COVID-19 and Event Cancellation: No Need to RSVP

25
Mar 2020

Contact: Jelena Jeremić

Who or what is powerful enough to cancel the Olympic Games, postpone the N.B.A. season, NASCAR racings, cause the Broadway shut down, close Louvre Museum and cancel the Cannes Film Festival and Eurovision Song Contest? These are just some of the events that were canceled because of the one and only – Coronavirus.

Countless concerts, shows, sports events and other public gatherings in Serbia have been canceled in accordance with state measures restricting the freedom of movement and the freedom of assembly.

Canceling such events can result in significant losses to companies, including organizers, hosts, participants, sponsors and media firms included in the formation of an event, from which they would otherwise profit.

Organizers of the events that have not been canceled yet are in doubt whether to postpone/cancel them or continue with the plan.

Let’s go through the basic questions together to clear the doubt.

What About the Never Give Up Phrase?

Are there any alternatives to cancellation?

If you have planned your event in Serbia in the recent period, i.e. while temporary measures restricting citizens’ freedom of assembly are still on the force, you should know the following:

In Serbia, a special Order issued due to a state of emergency prohibits all public gatherings in public places indoors – when more than five people gather at one time. Also, it is forbidden to convene and hold rallies and all other gatherings of citizens outdoors. Therefore, you should postpone the events, if possible, and if not, cancel them, bearing in mind criminal and misdemeanor penalties in the case of actions against measures.

If the event was to take place abroad, we advise you to check if there is a decision in the particular country, by which gatherings are restricted, and to act accordingly on time in order to minimize the losses.

So, if you cancel or postpone the event, you are likely to breach your contractual obligation to the party who also participated in the organization of the event.

In that case, an analysis of the contract is crucial for your next step.

Contract Analysis

If you have the contract in front of you, check the following:

Does the contract contain a force majeure clause? (what this clause means you may find out in our blog post COVID-19 and Contracts: This is Why You Will Be Reading Them More Carefully After the Pandemic).

  • If it does not, in such a situation the force majeure provisions of the applicable law will be relevant. If it is Serbian law, it provides that the debtor shall be released from liability for damages if he proves that he could not fulfill his obligation, that is, he was late in fulfilling his obligation due to circumstances arising after the conclusion of the contract which he could not prevent, eliminate or avoid.

If the law of another country should be applied, we advise you to check the provisions of the relevant legislation to see what the consequences of canceling the event are.

Also, remember to provide a force majeure clause in your future contracts, since it may become relevant suddenly, just as the circumstances which define it, so that you can specify what shall be considered a force majeure and what consequences it shall cause in your contractual relationship. It’s always easier to play by the rules you make, than by the ones someone else imposes.

  • If it does, check the following:

Is the epidemic predicted as a form of force majeure?

  • If it is, check if the outbreak of the epidemic relieves you of contractual obligations or at least limits your liability for its failure.
  • If it is not, know that force majeure clause generally determines its types, so check if an epidemic case can be brought under one of those types. Usually it can, so the next step is to look at the legal or contractual consequences it causes. And that is the end of this path – we have reached our destination – the consequence of canceling the event.

You should also be careful and check whether there is a clearly stipulated obligation to inform the other contracting parties of the inability to fulfill the obligation within a certain time-frame (event cancellation) in order to be released from the obligation.

And just one more note for the end: the party claiming force majeure relief is usually under a duty to show it has taken reasonable steps to mitigate or avoid the effects of the force majeure event. For example, have you considered whether the event could be postponed, reduced in size or held with further safeguards in place? Of course, if there is a prohibition on gathering, no alternatives are possible, other than the online event.

This may seem complicated, but no one expects you to know these legal rules. However, if you are in this situation, it would be best to consult a lawyer, having in mind the possible consequences.

Financial Difficulties

The most important consequence of canceling an event is financial, in the form of:

  • lost capital invested
  • legal or contractual obligations (if force majeure does not relieve or at least limit your liability), such as liability for damages for failure to fulfill obligations or contractual penalty.

Your reputation may also have an indirect effect on your finances. Keep that in mind when deciding (if possible) whether to cancel an event or not, considering the public health.

Another financial difficulty would be facing the requirements of the participants, suppliers, sponsors, media, companies or other parties regarding the cancellation of the event in front of the judge, bearing in mind the costs of litigation. Given that there is a legal possibility for all of them to bring litigation as interpleader claimants, it further complicates your position.

It is important to assess the risk of claims on time, develop a legal strategy and think about potential settlements.

Having insurance would certainly ease your financial situation. It is important to identify which policies may respond to your losses, either under a standalone policy or, commonly, as part of cover provided under other policies.

Many types of non-life insurance protect the gross of incomes expected from the event, as well as the expenses of organizing the event. For example, there is an insurance for film companies in the event of an interruption of recording a movie due to sudden situations, as well as the insurance for legal entities from disabilities to do business during the fire and some other dangers. Check if your policy covers the inability to fulfill obligations in case of an epidemic.

The contract is said to be a law for the parties, and since canceling a planned event is likely a violation of more than one law, deal with this topic now, as we have said, for the sake of your finances and reputation. While nowadays everyone advises you to be at home in order to stay safe, we advise you to be in safe hands as well.

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