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A Guide For Couples Looking For Help After COVID-19 Cancelled Their Wedding (Part 1) – Litigation, Contracts and Force Majeure



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The pandemic has derailed couples’ wedding plans for the
past two years and hundreds of Canadians are now struggling to
negotiate with vendors who refuse to refund or pay back deposits,
citing their own dire finances resulting from COVID-19. These
foiled plans and negotiation talks raise an interesting legal
issue: how will the pandemic affect the interpretation of wedding
vendor contracts?

This is new territory for the courts, and since re-opening a few
months ago, the Ontario Small Claims Court has yet to address the
issue. This two-part series hopes to provide some guidance for
couples who are in this precarious circumstance, and are looking
for answers after a “pandemic cancellation.”

The main question is whether a “non-refundable” clause
or contract can be overturned. The short answer is yes! If a
“non-refundable” clause exists, it is still possible for
the courts to overrule this clause by relying on the common law
doctrine of frustration of contracts or
when there is a material adverse change.

Frustration of Contracts

A party may consider relying on the common law doctrine of
Frustration, or otherwise known as “material adverse
change”. Pursuant to this doctrine, and as statutorily
prescribed by the
Frustration of Contracts Act
, a court may fully
excuse both parties from their obligations where the performance of
a contract becomes legally or physically impossible, or the
contract is “frustrated” without fault of either
party.1 This can relieve parties from obligations and,
in almost all cases, return any monies paid for in advance, such as
deposits unearned without services.

Based on the concept of “unjust enrichment” and
quantum meruit a Latin term meaning “for what it is
worth”), where a wedding vendor may have incurred expenses or
provided benefits before a frustration of the contract occurs, then
the supplier is entitled to keep a portion of the deposit for their
services. Unjust enrichment is a legal concept based on the general
equitable principle that no person should be allowed to profit at
another’s expense without a legal reason for doing
so.2

Exception to Frustration of Contracts – Force Majeure

In spite of a frustration of contract, there may be a force
majeure
clause, which makes a frustration of contract
inapplicable. Couples may want to check their contract to ensure
that there is no force majeure clause within their
contract, which creates an exception to the Act. A force
majeure
clause is a provision protecting parties from events
beyond their control even if those events make it impossible to
fulfill the terms of the contract. This includes events such as
those that are an “act of God,” war, a pandemic, and so
on. The clause must state something to the effect that the contract
will survive the pandemic (or other force majeure) and the
clause must set out an alternative measure for fulfilling the
contract. However, couples may be in luck as the recent amendments
to the Consumer Protect Act, 2002 can potentially come
into play when a contract clause appears to limit the
Frustration of Contracts Act.

What to Look Out For in the Future

We plan to release a follow-up blog when the Ontario courts have
issued decisions regarding wedding cancellation and frustration of
contracts. This issue has been addressed in BC, where the
“small claims” court in BC (British Columbia’s Civil
Resolution Tribunal) denied that government restrictions due to the
pandemic have radically changed parties’ original wedding
agreements, and ruled that frustration of contracts is
inapplicable. The legal decision turned on the judge’s
perception of what are the “essential elements” of a
wedding contract.

Somewhat similar to BC’s ruling, though not related to
weddings, the Ontario Superior Court ruled that frustration of
contract didn’t apply to standard loan and security agreements
(see Bank of Montreal v. 2643612 Ontario Ltd., 2021 ONSC 4401). It did not apply to the
debtors in this case because the pandemic did not render the
agreement “substantially” different.

Seeing as the frustration of contracts is a fact-driven
analysis, couples should seek advice from our lawyers at Devry
Smith Frank LLP (‘DSF’) if they are faced with a situation
involving an event that has been cancelled due to COVID.

This article was co-authored by Katherine Berze*

Footnotes

1. Frustration of Contracts, R.S.O. 1990, c.
F.34, s. 2 (1); 1993, c. 27, Sched.

2. Kerr v. Baranow and Vanasse v.
Seguin
, 2011 SCC 10

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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