CMA Guidance on Refunds and Cancellations for Wedding Services
Updated Monday 7th September 2020
In almost all cases, where guidance or restrictions have prevented a wedding from going ahead as planned, the couple has been able to move the wedding to an alternative date.
However, in a few cases, disputes have arisen and it is helpful to know the CMA guidance, summarised below. This may help businesses find solutions to the difficult situations they are facing, however it is widely acknowledged to be more confusing and misleading than it is helpful.
You can read the full CMA statement here and we have broken down the more relevant elements below.
What does the CMA Weddings guidance include?
The guidance published on 7th September covers how the law operates in relation to contracts for wedding services that have been or will be affected by the coronavirus (COVID-19) pandemic. Its purpose is to help consumers understand their rights and to help businesses to treat their customers fairly. It is also intended to give businesses a degree of certainty about the position the CMA may take in any enforcement action. Ultimately, only a court can decide how the law applies in each circumstance and the CMA can only issue guidance.
Where contracts are affected by government guidance, businesses should work with consumers to find solutions that work for both parties.
Contracts for weddings prevented by lockdown laws
This is likely to apply to all weddings until 30th September and any that are significantly different after 30th September as a result of restriction.
Where a wedding cannot go ahead on the date agreed without the parties breaching the lockdown laws, the CMA considers that this contract is likely to come to an end (“frustrated”).
The lockdown laws are regularly reviewed, so it has been difficult for wedding businesses to plan for the future. However, when the original lockdown laws were introduced in March 2020, the CMA considers that it was reasonable for people to plan believing that restrictions would remain until late September 2020, when the original legislation was due to expire. Any contracts during that period could be deemed as frustrated and the wedding contract would probably have come to an end without either party having to terminate or cancel it.
Where lockdown laws prevent or prevented a wedding from going ahead on the agreed date, according to CMA advice the consumer should be offered a full refund, even where they have paid ‘non-refundable’ deposits or other advance payments. HOWEVER the Guidance goes on to say that the wedding business may be able to withhold certain limited amounts relating to expenses it has already incurred in respect of the wedding.
It is likely to be just for the wedding business to retain:
- money to cover services or products which it has already provided, like bespoke goods made for the consumer. If the wedding business has provided items, such as dresses and decorations, that they could re-use at a re-arranged wedding, the consumer should expect to have to pay for them.
- a limited contribution to other costs incurred by the business which have a sufficiently direct connection with the contract in question. For example, costs that the business had already incurred, such as buying perishable items for a specific wedding which could not be re-used or a fair proportion of the business’s overhead expenses that relate closely to the cancelled wedding such as staff costs.
However, according to the latest CMA guidance, even where recoverable costs have been identified, a business may not be able to retain a sum to cover all of them. That would place all the loss on the consumer which a court would not regard as fair. The CMA feels a court would be likely to take into account that it may be fair to divide the costs between the parties (since both have been unlucky and neither is at fault). A court may also take into account that the business would be able to spread the recovery of its share of these costs over its future contracts.
There are some costs that the CMA felt a court would not ordinarily allow a business to retain when refunding consumers. These include:
- costs which produce ongoing and re-usable benefits for the wedding business, such as general refurbishment costs for the wedding venue
- fixed costs of doing business, e.g. costs associated with the right to operate the venue, general staff costs, general IT system costs, other general business costs. Those are the costs a business incurs in any event, whether or not any particular wedding contract was entered into.
- duplicate costs, for example, you cannot recover the same set of costs twice from different consumers or costs that you could recover from some other source (such as from a government support scheme).
- the costs of administering a refund
The CMA would not expect businesses to refund consumers who have got their money back from an insurer, because they should not be able to double-recover what they have paid.
Application in practice
Where lockdown laws prevent (or prevented) a wedding going ahead on the agreed date as planned, the business:
- should offer the consumer an appropriate refund, in line with the above
- may be legally entitled to deduct a limited amount to cover services already provided to the consumer and a contribution to some of the costs that the business has already incurred in respect of that wedding
In many cases, where consumers have paid substantial sums in advance of their wedding, the CMA would generally expect them to be offered most of their money back. It would be for the business to justify deducting any amounts. (We have information collated from other businesses to support you with justifying an appropriate deduction).
The business and the consumer may be able to agree on a refund or agree to re-arrange the wedding to another date. Wedding businesses may offer incentives to consumers to agree alternative dates, as long as it is clear that a refund is available to consumers who want one.
If the consumer asks for a refund and disputes the amounts that the business has deducted, the consumer could take legal action to recover the remainder of the refund. Businesses should give consumers clear and transparent explanations of how they have calculated refunds to help avoid unnecessary disputes.
It is worth businesses noting that where couples have been successful in claiming on their wedding insurance, some insurers have tried to “claw back” the payment they have made from the venue or supplier. Providing the insurer with the same clear and transparent explanations of how the refund was calculated should resolve the issue.
From the experts
It is important to remember that the vast majority of couples feel that their venue and suppliers have been unbelievably supportive and understanding. Alison Hargreaves, Wedding industry expert and Guides for Brides CEO
Weddings affected government guidance which may be able to go ahead in some cases
This section deals with a more complicated situation in which contracts for wedding services have been affected by a mixture of lockdown laws and government guidance but it is not necessarily illegal for them to go ahead. The wedding contracts most likely to be affected by the evolving legal restrictions and government guidance are those for weddings:
- which were scheduled to take place after the dates the original lockdown laws changed
- where, before those laws changed, both parties continued to work on the basis that the wedding would somehow go-ahead
- where there is now no specific lockdown law, such as a local lockdown law, preventing the wedding taking place on the agreed date
This section of this statement applies to wedding contracts that meet those three criteria.
Effect on relevant wedding contracts
Most wedding contracts are likely to cover a number of key elements such as the venue, the catering and the reception or other entertainment facilities.
In the CMA’s view, where a key element of the wedding cannot go ahead without breaching a restriction imposed by the lockdown laws, or the business assesses that a key element cannot safely and lawfully be provided, the contract may be determined by a court to have been frustrated. This is because the wedding would be radically different to what was originally agreed.
Similar reasoning applies in relation to the number of guests who can attend the wedding and/or reception. Where the number of guests who can safely and lawfully attend the wedding is radically different to that agreed in the contract, the CMA considers that the contract is likely to have been frustrated.
The differences between the services the wedding business agreed to provide under the contract and those it is able to provide within the limitations imposed by lockdown laws or government guidance may in some cases be less significant. The differences may relate, for example, mainly to social distancing and other safety measures. In these cases, it is much less likely that the contract would be frustrated and the above section about weddings prevented by lockdown laws would not apply.
However, where the business fails to provide elements of the wedding agreed in the contract (because it is complying with lockdown laws and/or guidance), the CMA feels it would probably be in breach of contract. That may entitle the consumer to bring a claim for damages. To avoid that scenario, the CMA suggests it would be sensible for the business to provide the consumer with a pro-rata price reduction to reflect the services that it would not be providing, or would be providing differently.
Application in practice
This situation is likely to cause uncertainty and anxiety for both consumers and wedding businesses. So, the parties would need to discuss the position. Businesses are expected to act fairly and constructively where refunds or price reductions are due, however where a contract has been negotiated based on a large number of guests, it is hard to understand the CMA’s position on suggesting a pro-rata reduction. Again, the business and the consumer may be able to agree what the right level of a refund or price reduction should be or agree to re-arrange the wedding to another date.
A business might try to use terms and conditions which seek to limit its liability to refund consumers whose weddings cannot go ahead or allow it to recover additional costs. The CMA considers that a court would be likely to find that such terms are unfair and unenforceable if they seek to prevent consumers from obtaining refunds.
A wedding business might try to rely on a term in its contract which says that it can provide something substantially different to what was originally agreed. These are known as ‘variation clauses’. Such terms are, however, likely to be unfair (and unenforceable) unless they:
- only allow the business to change what it agrees to provide in a narrow range of specified circumstances that are genuinely outside its control (such as changes in the law)
- give the consumer the right to advance notice of any proposed change
- give the consumer the right to a pro-rata price reduction if they accept the change and (where the change is significant) to cancel the contract and get a refund if they do not accept it
The CMA is unlikely to object to voluntary arrangements entered into between businesses and consumers provided they are fairly agreed, the consumer is made fully aware of their legal rights, and the business does not pressure the consumer in any way to accept the new arrangement. In practice, this has been the solution in most cases.
Where a consumer cancels the wedding contract in circumstances where the wedding could go ahead, the CMA considers that they should not face disproportionately high charges for ending the contract.
Terms saying no refund is available in any circumstances, or that a consumer must pay in full if they cancel, without taking into account any savings to the business for not having to provide the wedding, are likely to be considered unfair and therefore unenforceable.
CMA guidance states that any amounts that a business can keep under the contract must reflect what it is actually losing as a result of the cancellation and must not be excessive. The contract must set out clearly how the cancellation charge will be calculated.
In practice, the consumer should not be liable for anything more than a fair cancellation charge which is likely to be a proportion of the price of the wedding reduced to reflect:
- the pro-rata reduction that the consumer would have been entitled to had the wedding gone ahead under the likely restriction
- savings to the wedding business because it is not providing the wedding
- any ability the business has to re-use the date for another wedding
- the actual losses the business will incur because the contract is cancelled
You’ll notice in the guidance that Force Majeure isn’t mentioned at all, despite it being a clause so many businesses have relied on. We are aware that the CMA know how many contracts include a Force Majeure clause and are surprised that it isn’t specifically addressed, however they have clarified with us that it is covered within their guidance on unfair contract terms.
Pages 80-82 of their Unfair Contract Terms guidance, linked from the piece, includes the following:
The term ‘force majeure’ to describe events which are completely outside the trader’s control is sometimes used in clauses of this kind. It is legal jargon and best avoided, and should never be used without clear explanation. Plain language is required for terms in consumer contracts under the Act.
Laws v Guidance
‘Lockdown laws’ introduced at the start of the pandemic created legal restrictions on some activities. Further laws have been introduced, such as the requirement to self-isolate when returning from certain countries, and ‘local lockdowns’.
Some restrictions have been lifted and replaced with guidance, which is not legally binding. However, to help stop the spread of the coronavirus, businesses and consumers should follow government guidance.
Businesses that mislead consumers about lockdown laws or guidance, or put pressure on consumers not to comply, may infringe consumer protection law.
It’s worth understanding 3 principles:
- Frustrated contracts
- Breach of contract
- Consumer protection law
A contract will be ‘frustrated’ if, due to no fault of the parties, something happens after the contract was entered into which means it can no longer be performed at all or performance would be radically different to what was agreed. As a result, the contract comes to an end.
The laws for each of the 4 nations differ, but generally, consumers are entitled to a full refund, subject to certain exceptions.
The ability to make deductions, and the amount, depends on circumstances, including the nature of the service being provided. Few cases on deductions have been considered by courts, so it is hard to establish what the outcome of a court case would be.
2. Breach of contract
If a contract is not ‘frustrated’ but one party doesn’t meet its obligations, for example by providing a different service to the one agreed, they are likely to be in breach of contract. Depending on the seriousness and circumstances, the other party may be entitled to continue with the contract and get a price reduction, or terminate and get a refund.
3. Consumer protection law
Legal principles, such as frustration and breach of contract, apply to all contracts. However, where a contract is between a business and a consumer, then consumer protection law will apply too.
Consumer protection law ensures that businesses treat consumers fairly in all their dealings with them.
The Consumer Rights Act of 2015 requires consumer contracts to be fair and transparent.
Unfair terms are not binding and are not enforceable.
If, as a business, you are reading this and have concerns about the validity of your own policies, you won’t be alone. Our recent survey showed that the majority of wedding businesses have tried to do the right thing, and that is all anyone could expect at the height of an unprecedented situation. This refunds and cancellation statement comes ahead of the guidance specific for wedding businesses, which may help answer more questions. But, ultimately, this is just the CMA’s understanding of how consumer laws should be applied. Individual cases could only be determined by a law court and you should do what you know is right for your business and your couples.