To say that the COVID-19 (coronavirus) outbreak has changed the way we live our daily lives is an understatement. Many schools and businesses are closed, and working from home has become the norm for many Americans. Moreover, the social distancing requirements implemented by government authorities to help slow the spread of the virus have generally prohibited the gathering of large groups. This has greatly affected churches.
In an odd sense of timing, this global pandemic hit the US hard at a time when many denominations, churches, and church-planting organizations are gearing up for their annual meetings. This has caused church leadership to consider making the ultimate decision to cancel the upcoming events that they have been planning for many months. Generally, such an event may host hundreds, if not thousands, of individuals and the large venue necessary to accommodate the crowd has been contractually secured. Just as COVID-19 is novel to the human body, the issues surrounding large event contract cancelations based on this pandemic are likewise novel.
Whenever considering contract terms, a detailed review of the contract itself must be the first step. While reviewing the contract, there are a number of provisions that an experienced attorney would consider, such as the scope of the agreement and payment terms. In this instance, however, I would focus on whether the contract has a force majeure clause and what that clause provides.
Understanding force majeure
Force majeure is a French term that literally means “superior force.” As a practical matter, it is a provision that governs what happens if some outside force like a war, earthquake, flood or other acts of God cause one party or the other to not be able to perform under the agreed-upon terms. However, one of the most important requirements of a force majeure clause is that it be specific, and because COVID-19 did not exist until recently, it does not specifically appear in any contracts as a basis to void the contract. As such, many venues (especially hotels) are not allowing churches to cancel without paying the full sum that is due under the contract.
In the future, I expect that we will see the push to expand force majeure clauses to include a viral outbreak and the like. Moreover, the church will want to have future contracts specify that, should force majeure apply, all deposits are to be returned to the church and that no further sums would be due and payable under the contract.
Considerations for churches with signed contracts
If your church has already signed a contract with a venue to host an event, consider the following:
- First, make a detailed review of the contract terms. Read every word twice.
- Does the contract have a force majeure clause? If it does, is there anyway the current circumstances would provide your church a basis to cancel the agreement? If there is no force majeure clause, it will be necessary to review the state law and court decisions applicable to the place where the venue is located.
- Does the contract provide other reasons why a cancelation may be acceptable?
- If the contract is cancelable, are there any penalties?
- Finally, if there is not a clear legal basis to cancel the contract, reach out to the venue to see if it would show leniency to the church. Even if you can’t get a full abatement of sums due, perhaps the venue would be willing to accept the deposit as the total payment. Or, perhaps the venue will work with you to reschedule to a future date and time so that the church isn’t forced to pay for an event that never occurred.
For churches that rent a facility
In a similar way, churches that rent their building have run into issues regarding not being able to assemble. Because of government requirements to self-isolate and avoid gatherings, churches find themselves not being able to hold church services. Of course, this negatively impacts revenue and the ability to pay overhead, including rent. Most commercial leases for the renting of a building to a church would likely contain a force majeure clause.
Using the process above, consider whether the lease can be canceled. In commercial leases, however, the lease generally excludes the nonpayment of rent as a remedy. While it would be important to review the law in the state where the church is located, under common law, the requirement to pay rent is usually not suspended for any reason. This puts an obvious hardship on churches.
Again, after thoroughly reviewing the lease provisions, reaching out to the landlord to make a direct appeal is well warranted in the current pandemic. Even large retailers and chain restaurants have put their landlords on notice that they will either not be able to pay rent or will have to reduce their rent payments, according to Bloomberg. This includes Cheesecake Factory, Subway, Mattress Firm, and may other businesses, so churches should feel no shame in seeking remedies.
Churches may also find relief in the Coronavirus Aid, Relief and Economic Security (CARES) Act, which has passed the House and Senate and is awaiting the President’s signature. This Act is expected to provide wide support to small-businesses with fewer than 500 employees and nonprofits.
