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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 canceled due to COVID.
This article was co-authored by Katherine Berze *
1. Frustration of Contracts, RSO 1990, c. F.34, s. 2 (1); 1993, c. 27, Sched.
2. Kerr v. Baranow and Vanasse v. Seguin2011 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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