Heather Reid ARCT MSc, Founder & CEO, Planner Protect Inc.
This article is provided for general information purposes and does not constitute legal advice.
When the World Health Organization (WHO) declared COVID-19 a world-wide pandemic on March 11, 2020, and subsequently soon after most Canadian provinces and local regions declared states of emergency – the ability to host live events in Canada in the immediate and near future was eliminated. Live events – scheduled in the days and weeks ahead – were immediately thrust into unchartered waters as groups were forced to re-examine their existing event contracts to assess their legal options, their rights and obligations, their financial commitments – and ultimately – to chart a new, alternative path forward.
While groups continue to work through the unfortunate and intense ‘unplanning’, ‘lifting and shifting’ and ‘pivoting’ of existing events, there are already valuable lessons being learned (and re-learned) that can be applied to future live event contracts.
Lesson #1: Flexible terms will be key because we will need to sign event contracts before we truly know what our live events will be like
Understandably, live events are forever changed as a result of COVID-19. Our sense of personal space, our expectations for hygiene and sanitization protocols, our financial ability to afford extracurricular activities, our willingness to travel distances and our sensitivities for sustainable practices are just a few things that might change. As a result, our live events will need to adapt. However, for a period of time, we will need to be planning live events without knowing exactly how people will respond to them. This means that our historical records and data on our events – such as attendee numbers, room block performance, food & beverage minimums and ancillary expenditures – are most likely obsolete. For event contracts, we will need to negotiate the terms of the agreement as flexible as possible while being respectful of the needs of our event supplier partners. Considerations such as headcounts, attrition terms, room block cut-off dates, financial minimums and deposit schedules will all need to be carefully examined.
Lesson #2: Understand and negotiate thorough TERMINATION language
Termination language in an event contract allows either party to withdraw from the contract without financial liability, because an extenuating circumstance beyond the control of either party has made the execution of the contract inadvisable, impractical, illegal or impossible. The termination clause is also commonly referred to as Force Majeure, Acts of God, Impossibility or Excuse of Performance. During this pandemic, regrettably too many groups had poorly worded or one-sided or even non-existing termination language in their event contracts – making for difficult conversations and experiences – and in all likelihood cases for the courts to battle out for some time to come. The resulting laser focus on the importance and gravity of the termination language in an event contract is probably the greatest lesson learned.
In considering future termination clauses it is suggested that event hosts ensure that the following elements are considered (please note this is NOT an exhaustive list):
- Termination language exists in ALL event contracts (ie., venues, audiovisual, catering, décor, speakers, photographers etc).
- Termination language addresses ALL levels of performance possibilities:
- impossible (an objective decision)
- illegal (a mandated decision)
- inadvisable (a recommended decision)
- impractical (execution of the contract has been burdened or become unsafe)
- Termination language includes specific and generic examples of extenuating circumstances and has wording that keeps the terms open for ‘yet to be identified’ possibilities
- Termination language clearly articulates how and when notification of the need to invoke Termination is to be given
- Termination language clearly identifies that if the group proceeds with a reduced-sized event (due to the extenuating circumstance) that attrition penalties are waived
- Contract clearly identifies the geographical draw of attendees in order to support the invocation of termination if necessary
- Contract clearly identifies the core purpose(s) of hosting the event in order to support the invocation of Termination if necessary
- Understands what documents, reference materials and data you will need to produce/provide in order to support the invoking of termination if necessary
Lesson #3: Understand and negotiate thorough CANCELLATION language
Cancellation language allows either party to withdraw from the contract for contractual and non-contractual reasons – with financial damages owing to the other party. Either party may want to cancel the contract for their own non-contractual reasons or either party may need to cancel the contract because the other party breached the terms of the contract. All four perspectives – event host with contractual or non-contractual reasons and event supplier partner with contractual or non-contractual reasons – are equally important and must be reflected in an event contract.
While these four perspectives have always existed (although rarely all reflected in event contracts), I fear that in the future, both sides could be invoking cancellation clauses more frequently. As events start coming back on-line, event hosts will need to re-assured that our event supplier partners (who perhaps have been temporarily closed or reduced to skeleton staffs) are prepared and able to perform adequately – and if those reassurances are not available, cancellation may follow. On the flip side, our event supplier partners will need to protect their ability to take more lucrative pieces of business in a time of compressed inventory and resources – and if those opportunities are available, cancellations may follow.
In addition, as we move past COVID-19, the expectations around sanitization and hygiene protocols, food preparation and food service standards, personal safety as well as physical space requirements will have changed and become increasingly important to event hosts as well. As a result, event hosts will want legal reassurances and protections in their contracts to address these duty of care concerns and have the contractual ability to cancel if they cannot or will not be met.
Lesson #4: Please, please, please do not DIY your event contracts
There are far too many unfortunate situations being experienced right now by event hosts as a result of COVID-19 that may have been avoided or lessened if contracts had been strategically negotiated and carefully worded. Allocating financial resources for expert negotiations support and legal counsel is paramount for moving forward. We know that during this ‘pause’ time of COVID-19, the contracts of our event supplier partners are being reviewed and revised to further protect their interests. Now, more than ever before, contracts matter – event hosts cannot afford to sign one-sided, poorly negotiated contracts.