In the 6th episode of DWP Biz Edge Series, Rob Schenk, an expert lawyer from the USA who represents wedding industry professionals involved in business disputes shared insights on negotiating the wedding contract in the times of COVID-19. Since 2012, Rob has become one of America’s predominant wedding lawyers and is the editor of WeddingIndustryLaw.com. During the episode, Rob made us well acquainted with the term ‘force majeure,’ and what can be done to value the terms of contracts that are a win-win for both the vendor and the client.
COVID-19 Can Invoke Force Majeure Clauses
As the impact of COVID-19 builds by the day, supply chains are being significantly disrupted and businesses’ rights and obligations under contracts are coming into sharp focus. A particularly frequent question is whether a force majeure clause excuses parties from performing their obligations or from doing so on time.
Force majeure, or as it is widely known the “Act of God” clause, are contractual clauses that alter parties’ obligations and/or liabilities under a contract when an extraordinary event or circumstance beyond their control prevents one or all of them from fulfilling those obligations. This means both the parties can’t sue each other in case if such unforeseen events occur.
The pandemic is systematically causing the cancelation of events across the world. In this instance, it is not just pandemic, it’s the effect of this pandemic that is resulting in government restriction and has subsequently forced us to do things in a certain way like wearing masks, limiting public gatherings, etc. Most of the countries consider COVID-19 as a force majeure event as it prevents the legislation from going ahead with events.
What Happens Next?
The parties will go back to the status quo ante, which means you have to go back to where you were before the contract was signed. Hence clients and the vendor can’t sue each other in such situations as everything has to just push back, all bets are off and things go initially where they were. But this causes problems and conflicts if there’s already a money exchange involved. If the planner has invested time and effort already and then the client asks to reschedule, should they return the money? If yes, what percentage? What happens to the money? What happens to the event?
To overcome this situation, Rob suggests to use a Strong Contract Language that has 4 concepts:
Objective definition from both perspectives – Typically, there’s a different definition of force majeure for everyone. What you have to do is define distinctly what this means distinctly in lights of COVID-19 keeping in mind yours and the client’s perspective. Leave it objectively as the situation keeps changing and is out of control. It is best to keep it open from your side and clients’.
Example: You might not care if you are wearing a mask at an event, but if it is important to the client, you want to consider this as the definition of force majeure.
Picture Courtesy: @shutterstock
Obligation to reschedule- Typically with force majeure, everybody goes their separate ways, but from a business perspective, it is not good to go ahead with this step. Rob suggests to reconcile and get your clients to reschedule. You want to maintain the contract’s value as it benefits your business and assures your client that they can still plan their special day. Define what this obligation means and do it in good faith. Give yourself a window to draft the new schedule. If they don’t want to reschedule, then they are in breach of the contract and let them know directly what this would mean by the terms of the contract.
Example: If there’s a force majeure event, each party will give 2-3 dates that are comparable and considerable.
Payment Terms – Make sure that clients understand if they have to pay extra money in case of postponement. Make your clients understand any extra charges that you foresee in case of rescheduling or cancellations due to force majeure.
Example – If there are flowers involved, let your clients know that the price of the flower that you got in April will be different in the case they postpone it to October.
Picture Courtesy: @shutterstock
Assumption of cancelation risks – It’s important to educate the client about the risks associated with cancelations. Make sure in bold writing that they are assuming the risk in case of a force majeure event. In any case, if the event gets canceled, they are liable to assume the risk and the monetary loss associated with it. Get them acquainted with upfront charges they might incur in the future. Get the client to purchase some type of wedding insurance that covers the event.
And now a pro tip from the expert on what happens if the client is making you go into unsafe situations.
Rob emphasized on developing written policies and procedures with regard to your business for how you handle infection control. This way, you can educate the client on what measures you are taking to ensure everyone’s safety. Like temperature checks, wearing masks and gloves, disinfection protocols, social distance, etc. In addition to this, clearly define the policies on what precautions you are expecting from the client. Make sure that goes in the contract as well so that everybody’s on board. Hence, in the future, if you don’t want to take the risks, it’s there on the client’s contract which would indicate the safety measures that are in place.
Feature Image Credit: @shutterstock
