of an unexpected event or prevailing inclement weather was held to be unfair.
If you are able to successfully argue that the relevant terms are unfair, the event holder will then be required to establish that that clause was necessary to protect their legitimate commercial interests. The test for legitimacy appears to be whether the clause was essential at the time the contract was entered, not at the time of the event cancellation. If the event holder fails to prove the legitimate need, then the clause will likely be deemed void.
Further, amounts spent to accommodate customers or to alleviate their losses after the event will also likely be irrelevant to the question of whether the clause was fair.
If you have any questions or wish to seek advice in regards to an event cancellation, please contact our office on 02 9963 9800 and we will more than happy to help. In the meantime, we hope that you stay safe and healthy as Australia navigates COVID-19.
Read more of our articles about COVID-19 here.