Sports Q&A - What should we consider before cancelling a sports event due to Covid-19?
05 March 2020
With the number of cases of Coronavirus continuing to climb, the sports industry is starting to feel the impact. A number of sporting events, such as the Chinese Grand Prix, World Athletics Indoor Championships and Serie A football matches, have been cancelled or postponed. Our Q&A this month sets out some top tips for what you should be thinking about if you're in the unfortunate position of having to consider cancelling an event.
What should we consider before cancelling an event due to Covid-19?Postponing an event is a very difficult decision to take as it leaves fans and suppliers in the dark about if and when they can expect the event to take place. Of course, the athletes, who may have been training for months for an event, will also be hit hard both from a performance, and potentially a financial, point of view. They may miss out on appearance fees, win bonuses and even fail to secure endorsement deals if key events are cancelled. There may also be an impact on selection policies and how tournament results will be decided. What happens if key international athletes/teams decide not to attend the event? The variables are endless, and there are no easy answers, however we’ll try to help you navigate the key contractual issues for organisers and suppliers…
Consider the contractual terms on cancellation
The terms of any agreement between organisers and suppliers (including teams/athletes contracted to compete in an event) should set out when and on what basis the event can be cancelled or postponed, what the consequences of this are, and where the costs will lie. All parties should check their contracts now to make sure they know where they stand. If the contract’s not clear on cancellation and postponement (or even if it is, but it’s not favourable), having an up front and open conversation, as soon as possible, is probably the most conducive way to find a resolution.
If an agreement hasn’t yet been signed, then parties should include terms which deal with issues that may arise from the spread of Coronavirus, such as if the virus becomes a pandemic or official guidance advises against holding public events.
In the context of long term, multi-event/match sponsorship agreements, its also worth considering whether there is a ‘substitution of rights’ clause which might give you flexibility to offer a sponsor alternative rights if one or more event/match has to be cancelled.
What about force majeure clauses?
A “force majeure” clause will, depending on its terms excuse temporarily, or release entirely, a party from its contractual obligations.
Some force majeure clauses may have been drafted to specifically include epidemics or pandemics. Where a force majeure clause is widely drafted (even if it doesn’t relate to epidemics or diseases but includes any act or thing outside the control of the party affected), then the spread of Coronavirus could be a force majeure event. However, a badly drafted force majeure clause (which relates only to weather or ‘Act of God’ or just talks about a ‘force majeure event’) is unlikely to be sufficient.
Even if the scope of a force majeure clause covers the Coronavirus, it is necessary for the party relying on the clause to show that non-performance is due to circumstances beyond the party’s control and that there were no reasonable steps that could have been taken to avoid or mitigate the event or its consequences.
In the absence of a useful force majeure clause, the common law doctrine of frustration should be considered as this can apply to excuse performance in limited circumstances. The law requires a supervening event which strikes at the very root of the contract, entirely beyond what was contemplated by the parties when the contract was formed. Neither party must be at fault for the event. So a cancelled football match just might excuse performance of related contracts if those underlying contracts were conceived by both parties for the sole purpose of the event and cancellation was not contemplated.
What do your ticketing T&Cs say?
Whether fans are entitled to a refund if an event is cancelled or postponed will depend on the ticketing terms and conditions and consumer protection legislation. We’d suggest you review your ticketing terms and conditions to see what scenarios will trigger a right to a refund for fans. It’s also important to consider the T&Cs that you, the event organiser, have agreed with any ticketing agent you’ve engaged. These may include terms about cancelling or postponing the event. In many cases, it may be up to the ticketing agent whether a refund is issued.
Event organisers can potentially offer fans the choice of tickets for a rescheduled event or a refund. However, customers should be entitled to a refund if they can’t attend the new date. Anything less is likely to be considered unfair and contrary to UK consumer law.
If you sell hospitality to businesses, because consumer law should not apply, you may however have more flexibility to assert a force majeure clause or less favourable cancellation provisions.. There will obviously be significant commercial and PR considerations to take into account before taking a robust approach with business customers though.
It’s also worth checking whether your T&C’s would allow you to exclude spectators who you have grounds to suspect are infectious, but be careful to ensure that you’re not discriminating in exercising this sort of discretion.
Are you insured?
Event organisers can usually get cancellation insurance which would cover them if the event had to be cancelled or postponed because of events outside their control. Standard cancellation policies may not, however, cover the situation we now face. An extension of these policies is normally available to cover ‘communicable diseases’, but many insurers are now excluding Coronavirus from this cover on new policies. This means that if you don’t have existing cover of this nature in place, you’re unlikely to be able to insure against this now. Checking your policies to see what cover you have in place and speaking to your broker if you’re unsure is therefore essential.
The advice from the government is for people to go about business as usual and, until any further guidance is published to the contrary, event organisers and suppliers are likely to be left with few other options. The situation is rapidly evolving, so organisations should keep the situation under review and watch out for further guidance from the government. Meanwhile, organisers should be thinking practically about having good health and safety measures in place and making provision for upgraded hygiene facilities at any upcoming sports events.
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