What is the position regarding contracts "cancelled" owing to corona virus?

Manxman_in_exile

There is (unsurprisingly) an abundance of threads at the moment where posters have paid money up front for a service or to attend an event etc where the service or event has been cancelled by the provider because of the corona virus situation.  eg https://forums.moneysavingexpert.com/discussion/6119139/partial-refund-for-cancelled-season-ticket#latest

In most of these threads the advice from experienced MSErs seems to be along the lines of:  "If the provider has not provided the service/event etc that has been paid for, then they are in breach and a refund is due to the consumer."

Is this actually correct and is it desirable?  I ask whether it is correct because in effect providers and suppliers are not doing what they contracted to do because, for one reason or another connected with Covid, it is no longer actually possible for them to do so.  It's over 40 years since I was a law undergraduate and I've forgotten most of what I learned, but I'd be surprised if the law blindly said there must be a refund in this situation. 

Related to this is the question of desirability as expressed in one of the posts in the thread linked to above:  "...and with this being unprecedented do you believe all these clubs ,venues etc should refund with the possibility of going bankrupt. Which of course wouldn’t help anybody."  It seems quite obvious to me that the economy is going to suffer enough damage as it is without making suppliers/providers pay refunds out of non-existent income.  They're all going to go bust which, assuming we come out of the current mess unscathed, may not be the outcome we want.

I'm not trying to be anti-consumer here, it just seems to me that blindly enforcing consumer rights in all circumstances under the current situation might be counter-productive.  And no, I don't have a solution to put forward...

JJ_Egan

Yes spoke to one guy yesterday  shutting down his business as customers just asking for money back .

Plus  many more will close including a lot in the leisure industry .

Continuing to pay as many of my subscriptions as i can serviced or not so as they stand a chance of returning .

davidmcn

If the goods or services cannot be provided (for whatever reason) then I think the correct legal starting point for consumer transactions is that both parties go back to square one, so the consumer gets a full refund. Not sure in which circumstances that would be any different.

The moral question of whether everybody ought to be enforcing their rights is of course a different one.

The_Rainmaker

If I had to shut my business down I wouldn't be refunding at this stage I would be adopting a wait and see view.  I would be waiting to see if I had a business left after covid-19 blows through.  In the meantime I would be doing my best for my staff.

If at the end of the day the refund claims were greater than the assets then you just liquidate.

Don't get me wrong I would be trying to come up with a solution that helps the customer but doesn't bankrupt me at the same time, eg vouchers etc.

Manxman_in_exile

Actually, thinking a bit more about it, the law probably does require the payment of a refund.  It's not a situation where the contract is frustrated (or at least not as I understand it) and it's not necessarily force majeure either.

Hmmm....

unholyangel

Manxman_in_exile said:

Actually, thinking a bit more about it, the law probably does require the payment of a refund.  It's not a situation where the contract is frustrated (or at least not as I understand it) and it's not necessarily force majeure either.

Hmmm....

http://www.e-lawresources.co.uk/Frustrated-contracts.php

NBLondon

I am definitely not a lawyer - but what about Acts of God?  Could the virus be included in that?

Doesn't it come down to the T&C?   If the supplier has included a clause along the lines of "if the event is cancelled due to circumstances beyond our control" then that would apply.  Guessing that would often be followed by "liability is limited to refund of any monies paid" or similar.  So you are generally speaking due a refund if the provider cancels - but not any ensuing extra costs.

Pragmatically - for some organisations - refunding all bookings might well push them into liquidation if they have already paid for elements of the event/service and can't get a refund from their suppliers (or now can't use a perishable good)  so the reasonable thing on both sides is to try and agree on a voucher or a re-booking at an undefined future date - provided that voucher can be cashed in if the re-booking is not suitable.

If you want that particular provider to come out the other side and work with them again in 6 months time - maybe you share the risk.   If you don't care about who you deal with in the future - you push your claim to protect your own interest.

Manxman_in_exile

davidmcn said:

If the goods or services cannot be provided (for whatever reason) then I think the correct legal starting point for consumer transactions is that both parties go back to square one, so the consumer gets a full refund. Not sure in which circumstances that would be any different.

The moral question of whether everybody ought to be enforcing their rights is of course a different one.

I don't think it's a moral question.  It's a purely pragmatic and economic one.  The law has developed to give the consumer more protection because it was perceived, rightly, that traditional contract law (think b2b contracts) was balanced to much in favour of suppliers.

The problem in these current circumstances is somewhat different and perhaps the balance has moved too far the other way.  Perhaps public policy requires a different approach in the current pandemic.

I don't know the answer - I'm just concerned we're going to get consequences which perhaps ought to be avoided for future benefit rather than short term gain.

Manxman_in_exile

unholyangel said:

Manxman_in_exile said:

Actually, thinking a bit more about it, the law probably does require the payment of a refund.  It's not a situation where the contract is frustrated (or at least not as I understand it) and it's not necessarily force majeure either.

Hmmm....

http://www.e-lawresources.co.uk/Frustrated-contracts.php

My understanding of frustration of a contract is more restrictive than that link suggests.  I think when I studied law it was only frustrated if it was impossible because one of the parties no longer existed, or because the subject matter no longer existed, or subsequent performance would be illegal.  I didn't think "mere" impossibility was enough (despite the case referred to of the named ship which I would have said was not frustration!)  But even if frustration did apply, I suppose a refund is still the remedy - so it doesn't really address what I see as a problem.

Manxman_in_exile

NBLondon said:

I am definitely not a lawyer - but what about Acts of God?  Could the virus be included in that?

Doesn't it come down to the T&C?   If the supplier has included a clause along the lines of "if the event is cancelled due to circumstances beyond our control" then that would apply.  Guessing that would often be followed by "liability is limited to refund of any monies paid" or similar.  So you are generally speaking due a refund if the provider cancels - but not any ensuing extra costs.

Pragmatically - for some organisations - refunding all bookings might well push them into liquidation if they have already paid for elements of the event/service and can't get a refund from their suppliers (or now can't use a perishable good)  so the reasonable thing on both sides is to try and agree on a voucher or a re-booking at an undefined future date - provided that voucher can be cashed in if the re-booking is not suitable.

If you want that particular provider to come out the other side and work with them again in 6 months time - maybe you share the risk.   If you don't care about who you deal with in the future - you push your claim to protect your own interest.

Yes.  My understanding was (and I don't know what the law currently is) that "properly drawn" contracts would contain a force majeure clause covering things like war and "plague"(!) etc, but that the clause needed to define the sort of event in order to be invoked.  Perhaps we've got a "plague".

On your last point, that's sort of what really concerns me.  I'm not at all sure how far the law should support people in protecting their own interests when that may have detrimental effects on the economy as a whole.  I'm not sure whether a wider perspective may not be required at the moment.

As I say, I'm not sure of the answer - and maybe the problem is of my own imagining.  It's just that I'm uneasy about the response "The supplier is in breach of contract and must pay a refund".  I'm a bit worried where that leads to in present circumstances.  (And not from a moral point of view - from a pragmatic one).

unholyangel

Well remember consumer contracts are far more forgiving to the buyer than commercial ones. But frustration isn't as restrictive as you think. The foundation of it was taylor v caldwell - where a concert hall burned down. Both parties still existed but the subject matter of the contract did not. Frustration is restrictive, just not in the way you think. For example the two cases around the coronation in the link i posted above. 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/450440/Unfair_Terms_Main_Guidance.pdf

In particular, 5.9.6, 5.10.3, 5.13.2, 5.16.5, 5.16.6 & 5.27.1. 

Also under the CRA, if goods are involved then they must be delivered as agreed or within 30 days if no other time is agreed. Services must be performed when agreed or within a reasonable time if no time is agreed.