LawFit: The Legal Impact of COVID-19 on CrossFit Events and Contracts

April 3, 2020 by
Photo by Helloquence on Unsplash
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As countries around the world aggressively respond to COVID-19, what is the right course of action for you? Do you cancel your event immediately so that you can possibly still take advantage of reduced early termination penalties offered by your venue and before your attendees incur travel costs? When do you initiate conversations about postponing or rescheduling your event?

This article discusses how force majeure provisions in contracts may be engaged in the context of the COVID-19 pandemic. It also suggests steps that parties may take to safeguard their positions in view of the evolving situation.

The first step: If you are evaluating your rights to cancel or enforce a transaction, first review the terms of the contract itself. You should review all of your contracts for the event to determine what rights your company has to change or cancel them. This includes, but not limited to, your contracts with the venue, hotels, sponsors and vendors (e.g. A/V, equipment rental, transportation, etc.).

What happens if we cancel our event?

  • Most commercial contracts provide for an orderly way of canceling them if circumstances change. These provisions would be in the contract’s cancellation clause. The clause likely contains set damages that will be due upon cancellation.

Can we avoid liability if the cancellation is for circumstances beyond our control?

  • In addition to the usual cancellation provision, the contract is likely to include terms under which the contract can be canceled without incurring damages. Often this is termed a force majeure clause, although some contracts provide for similar terms under sections addressing performance, frustration or impossibility of completing the contract.
  • The force majeure clause defines the rights and responsibilities of the parties in a situation where one or both parties are unable to perform their contractual obligations due to circumstances beyond their control (e.g. a global pandemic coupled with government restrictions). Force majeure clauses are intended to provide relief to one or both parties when performance under the contract is truly out of the party’s control.

What kind of liability do we have to our participants and attendees?

  • Again, turn to the contract. Read the participant and attendee agreement’s cancelation and refund policy. While an event may have a clear registration fee refund policy, participants and attendees may have incurred additional out of pocket expenses, such as airfare and hotel. In those cases where attendees booked their own airfare and hotel, the airline and hotel’s own cancellation policies would be in effect.

How about my sponsors?

  • If you have sponsors, they might be contacting you to see whether they can get a refund as well. Once again, refer to your sponsorship agreement. In the absence of a cancellation clause, you will likely need to consider the benefits that the sponsor already received (e.g. pre-event advertisement) and the amount that the sponsor paid for those benefits. You will likely need to negotiate with the sponsor in order to reach agreement on a prorated refund of any prepaid sponsorship fees.

The take-away: Given the reputational and financial implications, please consider the following in influencing your decisions:

  • Base your decisions on facts, not fears.
  • Review the wording of your contracts with a lawyer along with possible insurance coverage. If you do not have event cancellation insurance coverage in place, your general business liability insurance is the next place to turn.
  • When is the event? Consider when the event is scheduled. If the event is not until five months from now, circumstances may change by then.
  • In lieu of canceling the event altogether, you might be able to work with the venue to reschedule with little or no penalty.

Disclaimer: This post was created for general informational/educational purposes only. The information is not privileged and does not create an attorney-client relationship with the author. Nor is the post an offer to represent you. Its information should not be construed as legal advice or legal opinion on any specific facts or circumstances. You should not act or refrain from acting based upon any of the information on this site and are urged to consult a licensed attorney for legal advice on your specific situation.

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