22 April 2020

COVID-19 NFP Guidance – Event cancellation – key considerations for not-for-profits and charities

This article was written by Lisa Huett and Jeremy Tan.

The spread of COVID-19 is causing mass disruption and uncertainty around the world. In Australia, government restrictions are in place, but they vary across States and Territories and it is unclear when they will be lifted and whether they will be relaxed or strengthened in the meantime.

No one knows what will happen next week, let alone in two or three months’ time.  So, what does this mean for the fundraising events that you had locked in this year, for the events that you may have even started selling tickets for, or services that you have committed to provide to members or supporters?

Whether you will be permitted to hold fundraising events depends on the Federal or relevant State laws that are in force at the time of the event.  However, you are probably considering now whether you should address the uncertainty and cancel the event or wait and see and make a decision closer to the event date.

The difficulty is that the timing of any cancellation and whether the cancellation is required by the Government restrictions or a voluntary decision is likely to impact the rights and obligations of your organisation and your supporters and members, as well as the venue owners and service providers that are scheduled to provide the event and other services to you.

This guide is intended to assist your organisation in navigating what cancellation rights you and your supporters and members may have and what refund or credit obligations flow from this.

Set out in the table below are three scenarios which may arise in the current climate and some of the things your organisation should bear in mind when considering whether to cancel upcoming events. It focuses on what statutory rights might be available under the Australian Consumer Law (ACL), recognising that these rights cannot be avoided or modified by terms and conditions that might apply to the event or to the services that you have committed to provide. Aside from the ACL, any terms and conditions governing the event or your services will play a big part in determining your supporters’ rights and your obligations. Likewise, your contracts with venue owners and service providers are critical to understanding your rights and exposure in the months ahead.

Scenarios

Rights and obligations

Scenario 1: A supporter or member decides they do not wish to attend an event or wish to cancel their booking or membership due to COVID-19

Supporters’ and members’ rights

The decision by the supporter or member would likely be treated as a ‘change of mind’ and your organisation would not be required to provide them with a refund under the statutory consumer guarantees found in the ACL.

However, you should check the terms and conditions which apply to the event or membership, as well as any cancellation policy, as these may provide the supporter or member with rights, including a refund.

You should also see if you made any promises or commitments in any promotional or membership materials.  If you had reasonable grounds for making those promises at the time (e.g. it was before COVID-19 was declared a pandemic) then your promises or commitments should not be regarded as false or misleading.

Of course, putting aside any legal obligations, you may still wish to offer supporters or members a full or partial refund or credit.  That may depend in part on your financial commitments to provide the event or membership services and whether you are able to recover any payments or deposits already paid.  If you do not offer a refund, having an open dialogue with your members and supporters regarding the reasons for your decision could assist in maintaining the relationship further into the future.

Your rights against event suppliers and service providers

Your rights will be determined by the contract terms with your suppliers.

You do not have any rights as a consumer under the consumer guarantee regime in the ACL if the service exceeds $40,000. Even if the service is below this amount, the decision to cancel is likely to be treated as a ‘change of mind’, notwithstanding the fact that it has resulted from supporters’ or members’ decisions.

Scenario 2: Your organisation decides to cancel an event or reduce or no longer provide certain services to members due to COVID-19 (but your organisation is not legally required to do so)

Supporters’ and members’ rights

Where supporters have bought tickets to an event or otherwise paid for services to be provided by your organisation which you cancel ahead of time, it is likely that they would be entitled to a remedy from your organisation which may be in the form of a refund or a credit to be used in the future.

However, you should review the terms and conditions that apply to the event or service, as well as any cancellation policy to see if they expressly deal with the situation. The terms may provide the consumer with a remedy but equally, you may have excluded or limited your obligations in certain circumstances (bearing in mind that you cannot contract out of any rights or obligations under the consumer guarantees, or the ACL more generally).

Likewise, you should consider what services you have committed to provide members and see whether you can still meet member expectations by doing things differently during these Covid-19 affected times.

Your rights in relation to event suppliers and
service providers

It will be important to review any contracts entered between your organisation and suppliers or service providers.  The specific terms and conditions of the contracts will determine:

▪     your and your suppliers’ termination rights;

▪     whether you are entitled to a refund for any deposit or service charges already paid; and

▪     whether you are required to make further payments to suppliers under the contract. 

Where your organisation has obligations under the contract, failure to perform those obligations could be a breach of contract by your organisation (which may result in further consequences).

Scenario 3: Your organisation is forced to cancel an event or member services due to Government-imposed restrictions

Supporters’ and members’ rights

In this situation, your organisation’s failure to comply with any consumer guarantees is likely to be due to government restrictions in response to the pandemic (which are beyond your control). In that case, the ACCC has suggested in its COVID-19 (coronavirus) information or consumersguidance that a consumer’s rights under the ACL will be impacted.  However, you should review any terms and conditions applying to your event to see whether they provide for what happens if the event can’t go ahead.

In addition, the terms and conditions may contain a ‘force majeure’ clause which may cover for events outside your control like the outbreak of COVID-19 (and Government restrictions).  Where a force majeure event occurs, the terms of the force majeure clause will determine the obligations of the parties.

Alternatively, the contract may be ‘frustrated’.  When a contract is frustrated, the contract automatically terminates at the time of the frustrating event and the parties are typically no longer bound to its terms.  However, the threshold is a high one, so you should not assume that COVID-19 has frustrated your contract.

Your rights in relation to suppliers

You will need to consider what services you have committed to acquire and whether the service providers can still provide you with those services if government restrictions are in place (even though you may not be able to use those services).

You should review the terms and conditions of the contract to determine your termination rights, whether you are entitled to any refund for deposits paid and any other obligations under the contract. They may also provide suppliers with certain rights to termination or further payment. 

As above, there may be a force majeure clause that applies in the circumstances or the contract may be frustrated and therefore automatically terminated.   Care should be taken before relying on this.

For more information on:

  • force majeure and frustration – click here.
  • insurance for Covid-19 related losses – click here.

COVID-19: Implications for Business

The spread of Coronavirus (COVID-19) has forced us to think and act differently. Beyond the human response, now is the time to think about what the consequences may be on your business, and how best you can prepare for those.

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