October 14, 2020 by David Gambrill
A public health emergency such as a pandemic may be an unforeseen “act of God,” but that doesn’t necessarily mean it will make it illegal or impossible for a business to fulfill the terms of a commercial contract with a client, the B.C. Civil Resolution Tribunal (CRT) found recently.
While the contract in Grant v. Waters was not an insurance contract, the CRT decision means that commercial service providers — in this instance, a wedding caterer — may not necessarily be in breach of contracts with clients just because public health regulations limit the services they can provide (depending on the cancellation clause).
The case may be of some interest to liability insurers who must defend their commercial clients in contract cancellation disputes related to the pandemic. [As an aside, the CRT found that the unanswered, ancillary question of whether the wedding planner could recover insurance money to pay back the full deposit to the client did not affect its decision.]
Grant v. Waters arose from a dispute between a B.C. wedding planner, Toque Catering, and Meghan Grant, who had to cancel her May 30, 2020 wedding due to the COVID-19 pandemic. The case turned on who (or what) was responsible for cancelling the contract.
Toque partially refunded Grant her deposit for the event cancellation, but held back $1,902, which represented 25% of the overall cost of the wedding event. In addition to laying out the conditions for this 25% cancellation fee, the contract also contained the following “force majeure” clause: Each party could terminate the contract if the contract became illegal or impossible to perform “due to acts of God, war, terrorist act, disaster, strikes, civil disorder, or other comparable unforeseen emergency.”
The CRT found that the pandemic — and the public health regulations that flowed from it — constituted an “unforeseen emergency.”
In the contract, the bride spelled out her desire for a wedding with 100 guests.
Toque said B.C.’s public health regulations, which took effect about two weeks before the wedding was scheduled, limited their ability to hold a large gathering to just 50 people (with no buffet). Nevertheless, the wedding planner told the court that it was still able to provide its wedding services within the limits of public health guidelines, so it was not impossible or illegal to carry on with the wedding (there would just be fewer than 50 guests). Grant, therefore, was responsible for cancelling the contract, which is why the company kept its cancellation fee.
Grant, on the other hand, argued that the public health rules designed to prevent the spread of COVID-19 made it impossible for the caterer to fulfill the terms of the contract, which was for a guest list of 100 people. She also did not wish to re-schedule the date of the wedding, as proposed by the wedding planner. And so in her view, since she did not cancel the contract — in essence, the pandemic did — no cancellation fee applied and she was entitled to a full refund of her total deposit of $4,009.
CRT Member Lynn Scrivener found in favour of the wedding caterer.
“I acknowledge Ms. Grant’s position that a reduction in her guest count is a radical change to the terms of the contract,” Scrivener wrote in her decision, released Tuesday. “However, I find that the purpose of the contract, being the provision of catering services, was not affected.
“Evidence from Toque’s website confirms that it continued to operate within the requirements of the applicable public health orders, and email messages show that it was willing to provide catering services to Ms. Grant, subject to the 50-person limit. Based on the evidence before me, I find that Toque remained able and willing to provide catering services under the contract.
“While Ms. Grant did not intend to have a smaller event, I find that this requirement did not strike at the root of the contract or amount to a radical change to the terms of the parties’ agreement. Therefore, the contract was not illegal or impossible to perform, and it could not be terminated by the force majeure clause.”