(Status: 16 April)
The event sector has been hit hard by coronavirus and the official event bans. From when and to what extent business can be resumed is impossible to predict. Organizers are being forced to make decisions about the fate of planned events on the basis of uncertain facts, often with far-reaching economic consequences. The "voucher solution" envisaged by the Federal Government will only bring limited relief. These vouchers do not apply to events in a professional context and with a professional audience. In this case, the following legal principles are decisive.
1. Determining factor: absolute or relative fixed-date transaction?
The determining factor is the classification of the event contract as either an absolute or relative fixed-date transaction. If the date is so important that the service can no longer be provided at a later date, then the transaction is an absolute fixed-date transaction. In the case of a relative fixed-date transaction, the purpose of the contract can still be fulfilled even if the service is provided on later date.
The importance of the date of the event must be assessed on a case-by-case basis. A high level of investment expenditure can be just as much a sign of an absolute fixed-date transaction as long-term planning, intensive coordination between the organizer and (a large number of) participants or a seasonal connection. Further criteria can be the internationality of the event, its participants and visitors. International trade fairs are therefore more likely to be absolute fixed-date transactions than regional seminars, for example.
2. Official event bans
Due to the nationwide contact ban, events remain officially prohibited until at least 3 May 2020, and major events - which are yet to be defined by the federal states - are even prohibited until at least 31 August 2020. Since events cannot be held at a later date if they are classified as absolute fixed-date transactions, they become legally impossible (§ 275 (1) German Civil Code [Bürgerliches Gesetzbuch - BGB]). The organizer is not obliged to provide its service, but must refund ticket prices that have already been paid (cf. § 326 (1) BGB). Since it is not responsible for the cancellation, it is not liable for damages. Any expenses incurred in connection with the event therefore have to be borne by visitors to the trade fair or seminar, for example, unless they were purchased from the organizer as part of a package.
If the business event is a relative fixed-date transaction, the service remains possible even if it cannot be held on the planned date. However, an official ban will regularly constitute a serious change of circumstances after conclusion of the contract and thus a frustration of contract (§ 313 BGB). This primarily entitles the organizer to adjust the contract, i.e. normally to postpone the date of the event. The organizer may only withdraw from the contract if its general terms and conditions envisage this or if it is impossible or unreasonable for it to postpone the event. If the organizer withdraws from the contract despite the fact that these conditions have not been met, it will be liable for damages. It often also faces contractual penalties.
3. Postponements and cancellations of events without an official ban
Events that are (currently) to take place after 3 May 2020 and are not major events may fundamentally be held. Organizers cannot invoke (legal) impossibility in this respect. If the event contract does not contain any special provisions, then regardless of the type of fixed-date transaction, the organizer is only entitled to adjust or cancel the event in accordance with the principles on frustration of contract.
It is difficult to assess whether the contract is frustrated even without an official ban. The basis for weighing up and deciding on this issue is unclear, because it is not yet known how measures to relax the contact bans in the event sector will look in concrete terms and when they will "reach" the sector. The further into the future the date lies, the more uncertain the balance of interests becomes. Organizers are faced with a dilemma: should they still make the investments necessary to carry out the event according to plan and thus increase their economic risk? Or should they postpone the event or even cancel it so that they can "at least" limit their damages to the cancellation fees they incur?
There can be no blanket answers to these questions. The risk of infection is still high and contact restrictions will remain in force. Even without nationwide bans, events will only be possible with considerable restrictions and conditions. It stands to reason that this constitutes a frustration of contract, enabling an adjustment of the contract, for example a reduction in the number of participants whilst maintaining hygiene measures. If this is out of the question, a cancellation may be justified. A comparison with events planned for the same period, especially events of the same type, can aid the decision-making process.
4. Conclusion and recommendations for action
The official ban creates clear facts. However, the cancellation of events is only justified if they are absolute fixed-date transactions. In view of the often uncertain classification of the event contract, this should be considered carefully, especially since it is the organizer who bears the burden of representing the impossibility or unreasonableness of a postponement in case of relative fixed-date transactions. In order to avoid disputes, the specialist organizer would be well advised to coordinate the procedure with its contractual partners, e.g. trade fair stand constructors and caterers. Especially in case of events to be held in the short to medium term, they should make contact and seek solutions at an early stage. This is especially the case with regard to the difficult question of (from) when a frustration of contract exists.