Before a wedding ceremony, the parties often enter into a number of contractual relationships with vendors for decorations, entertainment and venue ahead of their "big day". There are a number of legal implications to be considered when unforeseen circumstances arise and disrupt contractual performance.
COVID-19 and Disruption on the Wedding Industry
The wedding industry has experienced significant disruption during the COVID-19 pandemic. So what does this mean for wedding vendors, venues and couples facing wedding cancellations or postponements?
If a contract cannot be performed because performance has become impossible or illegal through an act of parliament or other legislation, the doctrine of frustration may be applicable and render the contract void, therefore absolving all parties of their contractual obligations. This means that for a majority of weddings which were scheduled to take place during the provincial state of emergency prohibiting organized social gatherings of more than 5 people, vendors will likely be required to provide a refund or alternative dates as accommodation.
“Force majeure” clauses generally discharge a contracting party of legal obligations of performance when an unanticipated event, beyond the control of either party, renders performance of the contract impossible or significantly different than what was anticipated. Most commercial agreements provide for parties to be excused of their contractual obligations in the event of serious unforeseen circumstances. These clauses are applicable when unforeseen events, such as an “act of God”, government or legislative action takes place which disrupts contractual performance. To invoke force majeure, the clause has to have been negotiated by the parties when entering into the contract.
A party seeking to rely on a force majeure clause must first establish that the intervening event falls within the contract’s definition of force majeure. In most contracts, there is a list that outlines the specific events that may trigger the clause. Some contracts contain broader catch-all phrases such as “other events beyond the reasonable control of the parties.” A determination of whether the event can release the parties from their contractual obligations would have to be on a case-by-case basis and turn on the particular words and objective of the contract and facts of the case.
It is important to note that the party invoking force majeure must establish that the event has sufficiently impacted its ability to perform. Most force majeure clauses set out the degree of requisite impact required for applicability, ranging from higher standards of performance such as “rendered impossible” to lower standards such as performance being “delayed.” Where the requisite impact is not specified in the agreement, Canadian courts tend to apply the higher threshold. Where an event has made performance merely more costly or unprofitable, it is insufficient to trigger a force majeure clause.
Venues and vendors facing losses from the business interruption from COVID-19 are advised to reach out to their insurance providers in efforts to find out whether they are able to recover their losses under the policy of insurance.
The Doctrine of Frustration
Frustration of contract happens where an event occurring after the parties enter into the contract, renders performance impossible or so radically different from what the parties negotiated that it goes to the very root of the contract. It is not enough for a contract to simply become more onerous or more difficult to perform. Rather, a party must show that the original purpose of the contract cannot be fulfilled and it would be unjust for them to be bound to the contract under the existing circumstances.
Where the doctrine of frustration is applicable, the effect of the doctrine of frustration is to discharge parties from their contractual obligations. Cases involving frustration are determined by the courts on a case-by-case assessment. Given the significance of its impact, the threshold for frustration is very high.
Mitigation and Cooperation
The parties to a contract have a duty to mitigate their losses. If the wedding could not take place, the couple should first consider other reasonable options with respect to accommodation and alternative scheduling. Force majeure and frustration claims should be seen as a last resort after conversations and negotiations with the parties to the contract have stalled or broken down. It is likely though that in the current pandemic, such claims will succeed.
For more questions pertaining to refunds of deposits and monies paid for weddings and other contracts for which performance has become difficult or impossible as a result of COVID-19, please contact our firm for a consultation.