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COVID and Cancelled Events: who keeps the deposit?

Apr 27 2021
Civil Litigation - Venting frustrations online

From vacations to events – even in our daily lives – not a whole lot has gone as planned over the past 12+ months.

With plans continuing to go awry, people are finding themselves in difficult positions for venue or service contracts entered into when restrictions may have been different. It goes without saying that the majority of (Pre-COVID) wedding planners anticipated much more than the 10 people allowed under the current government lockdown (outside and only those who reside in the happy couple’s health authority); even the 50-guest restriction during the summer of 2020 would be less than most to-be-weds would envision in a pre-Covid time. The same can be said for the surprise 50th birthday, school reunion, or celebration of life.

But, what if the to-be-weds or surprise birthday planners have already booked their venue, and paid their non-refundable deposit for it. What can be done?

Frustration

We’re all frustrated, but as a basic rule what is written in a contract will be followed. Generally, if a deposit has been paid and the contract says its lost if the event is cancelled – the deposit is lost if the venue booker cancels. To overcome this general rule, something drastic and unforeseen needs to arise that makes the contract radically different from what was bargained for; in this case, the law calls the contract ‘frustrated’. Where a contract is frustrated, the law tries to put everyone back to their position prior to entering the contract – i.e.: the deposit would likely be returned, and the event cancelled.

Frustrating a contract is an uncommon remedy that can result in a difficult legal battle. The law is not looking for an inconvenience – but whether the benefits of the contract is now impossible or impractical. A couple examples would be a cruise ship sinking just before a scheduled voyage or if a wedding venue burns down.

The question in COVID-times is whether social distancing laws are enough to render the venue or service contract unable to be performed. The answer depends on whether a reduced guest list, and other restrictions, are a radical change to how a venue or service contract operates, as well as the terms of the contract.

Current State of the Law

The BC Civil Resolution Tribunal (or the ‘CRT’) is an administrative body that deals with, amongst other things, contract disputes of up to $5,000. The CRT does not have judges, but instead lawyers who decide the outcome of a case.

The CRT’s decisions so far point to the same outcome for post-COVID but pre-lockdown social events: COVID causing restricted guest lists, making travel difficult, or requiring attendants to follow social distancing protocols is not, by itself, a reason to find a venue contract is frustrated. While the CRT generally acknowledges that to-be-weds envisioned a much different wedding, it consistently finds that COVID restrictions are not a radical enough to reach the high threshold of “frustration”. As long as the venue is able to accommodate the event with a reduced guest list, or the wedding photographer (or other service provider) would have been able to attend, a deposit with the venue or service provider is likely forfeited.

Ultimately, a claim for a return of a deposit will turn on the wording of the contract and the facts of the situation. Where the contract makes promises that cannot be legally fulfilled because of the pandemic, you may have an argument for frustration.

Negotiation before Litigation

Rather than going to the CRT or court, if you are unable to have the event you envisioned it is likely worthwhile seeing if you can negotiate a change in your booking. Venues or service providers, and their contracts, may allow rebooking with adequate notice or may have solutions to any concerns about reduced guest lists. If you instead opt for a legal battle, you may lose both your deposit and your date.

Contact Us

We are in a unique situation and it is impossible to know exactly how the CRT/courts will handle deposits as the pandemic and health orders continue to evolve. If you are looking to cancel an event or are a venue owner/service provider, our experienced team of litigators can review your contract and provide you with the most up-to-date advice regarding your legal obligations. We encourage you to contact our office at 604.853.0774 to set up a consultation.

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