Out-Law Analysis 2 min. read
20 Mar 2020, 2:39 pm
The cancellation of this year's Glastonbury Festival follows recent announcements to suspend football and rugby leagues, cancel concerts, and the postponement of Euro 2020. Other major events scheduled for later in the year, such as the Tokyo Olympics, which are due to start on 24 July, remain in the calendar but are under increasing scrutiny.
The cancellation of entertainment and sporting events has a wide ranging impact for those who would have attended or participated in the events, sponsored, hosted or organised the event, supplied products and services or indeed the vast audiences across media, broadcasting and digital outlets who would have witnessed the events from afar. For all, however, the cancellation creates the potential unravelling of the carefully pieced together framework of financial certainty that is underpinned by the commercial contribution of them all – whether by ticket or hospitality payments, for media rights, sponsorship or simply for all those businesses who would have relied on such events for income this year.
The legal position differs for each situation; the law doesn't normally provide a remedy for disappointment, but what happens if a contract is in place – for example for sponsorship rights, or a corporate box at an event?
Most contracts contain a force majeure clause. This clause operates to alter the parties' obligations/liabilities under a contract when an event or circumstance – a force majeure event which is beyond their control – prevents one or both of them from fulfilling their contractual obligations.
The position regarding force majeure differs across jurisdictions, but in England it is up to the parties, when negotiating a contract, to decide what events will constitute a force majeure event, and the consequences of such an event occurring. For example, a force majeure clause might set out a list of specific events, such as an epidemic, or set out broad criteria for determining whether the event is a force majeure event or not.
Assuming that the "event" is a force majeure event, the next consideration will be what are the consequences? Usually a party will be excused from its obligations under the contract, without any damages being payable – this is because there has been a force majeure event, as opposed to a breach of contract.
Force majeure clauses sometimes provide for extension of time, suspension of time, or termination in the event of continued delay or non-performance. For example, if a force majeure clause specifies that a sponsor of a sporting event can terminate the sponsorship contract if there's more than a three month delay, the contract could not be terminated if the event was delayed for two months.
There are of course a number of factors that need to be considered, and much will depend on the individual circumstances on a case by case basis. For example, is the concert, match or competition cancelled in its entirety, or is it delayed? Is it a one off, such as a concert, or part of a series, such as the Champions League? In these circumstances, close scrutiny of the force majeure clause is needed to ascertain the rights, obligations and potential liabilities of the parties.
The hope is that the entertainment industry and the sporting calendar return to normal as soon as possible. But what is certain is that the force majeure clause, usually seen as "boilerplate" clause, will in future receive much greater attention when negotiating contracts.
26 Mar 2020