Refunds for events and services affected by public health measures: where does the law stand?

One sector of the economy that has been hit hard by the ongoing coronavirus pandemic is the events industry, in particular, festivals, concerts and sports fixtures. Many events have already been cancelled. Even as the lockdown restrictions gradually begin to ease, the likelihood of continued public health measures impacting upon social gatherings stretching well into the summer and beyond means that future events and service contracts may become affected too.

The UK’s lead consumer protection regulator – the Competition and Markets Authority (CMA) – has zoned in on this issue as its number one priority after its COVID-19 Taskforce saw consumer complaints regarding cancellations and refunds skyrocket in recent weeks and months. 

As a result, the CMA has launched investigations into the three sectors which have attracted the most complaints: weddings and private events, holiday accommodation and nursery and childcare providers. In its most recent update on 21 May 2020 the CMA’s Taskforce announced that it was extending the scope of its investigations to cover package holidays.

The CMA has also issued guidance on the impact of COVID-19 on cancellations and refunds in consumer contracts.

While the CMA’s guidance for the most part comes down squarely on the side of consumers, it is important to bear in mind that all consumer-facing businesses have been left with some extremely difficult choices by the crisis. Many firms simply do not have the liquidity to provide refunds for every customer who asked for one. If they were forced to do so, it is widely believed that many would have to cease trading and exit the market altogether. Leaving aside the damaging effect this could have on employment, this would not be a desirable outcome for consumers as it would ultimately result in less choice and weaker competition. 

It is therefore important that businesses and consumers alike understand their rights and obligations in relation to cancellations triggered by COVID-19. 

What does the CMA guidance say?

The CMA guidance states that for most contracts it would expect a consumer to be offered a full refund in the following circumstances:

  • where a business has cancelled a contract without providing any of the promised goods or services;
  • where no service is provided by a business, for example because this is prevented by Government public health measures; or
  • a consumer cancels, or is prevented from receiving any services, because Government public health measures mean they are not allowed to use the services.

On the face of it, this guidance would appear to be fairly conclusive. However, the legal issues involved are actually more complex than the CMA suggest. For example, they do not adequately address the situation where the business maintains that it can still provide the relevant services – just at a later date in time.

In practice, the CMA itself would acknowledge that each cancellation needs to be assessed on its own merits to determine whether a consumer is legally entitled to a full refund.

Where does consumer law stand on this issue?

It is important to stress that under general consumer law, there is no magic bullet that automatically entitles a consumer to a refund if their contract is significantly affected by restrictions put in place in response to the coronavirus. 

In almost all cases, the legal issues will ultimately boil down to the contract. Unfortunately this means the parties may need to untangle various complex points of law, including the historic common law doctrine of frustration, as well as modern consumer protection legislation. When you add to this to the fact that all businesses have different terms and conditions (or, in some cases, no terms and conditions at all) it is clear that there is no one-size-fits-all answer to this question. There may be some cases that genuinely need to go all the way to court for a legal judgment. 

While the specifics of every cancellation need to be assessed and understood on a case-by-case basis, the following issues are likely to be relevant:

1. Is the situation specifically catered for in the trader’s terms and conditions? Some terms and conditions may seek to protect the trader in the event of “force majeure” type situations. For instance, they may say something to the effect that the trader reserves the right to provide the services at a future date if they cannot be performed as agreed due to circumstances outside of their reasonable control.

2. If so, are the terms rendered void by the Consumer Rights Act? If a business is seeking to rely on the protections afforded by its terms and conditions, those terms will generally only be binding on a consumer if they satisfy the so-called “fairness test” under the Consumer Rights Act. A term is considered to be unfair (and therefore void) if “… contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.” Careful analysis may be required to determine whether there is in fact a “significant imbalance” in the circumstances. In some cases it may be reasonable for the trader to postpone their obligations given the severe and unprecedented impact the lockdown has had on so many businesses. At the same time though, the crisis does not give traders free reign to dictate unreasonable terms to their customers. In particular, the CMA’s guidance on unfair contract terms states that the following terms are likely to be considered void and unenforceable:

  • terms that give a trader the right to unilaterally cancel a contract outright without providing a refund;
  • terms that give the trader the right to require the consumer to pay for services that it will not, or cannot, deliver
  • terms that enable the trader to delay the provision of the services “at will” for an indeterminate period of time.

3. Has the pandemic made provision of the services impossible, or could they still go ahead at a future date? In many cases this may be the question that gets to the crux of the issue legally. If the contract has become impossible to perform (or radically different from what was agreed), the consumer could seek to run the argument that the contract has been “frustrated” under common law and brought to an end. In addition, if the customer would have a good argument for saying that, under common law, the contract has been frustrated, but a term in the trader’s terms and conditions seeks to prevent the customer bringing the contract to an end and claiming a refund, this may increase the likelihood of that term being treated as void on the grounds of unfairness.

However, any claim based on frustration would be far from straightforward for various reasons – not least because the consumer bringing the claim may need to show that postponing a contract to a future date would deprive the contract of all real value. To give an example, a consumer may find it easier to argue that a contract for a wedding has been frustrated (given how central the date is to the event) than they would for a more generic leisure service, such as a hot air balloon ride.  

What is the position for contracts due to be performed in the future?

If a contract is due to be performed at some point in the future, and there is still a realistic possibility the event could go ahead as planned, in most cases it would be premature for a consumer to claim a full refund at this stage.

Similarly, if a consumer is required to make a payment now for an event that is due to take place in the future (potentially after the lockdown restrictions have been lifted) it is reasonable for the business to hold its customer to the payment terms in the contract.

The CMA has offered the following guidance on this point:

“Some contracts may require consumers to pay now for services they will receive in the future, after the current disruption has lifted. A business should not seek payments for a service it knows it will be unable to provide. Where the business reasonably expects to provide the service as agreed, the CMA’s view is that, in general, the business can require consumers to carry on making these payments for the time being. That could be the case, for example, for some services due to be provided later in the year. Consumers’ rights to refunds will depend on whether the services can be provided when the time comes.”

How much flexibility is there for businesses that are legally required to provide a refund, but lack the liquidity to do so?

The CMA has accepted that it may take businesses longer than normal to process refunds in the present circumstances. This may provide some comfort to businesses that are prepared to issue refunds, but just need more time to release the liquidity to make the payments.

However, the CMA has cautioned that businesses should make the timeframes for providing refunds as clear as possible to consumers. Simply ignoring customers is unlikely to be helpful in the long run.

The CMA also confirmed that it is perfectly acceptable for businesses to offer alternatives to cash refunds, such as credit or vouchers – although this would generally require the agreement of the customer. Pressuring or misleading consumers into accepting credit or vouchers could raise further consumer law issues if the business has no legal basis for refusing a refund. 

If a customer does agree to accept credit or vouchers instead of a refund, businesses should make the terms on which the credit or voucher is offered as clear as possible up front (for example, a stated expiry date, conditions for making future bookings etc.). It may be tempting to make quick promises now to make the problem go away, but it is important that the business is able to follow through on any promises it makes at this stage.

If disputes continue, what legal powers does the CMA have to intervene?

The CMA does not have the power to impose direct fines on businesses that seek to rely on unfair contract terms. If it is unable to secure its desired outcome via dialogue, it can go to court in order to secure undertakings from the business concerned. The CMA has already indicated that it is prepared to do this.

It is also worth noting that the implications for a business could be more severe if its conduct goes beyond merely relying on unfair contractual provisions. In particular, if a business engages in aggressive commercial practices during its dealings with consumers (e.g. pressuring or misleading vulnerable consumers into waiving refunds that they are legally entitled to) they could face further criminal enforcement action – including prosecution and unlimited fines – under the Consumer Protection from Unfair Trading Regulations, which are enforced by local trading standards bodies. The Chartered Trading Standards Institute has said that the CMA is cooperating with local authorities in relation to wider consumer law enforcement.

In the absence of an intervention by the CMA or trading standards, the issue is ultimately a civil matter between the business and the consumer. A consumer who feels they have not been provided with a refund they are legally entitled to would need to issue proceedings and brave the civil courts system. 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.


Date published

27 May 2020



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