Coronavirus Best Practices and Clauses to Have in Your Contracts
*Note: This Post Was Updated March 16, 2020*
As Covid-19 (hereafter “coronavirus”) starts to spread around the world, travelers are starting to not only rethink their trips and vacations, but many people are becoming fearful of participating in large events, conferences, and really any situations involving people-to-people contact. All of this has a major impact on service providers such as photographers, event vendors, conferences, and other business owners who have clients that want to cancel or reschedule services.
Here are a few thoughts from The Legal Paige surrounding the coronavirus, implications it may have on your business, and ways to ensure your contracts are preparing you for situations like this that are outside you and your clients’ control.
What is coronavirus, where is it right now, and are there any travel risks?
Coronavirus Disease 2019 (COVID-19) has been officially reported in the U.S.
If you are a service provider that is traveling to different countries within the next month or two, it's important to stay up-to-date on the travel risks associated with entering certain countries. The CDC has created a travel risk assessment map that lays out the associated travel risk level or travel restrictions/bans by country, including transmission and restriction on entry to the United States: COVID-19 information for Travelers . Further, the CDC has an FAQ page related to travel and the virus and when they recommend cancelling or postponing trips depending on your destination: Travel: Frequently Asked Questions and Answers .
As of March 11, 2020, the World Heath Organization has declared Covid-19 as a "pandemic", which means that WHO believes a community spread will eventually happen, and that governments and health systems need to ensure they are prepared for that. And, now, as of March 16, 2020, the Center for Disease Control has recommended that for the next 8 weeks, organizers cancel or postpone in-person events that consist of 50 people or more throughout the U.S. This is merely a "recommendation" which means its a guidance directive to state governments. Thus, it will be in state government officials hands to issue actual mandates and government orders to ban such events (and some states have already officially done so).
With the developing world atmosphere, many different businesses are addressing Covid-19 concerns by allowing, for example, airline tickets to be credited to your account for a certain period of time and/or free cancellation or change fees. Another thing to note is that even if you or your clients have travel insurance or event insurance, it likely wouldn’t cover any costs of cancelling a trip right now out of fear of traveling unless you paid extra for a “cancel for any reason” plan. Many insurance companies exclude "acts of God" from their policies.
In sum, fear-related travel cancellation issues are at the utmost concern of businesses right now and its important to actively communicate with your clients and do a full risk assessment on your business.
RISK ASSESSMENT 101
Legally speaking, most business owners are wondering how their contracts may come into play with cancellations and/or rescheduling situations regarding the coronavirus.
The first thing you need to do is a contract review of your current contract. Does your contract have specific procedures in place to prepare you and your clients for situations like this that are unforeseeable, unpredictable, and impossible? Examples of these types of situations that should be addressed in your contract are: inclement weather, natural disasters, illnesses/epidemics/pandemics, travel issues, etc.
Remember, your cancellation and rescheduling policies should still be very clearly laid out with deadlines. Industry standard is generally 30 days prior to the event/session/wedding date for your clients to be able to cancel or reschedule and only forfeit the retainer, but not incur any remaining fees. However, ‘Force Majeure Events’ are different. Thus, if you or your clients want to excuse performance to an unforeseeable, unavoidable, or impossible event, that’s where a Force Majeure Clause would kick in to protect you.
A Force Majeure Clause should also clearly explain your business's policies for excusing performance related to unforeseeable, unpredictable, and impossible events and, specifically, include "epidemics and pandemics" as qualified Force Majeure Events. Oftentimes Force Majeure clauses are more basic and include occurrences such as "acts of God, natural disasters, government orders or laws, or strikes." It’s better to list out all qualified Force Majeure events and include the language “including, but not limited to” to expand the types of Force Majeure events under your contract.
So, are we dealing with a cancellation/rescheduling situation or a Force Majeure Event as it stands today?
Essentially, a cancellation and rescheduling clause is in place for any other reason that your client may cancel or reschedule. But Force Majeure Events are not part of that and have different procedures in place for cancellations and rescheduling situations. The non-refundable retainer applies under your cancellation and rescheduling clause(s) so long as you expressly delineate that policy under your contract. But, a Force Majeure Clause provides additional protection because it requires you to excuse performance under the contract until the Force Majeure Event is resolved (side note: Force Majeure Clauses were put into place in contracts to override the contract doctrines of impossibility and frustration of purpose).
Right now, DEPENDING ON YOUR LOCATION AND THE FACTS AND CIRCUMSTANCES OF YOUR EVENT, Coronavirus likely going to be interpreted as a qualified “Force Majeure Event” under most jurisdictions. While the mere declaration of a "pandemic" by the WHO and the declaration of a "national emergency" from the White House did not automatically bump this situation into a qualified "Force Majeure Event" under your contract, the official government orders restricting size limitations on gatherings and events does. However, remember that at this point in time it still may not entirely IMPOSSIBLE to perform your obligations under the contract or for your clients to perform theirs (say if your event is 9-12 weeks out and not 8 weeks). The Covid-19 situation is rapidly changing and its important to stay up-to-date with all official government orders being put into place. "Force Majeure Events" are incredibly fact specific and depend on whether you or your clients absolutely cannot perform. And, even if it is a considered a "Force Majeure Event" where you live or your event will be taking place, that still means you have to take sufficient and reasonable means to cure your performance under the contract. For the majority of service providers, that means working with your clients to reschedule their events.
As I've stated many times throughout the past two weeks, a Force Majeure Event quite literally has to make the performance by a party impossible. We'd all have to be quarantined, unable to travel or have government orders and restrictions put into place for it to be a true Force Majeure situation. As of March 16, 2020, we are in two lands: the land of general cancellation and rescheduling situations in some regions of the U.S., and then Force Majeure land in other regions. Regardless of where you are located, your policies in your contract apply...as well as your non-refundable retainer AS LONG AS your existing contract expressly speaks to that!
It is important that you stay consistent with your policies surrounding Covid-19 and your contractual obligations to your clients. Don't issue a refund to one client, but not another. Don't try to update your existing contract to cover yourself, because your clients likely won't sign a new contract (and if I were their attorney I would tell them not to). If you need to keep their retainer on credit and reschedule their event, make sure to sign a rescheduling contract with your clients, terminate the previous contract, and sign onto a new contract when your clients determine their new event date.
And don't send out an email to your clients with your new "Coronavirus Policies". Its doesn't work like that and you cannot unilaterally change your contractual obligations. Stick to the letter of your existing contract and ensure you are being consistent with what your contract says right now related to your cancellation/rescheduling and Force Majeure policies. If you need specific advice or legal help, I highly advise you consult an attorney in your home state!
**LEGAL DISCLAIMER: In the event that the parties to a contract disagree as to whether COVID-19 constitutes a "Force Majeure Event", it will ultimately be up to a court to decide the parties’ rights and obligations. The application of force majeure is an issue of contract interpretation governed by state law. As a result, jurisdictions vary in their treatment of such clauses and its dependent on case law and precedent. Clauses will be construed according to their plain language.
What if you want to cancel your services?!
Many people are asking right now if they can cancel/terminate contracts as the service provider. Some people have riskier health issues and some people just plain don't want to risk getting sick. The answer is pretty simple here: yes you can. BUT, you should take sufficient and reasonable steps to avoid any further damage to your clients--e.g. working with them to secure a backup service provider, issuing a credit on their account for a certain amount, or attempting to reschedule the event. In my opinion--and this is NOT specific legal advice to you personally-- but its definitely best in most cases to just issue a FULL refund under these circumstances if you decide to cancel as their service provider. Also, document all of your communications with your client(s) in emails (don't just chat with them over the phone) and save those as evidential proof that you did your due diligence to avoid further heartache. Moreover, as a business owner, if you cancel you should be prepared for adding on this type of risk to your business and legal implications if they claim any consequential or incidental damages based off your actions.
**NOTE: if you want to cancel your services its incredibly wise to speak with an attorney because your risks go way up and you want to be fully prepared for them.
List of clauses that you should have in your contracts to protect yourself
Now, while you cannot do much with your existing contracts right now (definitely stick to the letter of your existing contracts when navigating Covid-19 issues/cancellations/reschedulings and sign rescheduling contracts... no client is going to let you update your contract at this point), you CAN implement new clauses into your future contracts that you sign onto with clients regarding unforeseeable, unpredictable, and impossible events. Aside from just Force Majeure Events, its also important to have procedures in place under your contract for situations such as your client's responsibility to secure their own travel insurance, inclement weather policies (if, say, your flight is delayed or cancelled on your way to a big elopement overseas), or what happens when YOU as the service provider cannot or will not provide your services. Here is a list of clauses that you should consider putting into your future contracts to fully protect yourself from uncontrollable situations:
- Cancellation Clause
- Rescheduling Clause
- Inclement Weather Clause
- Safe Working Environment Clause
- Clients' Responsibility to Secure Insurance Clause
- Indemnification Clause
- Limitation of Liability
- Force Majeure Clause; and
- Failure of Company to Perform Services Clause
Additional Resources & Clauses to Purchase
Are you wondering what these clauses are and what they specifically relate to?! Download this free checklist HERE that goes step-by-step through each clause and how it will protect your business as well as your clients under these types of unpredictable situations. Remember, The Legal Paige always suggests you have two-sided contracts that also grants your clients rights and responsibilities under the contract (and they are way more likely to agree to a contract that allows them to be excused from performance in the event of acts of God).
And, if you’re sitting there thinking, “Gosh, Paige, I really just need your help drafting these clauses and getting them into my contract asap to protect myself, I’VE GOT YOU! The Legal Paige has put together a clause bundle that you can purchase today. It's called the “Protection Clause Bundle '' that includes clauses related to protecting your business from unforeseeable, unpredictable, and impossible events.
The bundle includes the following clauses: Cancellation, Rescheduling, Inclement Weather, Safe Working Environment, Clients’ Responsibility to Secure Insurance, Indemnification, Limitation of Liability, Force Majeure, Failure of Company to Perform Services.
Get your Protection Clause Bundle today!
Get your Protection Clause Bundle now.