Wedding services affected by COVID-19: statement of the CMA's position on cancellation and refunds

Introduction

This statement sets out the CMA’s views on how the law operates in relation to contracts for wedding services which have been or will be affected by the coronavirus (COVID-19) pandemic.

Ultimately only a court can decide how the law applies in each case. The CMA is providing this statement of its views because many couples have not been able to get married as planned as a result of the government public health measures introduced to restrict the spread of the coronavirus.

The statement is produced in direct response to clear and urgent problems being experienced in this industry sector.

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.

This statement adds to, and is consistent with, the CMA’s existing general statement on consumer contracts.

Some important concepts, including about the law of “frustration”, are set out in the glossary of technical terms.

Status of lockdown laws and guidance

Compliance with what we refer to as “lockdown laws” (see the glossary of technical terms) is mandatory. Compliance with government guidance is not currently mandatory in itself, although following it is still very important to help stop the spread of the coronavirus.

Where a business engages in business practices which lead to government guidance being contravened, this may infringe consumer protection law.

1. Contracts for weddings prevented by lockdown laws

This section deals with contracts for weddings services where the wedding has been prevented from going ahead because it would probably result (or have resulted) in the parties being in breach of lockdown laws.

Where a wedding cannot (or could not) 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 (in legal terms, it is said to have been “frustrated” – see glossary of technical terms).

In such circumstances, the consumer will be entitled to a refund, where they have already paid money, and will no longer be liable to make any further payments (see ‘Refunds’ below).

Going ahead with weddings could breach or could have breached lockdown laws including:

  • the restrictions imposed under the original lockdown laws in the early stages of the pandemic, which required wedding venues to close and prohibited people leaving their homes and attending gatherings
  • further restrictions imposed under revised lockdown laws, which limited the numbers of people who could attend a wedding
  • restrictions imposed by local lockdown laws, such as local laws that require venues to close or require people to stay at home
  • specific restrictions imposed by local authorities under their lockdown legal powers

When this section applies

The pandemic situation has changed rapidly over time, and the lockdown laws are regularly reviewed, meaning it has been difficult for wedding businesses and consumers to plan for the future.

However, when the original lockdown laws were introduced in late March 2020, the CMA considers that it was reasonable for people to plan on the basis that the same restrictions would remain in place until late September 2020 (when the original legislation was due to expire).

Whilst some couples may have been content to wait and see whether their wedding could go ahead, for many this was not a viable option – particularly where they had to take a decision about whether to spend money.

The CMA therefore considers that, where a wedding was scheduled to take place between late March 2020 and late September 2020, before the original lockdown laws changed in July 2020 the parties were entitled to take the view that the wedding could not go ahead (i.e. that the contract was frustrated).

In those circumstances, the wedding contract would probably have come to an end without either party having to terminate or cancel it.

This section of this statement therefore applies to both:

  • weddings scheduled for between late March 2020 and the date the original lockdown laws changed in the relevant part of the UK (see glossary of technical terms for the relevant dates in July 2020)
  • weddings scheduled up to late September 2020 where, before the original lockdown laws changed, the parties took the view that the wedding could not take place

Local lockdown laws imposed subsequently in specific areas of the country may also prevent weddings in that area from going ahead on the agreed date, with the result that the contract is frustrated and entitling the couple to a refund. Part 1 of this statement would therefore also apply in those cases.

Refunds

Where lockdown laws prevent or prevented a wedding from going ahead on the agreed date, the starting point under the law is that the consumer should be offered a full refund (see section 1(2) of the Law Reform (Frustrated Contracts) Act 1943).

Consumers would be entitled to refunds even where they have paid what the business says are ‘non-refundable’ deposits or other advance payments.

The wedding business may, however, be able to withhold certain limited amounts relating to expenses it has already incurred in respect of the wedding.

Exceptions to full refunds

There may be cases where the wedding business has already provided some services to the consumer, and incurred some costs, before it became apparent that the wedding would be prevented by lockdown laws.

There is no automatic legal right for a business to deduct its costs from a refund but it may be able to do so where this would be just in all the circumstances of the case.

Whether or not it would be just would ultimately be for a court to decide.

Each case will have to be assessed on its own merits but, in the CMA’s view, it is likely to be just for the wedding business to retain:

  • category A: money to cover services or products which it has already provided, like bespoke goods made for the consumer, which have an ongoing value that the consumer will continue to benefit from even after the contract has ended
  • category B: a limited contribution to other costs incurred by the business which have a sufficiently direct connection with the contract in question, such as the costs of staff time spent specifically on planning the wedding.

Given the nature of wedding contracts, the CMA considers that there are likely to be few sums falling within category A and some costs the business could retain under category B.

A. Services and products

If the wedding business has provided a consumer with bespoke items or goods that they could re-use at a re-arranged wedding, the consumer should expect to have to pay for them. It would, the CMA considers, be reasonable (and therefore just in the circumstances) for the business to withhold from a refund its costs in producing the items or goods and a reasonable profit margin for them, as provided for in the contract.

B. Contribution to costs

Where lockdown laws prevent (or prevented) a wedding from going ahead, it is likely that the business will have incurred some costs that a court would allow it to retain when giving the consumer a refund. The legislation governing the retention of such costs does not specifically outline which costs may be retained and which may not, and nor have the courts provided any detailed guidance on this. The CMA sets out below its view on the costs a court would be most likely to permit a business to retain under the relevant legislation.

The CMA considers that the business may withhold a proportion of its costs which:

  • have a sufficiently direct connection with the specific contract concerned (so, not for example, the venue’s general refurbishment and maintenance costs)
  • were actually incurred before the wedding was prevented from going ahead
  • have gone to waste because they did not produce any product or benefit to the business which it could use in other contracts

Examples of costs that may fall within this category include:

  • costs that the business had already incurred, such as buying food or flowers (or other perishable items) for a specific wedding and which it could not re-use for another wedding
  • a fair proportion of the business’s overhead expenses that relate closely to the cancelled wedding, like staff and other costs involved in planning for it

In the CMA’s view, even where recoverable costs within this category 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 and, in the circumstances, the CMA considers that a court would not necessarily regard that as just.

Each case has to be assessed on its own facts. However, in the CMA’s view, 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, the CMA considers, take into account the fact that the business would be able to spread the recovery of its share of these costs over its future contracts.

Whilst it has broad discretion, the court may therefore be attracted to the idea of splitting the costs falling into category B (contribution to costs) equally between the parties. The business may be able to recover a higher proportion, but it would be for it to justify doing so in the particular circumstances of the case.

Unrecoverable costs

There are some costs which, in the CMA’s view, 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
  • duplicate costs (such as costs the business could recover from another source)
  • the costs of administering a refund

Costs which produce ongoing and re-usable benefits for the business

In the CMA’s view, unrecoverable costs in this category include the costs of a venue’s general refurbishment and maintenance. These would not have been incurred for the provision of specific weddings, and the business would have the benefit of the refurbishments and maintenance under other contracts (e.g. for other weddings that do take place).

Fixed costs of doing business

The second category of unrecoverable costs which, in the CMA’s view, a business may not deduct from refunds are its fixed costs.

These include:

  • costs associated with the right to operate the venue (such as depreciation or rental payments)
  • general staff costs (other than those identified as potentially recoverable above)
  • general IT system costs
  • other general business costs (such as utility costs, bank charges and business rates)

Those are the costs a business incurs in any event, whether or not any particular wedding contract was entered into. In the CMA’s view, a court would not regard it as just to recover these from specific consumers whose weddings were prevented from happening.

Duplicate costs

The business may not, in the CMA’s view, recover the same costs twice.

It cannot therefore, for example, recover the same set of costs twice from different consumers or require a consumer to pay costs that it could recover from some other source (such as from a government support scheme aimed at helping businesses during the pandemic).

The costs of administering a refund

In the CMA’s view, the business cannot charge the consumer an administration or other fee to cover the costs of making a refund required because the wedding could not go ahead.

Such costs fall outside the costs the law would allow a business to recover where a contract is frustrated.

Insurance

Some wedding businesses may advise consumers to obtain insurance cover in case their wedding is cancelled.

This statement sets out the CMA’s view of consumers’ rights to refunds from the wedding business they had their contract with, whether or not they have insurance (although 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).

Whether a consumer could make a claim from an insurer as an alternative depends on the terms of their policy. Where they get a refund from the wedding business but it is subject to deductions as set out in this statement, they may also be able to recover the balance of their money under their insurance policy.

Insurance providers are regulated by the Financial Conduct Authority.

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 a 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.

The business and the consumer may be able to agree what the right level of a refund should be. It is also open to them to agree to re-arrange the wedding to another date, as an alternative to making a refund (as long as the option of a refund is just as clearly and easily available).

It may be that this kind of outcome is in both parties’ interests and wedding businesses may offer incentives to consumers to agree alternative dates (again, 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.

In certain circumstances, where a business tells a consumer that he or she is not entitled to a refund or refuses to refund the full amount owed, this may amount to a misleading action or aggressive practice which is in breach of consumer protection law.

Businesses, on whom the burden of justifying deductions to refunds lies, should give consumers clear and transparent explanations of how they have calculated refunds, including itemised breakdowns of costs incurred. This will help avoid unnecessary disputes.

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.

Over time, governments in the UK have each sought in their own ways to ease the lockdown laws and have replaced parts of them with guidance about what people should do. That process may continue where it is possible to ease restrictions further.

Particular changes to the original lockdown laws were made on the following dates:

  • 4 July 2020 in England
  • 10 July 2020 in Northern Ireland
  • 15 July 2020 in Scotland
  • 25 July 2020 in Wales

These changes removed or altered some of the legal restrictions which had the effect of requiring wedding venues to remain closed and/or prohibiting people leaving home and attending gatherings. Governments have also issued guidance about where and how wedding ceremonies and receptions can safely take place, taking account of legal and safety requirements (including under existing health and safety laws).

Whether and how these developments affect wedding contracts and consumers’ rights to refunds will depend on the circumstances.

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

Wedding businesses will have to comply with any legal restrictions in force. They will also have to assess whether and how the relevant wedding ceremonies and receptions can take place.

The effect on the wedding contract and consumers’ rights will depend on the results of that assessment.

Significant impact on wedding contracts

Most wedding contracts are likely to cover a number of key elements. Those may include:

  • the venue
  • the catering (food and drink) that will be provided
  • the reception or other entertainment facilities that will be provided

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 (treated by the law as having come to an end).

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.
The number of guests is likely to be a key aspect of the wedding contract (whether or not this is the case will depend on the terms of the contract).

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.

Where the contract is frustrated, the position set out in part 1 of this statement (about weddings prevented by lockdown laws) would apply. In the CMA’s view, the consumer would be entitled a refund which may be subject to the kinds of limited deductions described above.

More limited impact on wedding contracts

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.

It may be, for example, that the wedding can go ahead at the agreed venue, with catering and a reception mainly as agreed, for a substantial majority of the agreed number of guests.

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 (treated by the law as having come to an end), and part 1 of this statement (about weddings prevented by lockdown laws) would not apply.

Nevertheless, where the business fails to provide elements of the wedding agreed in the contract (because it is complying with lockdown laws and/or guidance), it would probably be in breach of contract.

That may entitle the consumer to bring a claim for damages. To avoid that scenario, 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

The CMA understands that cases that fall into this section of this statement are likely to cause uncertainty and anxiety for both consumers and wedding businesses.

It is likely that the parties would need to discuss the position. The CMA expects that businesses would act fairly and constructively where refunds or price reductions are due. If not, the CMA can consider complaints and has powers to take enforcement action, as do other bodies such as local authority trading standards services. Consumers may also bring claims against wedding businesses themselves.

As with cases that fall into part 1 of this statement (about weddings prevented by lockdown laws), the business and the consumer may be able to agree what the right level of a refund or price reduction should be.

It is also open to them to agree to re-arrange the wedding to another date (as long as the option of a refund is just as clearly and easily available where the contract is frustrated). As in other cases, this kind of outcome may suit both parties and businesses may offer incentives to consumers to agree alternative dates.

3. Contract terms

This section considers how the terms and conditions of a particular wedding contract may affect a consumer’s rights.

Terms restricting refunds

A business might try to use terms and conditions which seek to limit its liability to refund consumers whose weddings cannot go ahead or to 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 obtaining refunds as set out in this statement.

Variation clauses

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 (for example, a smaller wedding at a different venue). 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 pressurise the consumer in any way to accept the new arrangement.

Cancellation Clauses

If the wedding can go ahead but with differences from what was originally agreed, some consumers may decide that they would rather cancel it anyway.

If they do, it is likely that the contract will contain terms that say the consumer has to pay a cancellation charge. This may affect how much of a refund they get.

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 or being able (where it can) to use the date for another wedding, are likely to be unfair (and unenforceable).

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 also 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 (if one is included in the contract at all). That 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 in a way that was different to what was originally agreed
  • 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

Whether this results in the consumer getting money back will depend on how much they have already paid under the contract.

Glossary of technical terms

Lockdown laws

At the start of the pandemic, governments in the UK put in place similar legal restrictions designed to combat the spread of the coronavirus in the UK:

  • for England: The Health Protection (Coronavirus, Restrictions) (England) Regulations 2020
  • for Wales: The Health Protection (Coronavirus, Restrictions) (Wales) Regulations 2020
  • for Scotland: The Health Protection (Coronavirus) (Restrictions) (Scotland) Regulations 2020
  • for Northern Ireland: The Health Protection (Coronavirus, Restrictions) Regulations (Northern Ireland) 2020

As the situation has developed, the original laws have changed and new laws have also been introduced (which may be different in each of the 4 nations and in particular areas). Particular changes were made to the original lockdown laws on 4 July 2020 in England, 10 July 2020 in Northern Ireland, 15 July 2020 in Scotland and 25 July 2020 in Wales.

This is a fast-moving area, and consumers and business should check which laws affect them and the contracts they have entered into, and whether the laws have been changed or replaced.

Frustration

A contract will be ‘frustrated’ as a matter of law 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.

Other consequences of frustration, in particular what happens to money already paid under the contract, will depend on which of the 4 nations’ laws apply to the contract (although the position is likely to be similar in each case).

Under English law for example, which applies in England and Wales, certain consequences of frustration are set out in the Law Reform (Frustrated Contracts) Act 1943. Under this legislation, parties to the contract are no longer liable to make any outstanding payments and they are entitled to get back anything they have already paid, subject to certain exceptions.

In Northern Ireland the relevant legislation is the Frustrated Contracts Act (Northern Ireland) 1947. There is no equivalent legislation in Scotland, but similar consequences are likely to flow under the law of unjustified enrichment.

The ability to make deductions, and the amount, will depend on the circumstances, including the nature of the service being provided. Relatively few cases on such deductions have been considered by the courts.

Breach of contract

If a contract is not ‘frustrated’ but one party does not meet its contractual obligations in some way (for example by providing a different service to the one that was agreed) then they are likely to be in breach of contract. Depending on the seriousness of the breach, the other party may be entitled to continue with the contract and get a reduction in the price, or even to terminate the contract and get a refund. This will depend on the circumstances.

Consumer protection law

Legal principles such as frustration and breach of contract apply to contracts generally. However, where a contract is between a business and a consumer then consumer protection law will apply as well.

Consumer protection law ensures that consumers’ legal rights (both those which might apply under the usual legal principles and any rights which apply specifically to consumers) are protected and that businesses treat consumers fairly in all their dealings with them.

In particular:

Part 2 of the Consumer Rights Act 2015 requires the terms in consumer contracts to be fair and, if written, transparent. Unfair terms are not enforceable against consumers.

The Consumer Protection from Unfair Trading Regulations 2008 prevent businesses from treating consumers unfairly. For example, regulations 5, 6 and 7 prohibit misleading and aggressive practices.