Business Continuity and Cashflow

If you need to cancel a reservation,the first step will be to check the relevant contract terms with regards to cancellation. Whether any refund is payable will be dependent upon a number of factors and will vary on a case by case basis. Such factors may include: when the booking was made; when the booking was cancelled; and whether any payment has been made yet by the customer.

In particular, the clauses in relation to breach of contract and Force Majeure events are likely to be relevant (please see FAQs below in relation to Force Majeure clauses and breach of contract claims).

If a booking is cancelled and the contract does not expressly providefor the ability to do this, then it is likely that in the absence of any force majeure or other such clausecovering the situation, the contract is deemed to be breached. The result of this would be thatthe customer is likely to have a remedy. A refund is usually the most appropriate option in these circumstances. However, again it is important to carefully check the contract and to consider whether there are any appropriate limitation provisions. A
well- drafted contract or set of terms and conditions should contain details of any caps or limits that will apply to claims under the contract.

The property owner may consider alternatives such as offering a voucher or rescheduling a booking, which may be a more convenient option for both parties. However, there may be circumstances where it would be impractical for a consumer to accept this and unless the contract deals with this point, they are entitled to request a refund. The Consumer Rights Act 2015 sets out rules relating to the supply of services to customers, and it is more than likely to be considered unreasonable to expect a consumer to pay for a service which they have not received.

As a last resort, the consumer can try to contact their insurer if they have a policy in place.

For further advice, please contact Consumerline: https://www.nidirect.gov.uk/contacts/contactsaz/consumerline.

Yes, given the current industry climate businesses may choose to ensure that they have a robust set of terms and conditions in place which includes a change to their cancellation policies. For example, it might encourage guests to book if it was easier to cancel that booking.

Any new terms and conditions including the cancellation policy must be made readily available for review by potential guests and should clearly set out what will happen in the event of a cancellation. It is advisable to flag that a new policy is being put in place before any reservation is made.

There is no implied contractual liability for a host to provide alternative accommodation in the event of a cancellation.

However in some scenarios, in particular where a reservation has been made as part of a package holiday, it is important to check the contract terms and conditions as compensation may be payable for the cost of alternative accommodation.

Force Majeure contracts clauses potentially excuse one party from fulfilling its contractual obligations where those obligations have become impossible or impracticable to perform, due to an event that the parties could not have anticipated or controlled.

With no recognised definition under Northern Irish law, for a party to consider a claim for Force Majeure to excuse non-performance, there needs to firstly be a Force Majeure clause in the contract.
Once established that there is a Force Majeure clause, the party will then need to decide whether the coronavirus outbreak is a ‘Force Majeure Event’. This will depend on the wording of the actual clause and if, for example, “disease” or “epidemic” is expressly included, noting that most contracts will define the events by reference to general criteria, with a non-exhaustive list of matters that may constitute such an event.

In the absence of a reference to specific events, a party may have to rely on more general contractual terms, such as circumstances beyond a party’s reasonable control or for which they could not reasonably have provided for.

Most contracts will require an affected party to take reasonable steps in order to mitigate any impact that may result from a force majeure event. What this may mean in practical terms is that steps will have to be taken and alternative arrangements put in place in order to ease the overall impact upon a
business.

Contracts will often include notice requirements, meaning parties will need to ascertain whether prompt notification is a contractual condition to relief or not, and whether these provisions have been complied with.

Since Force Majeure is a contractually defined right, the options available in the event of a Force Majeure Event will be specified in the contract, and the contract terms should therefore be reviewed in the first instance.
In most contracts, establishing force majeure will lead to relief from performance, thereby avoiding the risk of a default termination, and an extension of time to target dates. Suspension of the obligation to perform for a given period (usually the period that the Force Majeure subsists) will often be included.
Extended periods of Force Majeure can lead to a right for one or more parties to terminate the contract.
If the parties do not wish this to happen, it is important to engage in discussions sooner rather than close to the deadline. 

Under Northern Irish law, as an alternative to relying on a Force Majeure clause in a contract, a party may claim relief under the doctrine of frustration. However, the threshold for frustration is high — performance must be rendered impossible, not simply more difficult/expensive.
Depending on the contractual wording, ‘Change in Law’ clauses may also provide an avenue for relief in circumstances where government bans on the movement of goods or people come in to effect.
In some circumstances, individuals and businesses may be able to rely on insurance policies in place. A party that suffers a loss as a result of disruption arising from Covid-19 should review its insurance policies to determine if such loss is covered. Insurance commonly has strict provisions requiring notification to insurers of actual or potential claims within a particular timeframe, together with duties to mitigate loss and to consult with insurers before taking action, and therefore it is key to identify these issues early.

As discussed above, in order for Covid-19 to relieve a party from their obligations under an agreement, the party seeking the relief would need to be able to prove, either a Force Majeure event had taken place, the doctrine of frustration applies, or a change of law provision means that they were unable to perform their obligations.

Further, a party would need to evidence that such event has rendered it impossible for them to fulfil their obligations under the contract. Given the practical steps required in order to adhere to payment provisions, it would be difficult to foresee an event such as the outbreak of the coronavirus, prohibiting a party from making payments under a contract, albeit the outbreak may have had a significant impact on their economic standing. 

Payment will depend on the provisions of the contract and as such, the terms of each contract should be reviewed to determine where a party stands on their obligation to pay. However, the general position if a party has not complied with their obligations to provide goods or services, is that payment would not be given.

If the scenario in question is one that a party has successfully established that a Force Majeure Event under the contract has occurred, and consequently that party has ceased providing their services or goods, payment obligations will generally be suspended during the period of Force Majeure and the contract terms will detail the contractual consequences in such event.

As noted above, whether the COVID-19 outbreak is enough to allow a party to be excused from their contractual obligations will depend, for the most part, on the specific terms of the contract.

The first step is to review the relevant terms of the contract. Does it contain a Force Majeure clause?

The parties should look to whether an ‘epidemic’ or ‘disease’ outbreak is expressly included as a force majeure event (please see note above of force majeure clauses).

If a contract is silent on force majeure, it may still be possible to argue that the outbreak has frustrated the contract or that performance of the contract has become objectively impossible.

The frustration of a contract may excuse the performance of a parties obligations (i.e. delivery) where the performance is possible but no longer provides a party with the benefits that induced them to make the bargain because of the intervening unforeseeable events.

A court’s decision regarding whether to excuse a party’s non-performance based on frustration may turn on the foreseeability of the COVID-19 outbreak and the overall purpose of the agreement in place. Generally invoking the doctrine of frustration is limited to instances where the event is wholly unforeseeable and renders the contract valueless to a party.

It can be a difficult legal argument to establish. 

It is not uncommon for some commercial contracts to contemplate and allocate risk among the parties in the event of a material adverse change (“MAC”) or material adverse effect (“MAE”) to the business.

If triggered a MAC or MAE may allow a party to terminate the agreement or otherwise avoid performance. Parties should consider abiding by any notice requirements associated with a MAC and or MAE.

In light of the above parties should review the contract in question to evaluate whether there is the possibility to claim compensation for the loss suffered by the party failing to fulfil its contractual obligations.

In unprecedented times like those that we find ourselves it is natural for businesses to worry whether they will receive payments for invoices on time. This new found economic uncertainty as a result of COVID-19 means that cash flow is of utmost importance, especially for businesses operating in the
tourism and hospitality sector in Northern Ireland. If there is a contract in place with clear payment terms, then parties have a legal right to be paid. Unless you have agreed an alternative payment date or any of the above circumstances apply (eg Force Majeure), customers must pay in accordance with the payment terms in the contract. Usually this is within a set period of days after receiving your invoice or the goods or service.
The information below is intended to help decide what steps may need to be taken or considered regarding receiving payment in light of the spread of the COVID-19 virus.

1. Proactively follow up invoices
   It is likely that the tourism and hospitality industry will be heavily affected by the Coronavirus, if you can, contact customers now to remind them of the pending invoice(s) and discuss whether they will
   be able to pay on time or whether you need to discuss putting a payment plan in place.
2. Offer an incentive for early payments
   Considering talking to customers that owe money and offer a discount if they settle early. You could find that those customers who can afford to do so might appreciate the discount in these uncertain times and you will have added security of being paid sooner.
3. Proactively follow up late payments
   It is perhaps worth noting that when an invoice becomes payable the law on late payment allows you to charge interest to a customer. Consider notifying the customer of the late payment interest charge, this often acts as a motivator to have payments made.
4. Legal Routes (i.e. Statutory Demand)
   If discussions with the customer prove ineffective members can decide to implement more stringent measures. Consider the use of a statutory demand.

The first step here is to review the terms of the contract in question to evaluate whether access can be restricted and/or services can be withheld where payment has not been made (i.e. whether the provision of the services are subject to payment being received). The general legal principle around payment terms is that a party has a legal right to be paid, however in terms of when the actual payment is to be made, this can be anytime within 30 days of receipt of an invoice or delivery of goods or provision of services. Payment cannot be demanded any time prior to this statutory period unless expressly set out in the contract in question.

Aside from this, members should consider whether insurance may cover losses sustained from COVID-19 related disruptions. This coverage may apply to trade disruptions or for losses related to quarantines or other travel restrictions and closures or general liability insurance. Members should not only assess the insurance policies that may apply but consider providing notice under such policies at this time.