Essential Legal Tips for Event Cancellation and Postponement
Editor's note: This information was accurate at the time of publishing, March 12, 2020. We are monitoring and updating as new information is available.
Over the past several weeks, many of us active in the meetings industry have faced the decision about whether to move forward with a meeting, proceed at a reduce size or cancel it altogether. This experience offers guidelines on how the industry will continue to react to the COVID-19 crises and its uncertainty.
When considering whether meetings can go forward, as with most issues, the answer is not clear-cut. There is a legal answer, and a practical response; and the two may not be the same.
Legal Response to Coronavirus
Force Majeure Contract Provisions: From a legal perspective, look to the meeting contract first. If it includes a force majeure clause—sometimes called “impossibility” or “excuse of performance,” instead—that provision is the primary determiner of each party’s rights.
It’s imperative to examine this clause very carefully. Does it only allow cancellation if holding the event becomes “impossible” or “illegal?” If so, from a legal perspective, the answer is probably clear-cut: Unless your meeting will be held in a country under quarantine where people cannot travel and flights were discontinued, it is not illegal or impossible for your meeting to be held. So your organization will be liable for damages if you cancel.
On the other hand, does the contract allow cancellation if it becomes “commercially impracticable” or “inadvisable?” These terms can expand the reasons for allowing cancellation without liability. The key is to understand exactly what they mean.
“Commercially impracticable” implies that performance would be an undue hardship; but its precise definition would be determined by state law in the place of performance. “Inadvisable” can be particularly ambiguous; contracting parties wishing to use that term should define it within the contract.
For example, it could be “inadvisable” if 50% of anticipated meeting attendees cancel their registrations or fail to register due to a particular occurrence. Whatever is intended, it’s best to agree upon the meaning of these terms with your meeting partners before including them in contract provisions.
The force majeure provision might have additional terms allowing a contracting party to cancel.
Is a “governmental regulation or act” one of the listed reasons? If so, a government-ordered quarantine affecting a substantial number of attendees may be a triggering event. The same for a government-issued advisory not to travel to the meeting location. A government ban on group gatherings of more than a certain number of people could also be a force majeure occurrence.
Part Performance Possible: Keep in mind that force majeure clauses sometimes allow for part performance. If a contract includes terms excusing performance “in whole or in part” or “to the extent prevented” by the force majeure occurrence, the meeting might still proceed with a reduced room block and without attrition. The contracting parties can also agree to this part performance without a contract provision.
(Photo: Meetings industry attorney Joshua L. Grimes, Grimes Law Offices)
Working With No FM Clause, or an Unhelpful Provision: What if a meeting contract has no force majeure clause at all, or there’s a provision but it’s not helpful? In those situations, the meeting parties might still have some remedies if they cannot move forward.
Most states and countries have force majeure principles built into their laws. These principles might be in written statutes, or they may be in legal traditions expressed in case law. Meeting parties seeking to cancel for Coronavirus should look into those laws if their contracts will not provide needed relief.
The laws of some jurisdictions also allow cancellation for “frustration of purpose.” This means that the meeting should be canceled without liability because the main reason for holding it cannot happen.
In the coronavirus context, it may allow a group to cancel if, for example, the main speaker cannot travel due to a government-ordered quarantine. But frustration of purpose would likely not apply to a situation where attendees have a fear about travel, or a portion of the prospective attendees are subject to company-imposed travel bans.
Practical Response to Coronavirus
Many groups lack the legal rationale to cancel a meeting due to the coronavirus outbreak, but they may still want to cancel because their members don’t want to attend based on a fear of catching the virus from air travel, or concerns about taking part in a large group gathering. Can groups get relief because their members are afraid to attend?
The answer is “maybe.” If the meeting contract has a force majeure provision that allows cancellation if it’s inadvisable to move forward, the demonstrated apprehension of a material number of prospective attendees may allow the group to terminate. This can be proven by showing that a material number canceled their registrations or failed to register.
Even if there’s no contract provision, however, the group might still get relief.
Given the current situation, many hotels and other meeting partners are taking a flexible approach to minimize their cancellation damages. Some groups are able to negotiate a reduced-size meeting; others that cannot meet now have agreed to postpone their meeting for several months, with cancellation damages waived in whole or in part so long as the rescheduled event goes forward.
This is an evolving situation. No one knows the full extent of the severity of coronavirus or how long the outbreak will last.
Meeting professionals should keep current on developments, review meeting contracts to confirm their rights and obligations, and negotiate with contracting partners in good faith. By doing that, each party can mitigate the harms to their organizations, their meetings and their attendees.
Read next: How to Protect Against Coronavirus