Amidst the widespread disruptions caused by the COVID-19 pandemic, nonprofit organizations must make difficult decisions on whether to cancel meetings, conferences, expos and other events. In addition to contracts with event venues such as hotels and convention centers, there may be contracts with vendors of event-related services, such as providers of transportation, decoration, drayage, and audio-visual services. And there may be contracts or obligations with sponsors, part-time help, and others. Finally, consideration must be given to registrants, exhibitors, speakers, and others who may be depending upon the event going forward. Decisions by nonprofit organization event sponsors on how to address all of these issues are made particularly challenging by the uncertainty regarding how long the virus’s threat will last and the length of government-mandated shelter-in-place orders, bans on mass gatherings, and social-distancing policies and recommendations.
Most event venue contracts provide for the payment of liquidated damages in the event of cancellation, and those payments often escalate as the event dates draw nearer. Organizations should be sure to track these scheduled dates and fees so that decisions can be made with reference to them. In considering a cancellation, to shield themselves from these often steep penalties, nonprofit organizations should look at whether the event can be cancelled under the contract’s force majeure provision. As discussed in Pillsbury’s advisories about insurance implications of coronavirus cancellations, organizations should also review their insurance coverage for cancellation-related losses in connection with evaluating when, whether and how to cancel event contracts.
The specific force majeure language in each contract varies, but nonprofit organizations should consider the following issues:
If a nonprofit organization is considering cancelling an event due to COVID-19, it should carefully review the relevant provisions, particularly force majeure, in all venue, vendor, and other contracts for obligations related to the event, as well as the instant circumstances.
Experts warn that even after the current COVID-19 outbreak is contained, there could be future resurgences of the virus. As nonprofit organizations look ahead toward planning future events, we suggest including a force majeure provision that specifically covers COVID-19 and similar developments. We’ve drafted the following sample force majeure language, which can be edited as needed for your event contracts:
The performance of the Agreement by either party shall be subject to force majeure, including but not limited to acts of God, fire, flood, natural disaster, war or threat of war, acts or threats of terrorism, civil disorder, unauthorized strikes, governmental regulation or advisory, recognized health threats as determined by the World Health Organization, the Centers for Disease Control, or local government authority or health agencies (including but not limited to the health threats of COVID-19, H1N1, or similar infectious diseases), curtailment of transportation facilities, or other similar occurrence beyond the control of the parties, where any of those factors, circumstances, situations, or conditions or similar ones prevent, dissuade, or unreasonably delay at least 25 percent of prospective Event attendees from appearing at the Hotel, or where any of them make it illegal, impossible, inadvisable, or commercially impracticable to hold the Event or to fully perform the terms of the Agreement. The Agreement may be cancelled by either party, without liability, damages, fees, or penalty, and any unused deposits or amounts paid shall be refunded, for any one or more of the above reasons, by written notice to the other party.