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WHAT TO DO WHEN A CUSTOMER WANTS THEIR DEPOSITS BACK ON A CANCELLED EVENT
by Andrew Cromer, Attorney at AXS Law Group
The effects to the hospitality industry from COVID-19 are glaring, but some of the more subtle and unanticipated implications are the ripple effects being felt by the service/event industry resulting from cancelled events. What happens to the various deposits that a customer provides to a vendor if the event never happens? Depending on what perspective you view the issue from, the answer is complicated, with practical, legal and ethical implications at play. Take the example of a client of mine that was set to get married in May of 2020 in front of 200+ people in New York. When the pandemic hit in late March, they believed they were being responsible and prudent by moving their wedding to July of 2020. Back in March, July felt like a conservative date for when life would return to normal. All the vendors (including the caterer, the band, and the venue) all agreed to the new wedding date. Fast forward to May of 2020, it became obvious that due to safety concerns and legal implications, a wedding of 200+ people in New York would simply not take place. Based on some other variables, that made the young couple want to get married sooner than later and they opted instead for the “pandemic-chic” option of a “zoom wedding.”
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a result of the pandemic, the wedding was now cancelled and the young couple wanted their security deposit returned, my clients received a mix bag of reactions from their vendors: Vendor X was understanding. They informed my client that they had incurred some costs, and would return the security deposit, minus those costs. Seemed fair. Vendor Y was also understanding, but noted that they no longer had the money to return the full deposit. They offered a payment plan where vendor Y would pay half the money owed in installment payments, and offered the other half in credit over a 10-year period. Not a perfect solution, but also seemed fair. Vendor Z was venomous. They started to review the contract that my client signed. In their view, the language spoke for itself, and they refused any return of the deposit. Whether you view this as fair or not, it seemed rather short-sighted.
When it came time to inform each vendor that as
Whether or not my client had a contract in place with vendor X, Y, or Z that stated the deposit was non-refundable, there’s certainly a legal argument that entitles my client to a return of the security deposit. Whether it’s Force Majeure, Impracticability or Frustration of Purpose, there’s no denying that the originally contemplated agreement between the vendor and my client was frustrated by the limitations resulting from the pandemic.
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