What Can a Wedding Vendor Do When a Demand For Refund of Deposit Money Is Received Due to Covid-19?
A Wedding Vendor May Be Legally Required to Refund Deposit Money; However, Negotiation For An Alternate Arrangement May Be Possible.
How Wedding Supplier Contracts Are Affected by Covid19
As a wedding supplier, Covid-19 is one variable that was unexpected when starting or operating your business. With events like conferences, trade shows, home shows, weddings, jack and jill parties, bar mitzvahs or bat mitzvahs, retirement parties, and more, being affected, many vendors are receiving emails from clients requesting cancellatoin and seeking refund of deposits. In many circumstances, a threat of litigation follows if a vendor fails to give in to the demand for refund. Every situation is different but let SFG Paralegal Services LLP share some thoughts to consider for when you get such a demand.
Affected Wedding Suppliers
Banquet Hall Venues
Floral & Decor Services
Church or Other House of Worship
Tuxedo Rental Services
Disc Jockey Services
Food & Drink Catering
If at the time of a scheduled event an emergency order is in place with conditions that render a contract impossible to perform, it is possible that the contract would be deemed legally frustrated in accordance to the Frustrated Contracts Act, R.S.O. 1990, c. F.34 and performance of the contract becomes unenforceable. Specifically, the Frustrated Contracts Act states:
Application of Act
2 (1) This Act applies to any contract that is governed by the law of Ontario and that has become impossible of performance or been otherwise frustrated and to the parties which for that reason have been discharged.
(2) This Act does not apply,
(a) to a charterparty or a contract for the carriage of goods by sea, except a time charterparty or a charterparty by way of demise;
(b) to a contract of insurance; or
(c) to a contract for the sale of specific goods where the goods, without the knowledge of the seller, have perished at the time the contract was made, or where the goods, without any fault on the part of the seller or buyer, perished before the risk passed to the buyer.
Adjustment of rights and liabilities
3 (1) The sums paid or payable to a party in pursuance of a contract before the parties were discharged,
(a) in the case of sums paid, are recoverable from the party as money received for the use of the party by whom the sums were paid; and
(b) in the case of sums payable, cease to be payable.
(2) If, before the parties were discharged, the party to whom the sums were paid or payable incurred expenses in connection with the performance of the contract, the court, if it considers it just to do so having regard to all the circumstances, may allow the party to retain or to recover, as the case may be, the whole or any part of the sums paid or payable not exceeding the amount of the expenses, and, without restricting the generality of the foregoing, the court, in estimating the amount of the expenses, may include such sum as appears to be reasonable in respect of overhead expenses and in respect of any work or services performed personally by the party incurring the expenses.
(3) If, before the parties were discharged, any of them has, by reason of anything done by any other party in connection with the performance of the contract, obtained a valuable benefit other than a payment of money, the court, if it considers it just to do so having regard to all the circumstances, may allow the other party to recover from the party benefitted the whole or any part of the value of the benefit.
Of course, with a frustrated contract such raises the issue of what happens if a vendor performed work based upon the frustrated contract? The Frustrated Contract Act and common law generally deal with this issue by granting compensation in accordance to section 3 of the Frustrated Contracts Act as shown above.
There is also a common law, meaning judge rulings, principle known as quantum meruit which loosely means that a person should be compensated for work done even though a price was unestablished for the work. For a business that provides both products and services a quantum meruit may also be provided a proportion of the overhead expenses such as rent, telephone, marketing, etc.
Does your client have a legal right to cancel a contract? The short answer is it depends. Whereas most contracts for events are deemed future performance agreements per the Consumer Protection Act, 2002, S.O. 2002, Chapter 30, Schedule A, if the supplier, meaning business, within a business-to-consumer contract is unable to perform, the consumer, meaning client, is legally entitled to cancel the agreement. Specifically, section 26 of the Consumer Protection Act, 2002 states:
26 (1) A consumer may cancel a future performance agreement at any time before delivery under the agreement or the commencement of performance under the agreement if the supplier,
(a) does not make delivery within 30 days after the delivery date specified in the agreement or an amended delivery date agreed to by the consumer in writing; or
(b) does not begin performance of his, her or its obligations within 30 days after the commencement date specified in the agreement or an amended commencement date agreed to by the consumer in writing.
Did your client receive the service allowed for in the contract within 30 days of the agreed upon date or did the client agree to amend the agreement to a subsequent date? For instance, if an event is scheduled for June 2021, which is yet to occur, could a consumer cancel the contract in advance because of an anticipated frustration or expectation that the supplier will be unable to perform?
What if you, as a vendor, have a force majeure clause within your contracts? The law of force majeure in a global pandemic is unclear and may also be dependent the individual circumstances of each unique case. Additionally, in accordance with the Consumer Protection Act, 2002, a force majeure clause may be deemed unenforceable as a clause that conflicts with the Consumer Protection Act, 2002 whereas the statute prescribes that the statute prevails and attempts to contractually over-rule the statute are void. Specifically, the Consumer Protection Act, 2002 states:
7 (1) The substantive and procedural rights given under this Act apply despite any agreement or waiver to the contrary.
A requirement to return deposit monies is onerous and may be essential in these times; however, there may be options available.
- You may attempt to negotiate with your client in an effort to choose an alternative date for for the event service or perhaps agree to a reduction in fees to accommodate government regulations restricting guests; or
- You may attempt to negotiate a fair return of funds based upon provable expenses that you incurred in trying to fulfil the contract.
With it said that you may attempt to negotiate an alternate resolution, it is key to bear in mind that any attempt to negotiate must be done fairly and honestly without any misleading representations whereas section 14 through section 18 of the Consumer Protection Act, 2002, provide special consumer remedies when a business, or a person acting for the business, engage in unfair practices and unconscionable representations.
If you are unsure what options are available to you, SFG Paralegal Services LLP offers a paid one-hour consultation which may be used to review your client correspondence and to discuss the possible next steps.