Coronavirus: The impact on the live events sector

We are all having to consider our ongoing response to the threat of coronavirus, both personal and professional. UK government guidance is rapidly changing and adapting to the situation to address public health concerns which are at the forefront of everyone’s minds. It seems that increasingly tougher restrictions will be placed on social gatherings (if they continue to be allowed at all): at the time of writing, the UK government has just announced a three-week lockdown during which time the only reason people will be allowed to leave their homes is to buy food, do exercise once per day, go to the doctor, care for a vulnerable person, or go to work, but only if that work is essential. All non-essential workplaces have been forced to close.

Perhaps nowhere are these measures being felt more acutely at a business level than in the live events industry. Venues, promoters, artists, booking agents, among others, are all having to consider the drastic but necessary option of cancelling and postponing events. Clearly the knock-on effects will be significant.

While such courses of action are the responsible choice in the context of a public health emergency, they frequently come at the expense of the business and carry significant financial and legal risks. The network of contracts and parties involved in live events means that it is all but inevitable that cancelling or postponing an event or festival will give rise to multiple legal issues linked to who, if anyone, is liable. In these extreme circumstances, what solutions and remedies does the law offer for live events businesses and artists forced to take such measures?

Most likely there are two: the so-called force majeure clause and the doctrine of frustration. This article explores their applicability and usefulness to those in the live music sector.

Force Majeure

Most contracts, whether between the venue and the promoter, or the promoter and the artist/booking agent, for the provision of related services or for the sponsorship of a concert or festival will or should include a force majeure clause. The effect and purpose of this clause is to release parties from their contractual obligations (or to suspend the performance of those obligations) on the occurrence of a specified event outside of the relevant party’s control.

Whether the coronavirus pandemic constitutes such an event will first depend on the precise language of the force majeure contractual clause. Frequently the clause includes language referring to an “epidemic” and “event or cause beyond the reasonable control of the parties”.  Often “Act of Government” wording features too, in order to cover a government measure or administrative action (such as banning social gatherings) making performance of the contract impossible. However direct reference to coronavirus is unlikely, and so careful attention will need to be paid to the language of the clause to see if it is applicable.

It is likely that disputes will follow as to whether the clause covers the situation or not because the party seeking to rely on the clause may then be able to limit its liability. This is provided that it can show that it took reasonable steps to mitigate the effects of the force majeure event. If it can, it will then be able to say it is no longer bound. In the context of social distancing, it will be necessary to look at whether it was possible to hold the event (or a series of events) on a much smaller scale, or whether postponement rather than an outright cancellation is the best step.  So, while force majeure may be a solution, just because you have the clause, that is unlikely to be the end of the matter.

Frustration

Not all contracts will contain force majeure clauses and some may not cover the coronavirus situation or the responsive government measures that have been (or are yet to be) taken.  In that case, what can a contracting party do? One possible solution is that it may be able to rely on the legal doctrine of frustration, a common law doctrine applicable where an event arises after the formation of the contract which makes performance of it impossible. Changes in the law and illness/incapacity have been held as sufficient to frustrate contracts.

The party who says the contract has been frustrated must show that the event was unforeseen by the parties, that it was not their fault, and that it makes it physically or commercially impossible to fulfil the contract (or transforms it). Frustration is unlikely if the contract contains express provision for the event which has occurred in the force majeure clause but if the force majeure clause is unclear frustration may be the mechanism by which one party can be released from its contractual obligations to another party.

This area of law is complex but generally, and broadly, the financial consequence of a contract being frustrated is that money paid by one side to the other before the contract is frustrated is recoverable, perhaps with the other side being able to offset the expenses they have incurred.

No doubt those contracting parties who have been in business over many years will cooperate and be flexible in response to the coronavirus threat. For businesses and artists whose livelihood depends on the live events industry and who cannot or who do not have the luxury or ability to compromise, the law does offer some solutions – although how the courts will apply them in this unique situation remains to be seen.

For more information please contact Steven Tregear or another member of our Litigation team who can help you further.