To date, no one word has better defined 2020 than perhaps COVID-19. When the spread of the coronavirus resulted in the public having to shelter in place and limited our ability to gather, the events and wedding industry came to a sudden halt. The current impact of COVID-19 on the industry as well as the uncertainty of planning future events has compelled event professionals to take a closer look at their contracts to develop new or clarify existing policies to better address this risk. In light of the current environment, here are a few contract terms that event professionals might consider including or revising:
Hopefully your contract already addresses issues like event rescheduling. If you haven’t already done so, review your rescheduling policy in light of the possibility that COVID-19 (or a similar virus) might still exist or resurface in the future. Here are a few questions to consider when developing your rescheduling policy:
- Will your policy allow a client to postpone? For example, some vendors are permitting postponements up to a year or 18 months with no extra charge, while others are charging a percentage or flat-fee in order to do so.
- Will you charge a fee in order to postpone? If so, how much will it be and when is it due?
- Are there any other conditions on rescheduling? For example, some vendors are requiring a fee for any postponement, if the new event date falls into a new calendar year or after a set period, or if there are multiple postponements.
- From what date will you calculate the time period in which a client can reschedule their event: the original event date or the date they notify you of their intention to postpone?
- Does the client have to continue making payments to you even though the event has been postponed or will the payment schedule be deferred as well?
Ultimately, there is no one way to approach this issue. When a client postpones an event, determine the “cost” to you – both in terms of time and lost revenue to help develop a policy that makes sense for your business.
The hope is that a client (or you) will never need to terminate a contract. However, like any relationship, sometimes we need to “break up.” As we’ve seen with COVID-19, a client may no longer have a need for your services and therefore either you or your client may need to terminate the contract. Here are a few things to think about:
- Does your contract address the circumstances under which a party can terminate the contract and any obligations that must be met upon termination?
- Does the contract allow the parties to terminate the contract at any time, or does it require that the terminating party notify the other party in advance of its decision to terminate the contract? If so, how much advance notice is required?
- Upon termination, do the parties have specific obligations they need to uphold?
- Does the contract address how you, as the business owner, can terminate the contract? Or does it only address how a client can terminate?
If you and your client agree to terminate a contract and go your separate ways, it’s also a good practice to document any contract terminations in writing (i.e., an Agreement to Terminate a Contract) and have it signed by both parties.
In recent months, you’ve probably become really familiar with the term “force majeure.” Generally, a force majeure clause provides that should certain unforeseen events or circumstances beyond a party’s reasonable control occur, then it will excuse that party from the performance obligations that are impacted by those unforeseen events or circumstances. Review your contract to determine if it includes a force majeure clause and what type of events qualify as force majeure events. Does it expressly include events like pandemics or epidemics? If a party is going to invoke force majeure, such “unforeseen event or circumstance” must fall within the scope of the force majeure clause and it must be the true reason that the party cannot satisfy its contractual obligations. Depending on the relevant standard, a party may not be excused simply because the ability to perform has become more difficult or expensive.
You hope it never happens to you – but unfortunately, most business owners are bound to experience a dispute with their client at some point in their career. And unfortunately, with COVID-19, some business owners are finding themselves in a conflict with their clients about each party’s obligations. Your contracts should include a clause providing how the parties will resolve conflicts. There are three main ways in which disputes are resolved – mediation, arbitration, and litigation. Also, most contracts will specify which state’s laws will apply and which state will be the exclusive venue for resolving disputes. Before drafting this clause in your own contracts, do your research and think carefully about the time, cost, and rights associated with each dispute resolution option and the best venue for resolving any client disputes.
Assurance of Services
Does your contract address what your client can expect if you are unable to personally deliver the services? For example, what if you were diagnosed with COVID-19 or were otherwise physically unable to perform services for your client? Do you have a team or other colleagues you can turn to in case you are physically unable to perform the services? Have a plan in place and if appropriate, address it in your contract.
Compliance with Laws
What if a client wants to continue with an event although there is an ordinance or regulation forbidding events? Are you required to continue performing services? Think about a clause that reiterates the client’s responsibility to comply with relevant laws.
A Final Thought
Contracts are not “set-it-and-forget-it” documents and recent events have only highlighted this to be the case. Rather, treat your contracts as evolving documents and continuously review and revise them to reflect your experiences, policies and practices.