Coronavirus, Cancellations and Contracts - liability, force majeure in the live music & art scene
These last couple of days, we’ve heard news of cancelled concerts, events and other properties in the entertainment and creative industries – cancellations based on the increasing scare and spread of COVID-19 or the Coronavirus. The ever increasing list of cancellations brought to our attention by publications such as the Vulture and the Wild City and social media feeds (SXSW recently shared their intention to cancel this year’s edition - the first time they’ve cancelled in nearly 34 years), suggests that the fear of the Coronavirus outbreak has affected events regardless of scale, causing the abrupt halt of international tours and house concerts alike.
With cancellations come challenges of all sorts. Not limited to logistics and losses, a cancelled event also raises important questions regarding the liability or legal responsibilities that parties or people involved in the booking and organisation of such events, have towards one another. Typically speaking, cancellations are informally understood as falling under two broad categories – an artist derived cancellation or an organiser based cancellation. But in cases like the current virus outbreak, who’s to blame for a cancellation?
Superior forces beyond our control
In the wake of the spreading fear of the Coronavirus, an increasing number of businesses are referring to a clause in their contracts known as Force Majeure – a clause that is meant to help mitigate the liability of the parties to a contract, when faced with extraordinary circumstances that are beyond their control and affect carrying out the obligations they had initially agreed to. In other words, invoking a Force Majeure clause can help release parties from their obligations and liability to one another.
The Force Majeure clause or some form of it, is a part of most contracts in the entertainment industry particularly in management, booking and production agreements where it becomes necessary to safeguard our interests considering the stakes and variables involved. These clauses will usually include some reference to events that are considered ‘acts of God’ like earthquakes, floods and a catch-all phrase that is usually along the lines of “or any other events or circumstance beyond the reasonable control of the parties.”
The Devil is in the detail
As is the case with most legal agreements and clauses, it’s always advisable to get as clear and explicit as one can, when it comes to describing the possible events that qualify under Force Majeure. This is the reason why many clauses of this nature include an additional array of events and situations that are deemed relevant to the nature of the industry and context of the contracting parties.
A simplified but essential understanding of how a Force Majeure clause gets triggered involves the following three steps:
(1) Figuring out whether the event or situation qualifies as a Force Majeure event as per your contract;
(2) Being able to show that you had taken all steps to avoid the after effects of the event (because Force Majeure only works when the situation is reasonably unforeseeable and out of your control);
(3) Acknowledging that the current situation or event impacts the obligations of your agreement in such a manner, that it’s practically impossible to carry out under the current circumstances.
The above is a really simplified breakdown because a complete understanding of how this clause works in your engagement, depends on the language and the details of your contract.
The language also determines the aftermath of triggering a Force Majeure, meaning what happens now that both parties agree that the event in question qualifies under this clause. The interesting thing to note is that more often than not, these clauses only call for the suspension of the obligations for the duration that the Force Majeure event persists thereby making the agreement and its obligations valid once the event ceases. So it isn’t right to assume that all Force Majeure clauses automatically fully release the parties from their liabilities.
Applying this to the current scenario
Some Force Majeure clauses include language such as illness, outbreak or epidemic – all of which might be used as valid when considering the context of the Coronovirus outbreak. In this sense, artists, organisers and booking agents might be able to rely on Force Majeure clauses in their contract to reduce some of the damage caused by the recent spate of cancellations.
While these clauses help reduce liability, as mentioned earlier they may not necessarily lead to a termination of a contract. This means that parties to a contract can potentially explore rescheduling shows and gigs to a later date, failing which they can make a mutual decision to terminate their engagement all together.
Ultimately, a lot boils down to relationships. The decision on how to handle the legal, financial and logistical obligations arising from an unforeseeable crisis like the Coronavirus outbreak, is one that depends largely on the people involved, something that is especially relevant in the space of independent music and art, where we see a surplus of niche businesses and stakeholders. The important thing to remember is that circumstances such as these cannot be understood in the more conventional binary system of artist or organiser derived cancellations.
In addition to discussing liabilities, it’s also incredibly important that organisers and artists bear in mind nitty gritties related to insurance since that’s another huge area of concern (Reports just emerged that SXSW isn't equipped with the required insurance cover in light of their event cancellation). In India, the Insurance Regulatory and Development Authority of India recently issued guidelines asking all health insurance coverage to include cases of hospitalisation and treatment for COVID-19 (but bear in mind that you should check this individually with your policy provider).
While data seems to suggest that we remain optimistic and vigilant, there’s no denying the chain reaction the virus outbreak has caused on the business of live shows, entertainment and events. In this context, it’s our advice that you stay safe while also seeking appropriate and professional legal counsel when seeking to navigate obligations in the aftermath of these cancellations.