The coronavirus pandemic has resulted in a countless number of closings and cancellations all over the world, giving rise to a tricky legal question: Can you still be required to pay for something even if you are unable to use it because of public health concerns?
For example, imagine an engaged couple who booked a wedding venue, bought plane tickets for a honeymoon, and made hotel reservations at their destination. They later find out that gatherings of more than 10 people are prohibited, and the hotel has been temporarily closed, but their flight is still a go. Can they get refunds?
The law of contracts provides some guidance in answering the question. Under a doctrine called frustration of purpose, a party to a contract can be excused from performing its agreed obligations, if the benefit that party was to receive under the contract is negated by some event that both parties assumed would not happen and that is beyond the control of the parties. (Such an event is sometimes called an “act of God” or “force majeure”.) Under the related doctrine of impracticability, a party’s obligations under a contract can be excused if it is unable to perform due to events beyond its control. A party’s obligations are not excused, however, if it has assumed the risk that an unusual event will happen. Such an assumption of risk must be made explicit in the contract.
A recent example of risk assumption was the 2020 Tokyo Marathon, which had over 38,000 athletes registered. The event was cancelled for all participants except a handful of elite runners, due to fears of spreading the coronavirus. The entrance fees were not refunded, because the runners had signed a contract explicitly stating that the entry fee was non-refundable unless the race were cancelled “due to snow, flood, structural damage due to strong wind, lightning, tornado, building fire along the course, cancellation order from the authorities concerned, cancellation due to earthquake within Japan, and in case of J-ALERT announcement (war/terrorist).” Clearly the runners’ purpose in paying the entrance fee was frustrated, but they had assumed the risk—at least in the opinion of the Tokyo Marathon—of all occurrences other than snow, flood, etc.
Coming back to the hypothetical engaged couple, they could probably insist on refunds from the wedding venue (due to frustration of purpose) and hotel (due to impracticability), unless their contracts explicitly provided otherwise. They could probably not insist on a refund for the plane tickets, because the airline did not enter into the contract assuming that it was somehow contingent on a wedding taking place.
If you are affected by similar circumstances, you should examine the “fine print” in any contracts you signed to see if you have a case for getting a refund.
