In my previous article on this topic, I looked at the Competition and Markets Authority (CMA) guidance on consumer rights where private events, such as weddings, were cancelled due to the original lockdown laws (introduced in late March 2020). However, since the lockdown rules were relaxed in July 2020, certain private events booked before late March 2020 have been able to go ahead, albeit not as originally planned. To make matters more confusing, legal restrictions and government guidance relating to private events is constantly evolving, and varies by location and the type of event. This makes it difficult for businesses and their customers to plan for the future. So how do events businesses manage their customers’ expectations during such uncertainty?
Latest CMA guidance
On 7 September, the CMA published guidance on how the law operates in relation to contracts for wedding services which have been, or will be, affected by COVID-19 restrictions. Although it focuses on one sector, the general principals and examples will apply equally to other private events in the hospitality sector, and the events sector more widely.
What is the impact of the current restrictions on the event?
The most difficult customers are likely to be those who have events which can technically take place, but are heavily impacted by the legal restrictions in force at the time (which businesses must comply with). In its most recent guidance, the CMA considers that key elements of a wedding contract which may be affected may include:
- the venue;
- the food and drink that will be provided;
- the reception or other entertainment facilities that will be provided; and/or
- the number of guests.
In the CMA’s view, where a key element of a wedding cannot go ahead without breaching the legal restrictions in place, the wedding would be radically different from that agreed in the contract. Where this is the case, the contract is likely to have been frustrated and the consumer would be entitled a full refund, subject to certain limited deductions. The guidance looks in detail at what costs a wedding business may be able to lawfully deduct in this situation, and concludes these fall in to two, very specific, categories:
- Bespoke services or products: where a business has already incurred the cost of supplying bespoke services or products to the customer, which could be used at a later date (e.g. a rearranged wedding).
- Contribution to costs: where a business has already incurred costs which directly relate to the specific contract (i.e. not general maintenance costs of the venue), and which would otherwise have gone to waste because they cannot be used in relation to other events. In these circumstances, the CMA considers a court would likely split these costs between the customer and the consumer.
Costs which the CMA specifically lists as not being recoverable include:
- the costs of administering a refund;
- ongoing business costs; and
- costs which produce ongoing and/or re-usable benefits for the business.
There will also be cases where the impact of lockdown laws is less significant. For example, a wedding may be able to go ahead safely and lawfully at the agreed venue, with a substantial majority of the guests and with the catering and reception as agreed. The only difference may be the requirement for social distancing and other safety measures to be observed. In these circumstances, the guidance considers it is much less likely the contract would be frustrated (i.e. treated by law as coming to an end). However, the CMA goes on to say that where a business fails to provide elements of the wedding as agreed in the contract, it will probably be in breach of contract. As this would entitle a customer to bring a claim for damages, the CMA considers it sensible for the business to provide the consumer with a pro-rata price reduction to reflect the services that it would not be providing (or would be providing differently).
What does the contract say?
It is important to remember that, although a contract may contain certain provisions restricting customers’ rights to cancel and to obtain refunds, while giving the business wide discretion to cancel and vary a contract, these will not be enforceable if they are unfair.
Terms restricting refunds
The CMA considers any provision which seeks to exclude or limit customers’ rights to refunds where events cannot go ahead due to lockdown restrictions is likely to be unfair, and therefore unenforceable.
The CMA considers a business is unlikely to be able to rely on a clause in a contract which allows it to provide something substantially different to what was agreed, unless it:
- only allow the business to change what it agrees to provide in a narrow range of specified circumstances that are genuinely outside its control (such as changes in the law);
- gives the consumer the right to advance notice of any proposed change; and
- gives the consumer the right to a pro-rata price reduction if they accept the change and (where the change is significant) to cancel the contract and get a refund if they do not accept it.
The CMA’s view is that where an event can go ahead, but with differences from what was originally agreed, and the customer decides to cancel anyway, they should not face disproportionately high charges for doing so. Any cancellation charge must be fair, and (in the case of weddings) the CMA considers a fair charge might be a proportion of the price of the wedding, reduced to reflect:
- the pro-rata reduction that the consumer would have been entitled to had the wedding gone ahead in a way that was different to what was originally agreed;
- savings to the business because it is not providing the wedding;
- any ability the business has to re-use the date for another wedding; and
- the actual losses the business will incur because the contract is cancelled.
What can the parties agree?
Ultimately, the CMA acknowledges that the parties may discuss and agree an appropriate course of action. This might be cancellation and a refund (and an agreement as to the amount of any refund), a price reduction to reflect any changes to the event, or rescheduling the event to a later date (so long as where a contract is frustrated, the customer was just as easily able to cancel and obtain a full refund).
The CMA considers that customers’ rights to refunds applies whether or not they have insurance (although the CMA does not expect businesses to refund consumers who have got their money back from an insurer).
Ultimately, businesses who do not act fairly and reasonably open themselves to customer complaints, which may result in bad reviews/publicity, enforcement action by the CMA, and ultimately court proceedings.
If you would like any further advice on this topic, please contact Alexandra Cooke