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Raining in cancellation clauses: stemming the flow of losses caused by the bad weather

Amid the constant complaining about the ‘wash out’ summer, there are those who have suffered more than just a battered umbrella and are feeling the financial effects of the rain. This summer’s weather has burdened some businesses, particularly those in the travel and tourism industry, for whom the effects have been far-reaching. The incessant rain has caused music festivals to be cancelled, international cricket matches to be abandoned and a dramatic reduction in tourism in rural and coastal parts of the United Kingdom, particularly because walkers fear routes will be closed off due to flooding. Local, regional and national events have all suffered.

The rain has not just caused a downturn in mood, but a downturn in profits, as many businesses in the travel and tourism industry feel the effects of cancellations and reduced visitor numbers. It has also brought to the fore the ins and outs of any terms and conditions attached to the contract made when a consumer purchases a ticket or makes an accommodation booking, particularly in relation to the detail of any cancellation clauses. Suppliers, too, are starting to pay closer attention to their terms of business, to ensure they are not lining themselves up for big losses if they are unable to deliver their products or produce on time due to bad weather, or alternatively if their order is cancelled because an event they were due to supply to cannot now take place.

How can you protect your business?

It is essential that you ensure your business is protected as far as it can be from the financial consequences of cancellations by incorporating the right clauses into your terms and conditions.

As an event organiser, cancellations due to bad weather can lead to the following losses:

  • Reimbursement of the price of tickets;
  • Reimbursement and lost costs of any trader who had booked space at an event;
  • Deposits paid out for a venue;
  • Staffing costs;
  • Advances or monies paid to suppliers for any perishable goods.

In an attempt to minimise these losses, you should endeavour to include a clause that absolves your business from having to reimburse the total cost of the ticket if the event is able to be reasonably rescheduled. It is also good practice to state that customers must return their tickets for reimbursement within 28 days of the cancelled events, to avoid months of unforeseen revenue loss as tickets are returned in dribs and drabs. You should also be mindful of the last moment in time by when you can cancel an order with a supplier and/or cancel a booking with the venue owner and still be eligible for a full refund of any monies paid in advance. Keeping these dates in mind will assist when it comes to having to making a final decision as to whether or not the event should be cancelled.

Hotel and bed and breakfast owners also face cancellations and lost revenue as holidaymakers look to spend their time off in sunnier climates rather than the UK. It is important in this line of business to incorporate within your terms and conditions of sale that a full refund will only be offered if the cancellation is made at least a set amount of time before the guests were due to begin their stay. This will allow your hotel an opportunity to arrange an alternative booking to reduce or avoid any losses. If a guest tries to cancel immediately before their scheduled stay, it must be open to your business to still be able to charge them for their booking. For those who are concerned this may damage their levels of customer service, it may be advisable to offer to reimburse the guests for any time which you are able to re-let the room for.

Looking to the future

Stemming the losses presently being suffered by the tourism industry may only be possible with a ray or two of sunshine. For now however, close scrutiny of the cancellation clauses that govern your business’ liability to pay out refunds will potentially help your finances, if not the landscape, look much brighter.

Find out more about our Commercial Litigation department Find out more about our Corporate & Commercial department

 

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