How to Initiate Postponements and Cancellations Regarding Coronavirus (& What to Do With Your Client Contracts)

A version of this article originally appeared on The Legal Paige. It has been republished here for our audience. 

Due to the sweeping government mandates and orders that have gone into effect over the past few days, many events are getting cancelled or postponed. Although the recent CDC recommendation is just guidance and is not a mandate, it has had a significant impact on federal, state, and local governments beginning to implement actual restrictions on travel and close person-to-person contact.

In response to these mandates and orders, events of anywhere from 10+ people to 250+ people have made changes. Many clients are cancelling or rescheduling their events. Thus, as event industry professionals, it is critical to take action and have a plan for your client contracts.

Here are step-by-step suggestions for how to approach your client contracts.

Step 1: Communicate with your clients

Communicate with your clients about what they are doing with their event.  Are they thinking of cancelling or rescheduling?  It is SO important to convey to your clients the importance of rescheduling.  It’s vital to the health and financial viability of your business and the small business world as a whole. We recommend starting off the conversation with an email like this that directs clients toward rescheduling:

Hi XX,

In response to the increased uncertainty that Coronavirus (COVID-19) is causing our community and the world, I wanted to be proactive in touching base with you.

The spread of this virus over the past few days has had a huge impact on events. Many venue locations are closing and events are being postponed to maintain the health and safety of our communities. Thus, it’s important for us to address next best steps as soon as possible. What are your thoughts and how are you feeling about proceeding with your scheduled event?

At this point, please know that I am happy to continue forward as usual and am committed to [photographing/providing services for] for you and your event. However, if you do feel like you need to reschedule due to governmental or personal health restrictions and concerns, I am also more than happy to honor our contract and make specific rescheduling accommodations that will ensure you can confidently move forward with your decision.

[Add in a reference to your rescheduling/cancellation policies here if you’d like.]

As of now, I have availability on [enter availability]. If those dates do not work for you, I would be happy to discuss other postponement date options.

Thinking of you during this difficult time,

XX

Step 2: Find a mutual resolution

Be on-tap for your clients after the initial email. Communicate effectively with them, understand where they are coming from, and DOCUMENT EVERYTHING (email documentation is fine). Wait to hear what their venue or event location says regarding any closures. Work together to find a mutual resolution but try your hardest to facilitate a postponement rather than a full-on cancellation. 

Step 3: Determine whether a contract addendum, rescheduling contract, or cancellation contract is best

Depending on what you and your clients have decided, you need to determine whether its most appropriate to either: (1) modify your existing contract using a contract addendum; (2) terminate the existing contract, sign a rescheduling agreement that explains your process for holding the retainer/fees paid on credit, and THEN sign a new contract for services once the event is officially rescheduled; or (3) cancel the existing contract by sending a cancellation contract to terminate all services and further payments. Here are the general circumstances you will be in that will guide which action to take.

When You Should Modify Your Existing Contract Using a Contract Addendum:

You need all of the following things to occur for a contract addendum to be appropriate:

1. your clients determine that they want to reschedule;
2. your clients agree to that all fees paid for your services under the existing contract will be transferred to the new date;
3. your clients have officially decided on a new event date and booked it with their venue;
4. you are confident with your existing contract and all the clauses in it; AND
5. you are fully comfortable with only changing out the dates of the existing contract and offering the same services for the same price on the new date.

If ALL of these apply, you can use a contract addendum. A contract addendum is an agreed-upon addition signed by all parties to the original contract. It details the specific terms, clauses, sections and definitions to be changed in the original contract but otherwise leaves it in full force and effect.

A big thing to consider here is whether you are comfortable and confident with your existing contract. Now that every business owner is actually having to look at and read through their contract, many are discovering inconsistencies throughout, contradictory language, confusing language, and/or know they need to add in more clauses to protect themselves and their clients. If that’s the case—which is the likely case for most business owners right now—then a contract addendum is NOT your best option.

When You Should Use a Rescheduling Contract:

You need all of the following things to occur for a rescheduling contract to be appropriate:

1. your clients determine that they want to reschedule;
2. your clients agree to that all fees paid for your services under the existing contract will be transferred to the new date;
3. your clients have NOT decided on a new event date and are working with their venue owner/other venues/family and friends to make a final decision;
4. you want to adjust and update your existing contract.

Again, if all of these apply (this is a conjunctive list!), you can should sign a rescheduling contract with your clients. A rescheduling contract does a few important things related to your business-client relationship: first, it terminates the existing contract as a whole; second, it releases you from and further performance; third, it tells your client exactly what you as a business are doing with the fees they’ve paid thus far and how long it will stay on credit on their account (you can outline specifics in this agreement such as when they need to notify you of the new event date); fourth, it includes crucial clauses like mutual release of claims/confidentiality (because you are probably doing different things with different clients depending on their unique facts and circumstances); and fifth, it allows you to UPDATE YOUR EXISTING CONTRACT!

Because many of you need to update your existing contract and clients are unsure of when they will reschedule their event, this option overall seems to be the best for a majority of small business owners.

When You Should Use a Cancellation Contract:

You need all of the following thing to occur for a cancellation contract to be appropriate:

1. your clients determine that they DO NOT want to reschedule but want to cancel your services and the contract altogether.

It’s really as simple as that. A cancellation contract (aka a “termination contract”) occurs when a contract is voided before the contract is fulfilled by each party. Obviously, the goal is to NOT get to this point and work hard with your communication to have a postponement occur rather than a cancellation. But there is really no getting around the fact that some clients will not budge on wanting to just cancel and you need to be prepared for that as a worst-case scenario.

The tricky part about cancellations:

The facts and circumstances of the cancellation will vary greatly. Unlike a rescheduling situation where the fees your clients have paid get transferred, you and your clients will need to come to a resolution regarding what you will do with their fees. This is where it is IMPERATIVE to look at the exact language of your contract. What does it say regarding the refundability of your reservation fee/retainer/deposit?  Have you rendered any services so far that you can provide documentation for? Have the clients paid in full already? If your contract language allows you to keep the reservation fee/retainer/deposit (such as it says “the retainer is non-refundable under any circumstance”) then you should be able to keep that retainer, but will likely have to refund the remainder to your clients.

However—THIS IS A GREY AREA!!! It’s really, really important that you have an actual lawyer in your home state review your contract for what you can and cannot do under cancellation situations. Some contracts may allow you to keep the full payment, some contracts may have wishy-washy language related to the refundability of the reservation fee/retainer/deposit, and some contracts don’t really speak to what to do at all. The specific language will determine what action is appropriate. And, an attorney will be able to tell you the risks and liabilities you may face if you keep the retainer, retainer & remainder, or a specific amount that you’ve fully rendered services for thus far. Right now, we are in unprecedented times and there is no RIGHT answer on what you should do with your fees. 

In sum, you need to make the best business decision for YOURSELF right now. Please stop getting answers from people in Facebook groups that say “x” is the only answer. There are options and you need to make the right one for YOU. The Legal Paige suggests best practices are to try and keep your reservation fee/retainer/deposit if at all possible, by rescheduling your client’s event and your services to a new date.

Step 4: Execute the Addendum, Rescheduling Contract, or Cancellation Contract.

 Once you determine whether an addendum, rescheduling contract, or cancellation contract will be initiated, make sure all parties, including you as the business owner and both clients, SIGN THE DOCUMENT!

Get all of these documents right now!

Okay, now after reading through this blog post, I’m sure you now really want access to all of this! The Legal Paige is here! Don’t you worry one bit!

We’ve updated our bundle in the TLP Shop to include a contract addendum, a rescheduling contract, AND a cancellation contract! That’s right, you get everything in one purchase! If you’ve already purchased the bundle, don’t worry you will get an email updating your purchase with the addendum. Because each client situation will be different during the next few weeks, you will need all the options. Which is why we here at TLP want you to have them all.

Purchase the Contract Addendum/Rescheduling Contract/Cancellation Contract Bundle HERE!

THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. EVERY SITUATION IS DIFFERENT & IS FACT-SPECIFIC. A proper legal analysis is necessary based on your location and contract. Consult an attorney in your home state for advice regarding your contract.

See our full disclaimer here: https://thelegalpaige.com/disclaimer

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