In March 2020, the event ticketing website StubHub faced a tide of cancellations and schedule changes as the coronavirus spread across the United States.
In response, the company offered customers a choice: either receive a full refund or get company credit for 120% of the original ticket price. The opt-in was a success, with many customers choosing to get company credit over a refund.
Several days later, StubHub changed the terms of their policy. Instead of offering their customers refunds as an option, everyone would get the 120% company credit.
The first lawsuit was filed within a week, asking upwards of $5 million in refunds for all of the customers who were affected by the policy change.
It’s a business owner’s nightmare come to life.
If you haven’t taken a look at your cancellation and rescheduling policies since the pandemic, the sooner you review them with a local business lawyer, the better. If you’ve never considered these policies at all before, you’ll want to do so now. A misstep in this shifting economy could prove costly to your business, your brand, and your professional reputation.
Cancellation and refund policies apply to more than just event-based companies. You may have to cancel orders or shipments based on global supply-chain disruptions. Your employees may be unable to reach originally promised project deadlines because of reduced staff hours. You may be a service provider who’s unable to see clients under local COVID-19 laws.
Even with all the uncertainty in the world, it’s clear that the coronavirus is here to stay. As we round out the sixth month of the pandemic, the ride has been bumpy, chaotic, and unpredictable. The right legal precautions can help make the next six months smoother and set up your business for long-term success in a post-COVID world.
What to Consider in Cancellation & Rescheduling PoliciesWhen considering your cancellation and rescheduling policies, the first thing you should do is review your current contract. Your policies should be clearly stated with time limits.
What if you don’t have a contract or your contract doesn’t contain a cancellation or rescheduling policy? You can look at your industry’s commonly-accepted standards for a place to get started.
Your policy should answer the following four questions:
- Is your retainer or deposit refundable?
- What are your deadlines for canceling and rescheduling?
- How many times can your customers reschedule without a fee?
- Is there a potential increase in price for prime dates in the future?
Now, consider whether you need to make changes because of the impact of the coronavirus. Would you like to extend your cancellation and rescheduling deadlines to offer a greater grace period for your customers? For example, a local gym that’s shut down under a local ordinance may want to extend their customers’ class passes until they can actually use them in person.
It’s important to make these decisions thoughtfully, with long-term effects in mind. You have to balance customer expectations with your bottom line. Giving all your customers immediate refunds may leave your business cash-strapped or even bankrupt. But walking back on your policies may land you in the same legal trouble as StubHub.
Right now, brand trust and loyalty are more important than ever. Your dedicated customers could determine whether or not your business survives these turbulent times. The last thing you want to do is alienate them with poor business policies.
What About Force Majeure Contract Clauses?Your contract may already set out procedures in place for situations that are unforeseeable, unpredictable, and impossible. Many contracts include force majeure clauses that allow cancellation for “acts of God” beyond the control of the parties.
We’ll go deeper into force majeure clauses in a later blog post. But just because you have a force majeure clause doesn’t mean it automatically applies to the coronavirus. That ultimately depends on how the force majeure clause is written in your contract.
Generally, the more specific your force majeure clause, the more narrowly it gets interpreted. For example, your force majeure clause might cover specific types of disasters but fail to mention pandemics. That could leave you on the hook for fulfilling your contract even with the difficulties wrought by COVID-19. The only way to truly determine how your force majeure clause applies to you is to discuss it with an experienced local business lawyer.
Get Local Legal Help With a Philadelphia Business Lawyer
When considering COVID-19 policies for your business, it’s important to consult with a local lawyer about your options. The pandemic response has varied by location, which means the laws in your locality could affect the rules by which your business operates. Your options may vary if your business is located in New Jersey compared to Philadelphia or other Pennsylvania counties like Bucks, Montgomery, Delaware, or Chester County.
Every case is fact-specific. Your cancellation and rescheduling policies may look different than businesses in other industries. In addition, your business has unique needs and operational challenges. Your customers have particular expectations. Working with a lawyer allows you to create policies tailor-made for your business, with your customers in mind.
At the Holmes Business Law Firm, our talented legal team will work with you to create a cancellation and rescheduling strategy that:
- Protects your business and brand reputation,
- Takes care of your customers and surpasses their expectations, and
- Prepares your business for long-term success even in the pandemic.
In addition to differences in the law based on where you’re located, COVID-19 business requirements can change drastically on a day-by-day basis. These changes continue to be out of your control, based on coronavirus statistics in your area. When creating cancellation and rescheduling policies for your business, our lawyers consider not just what makes sense to your business right now, but what will continue to serve you even in times of future uncertainty.
Call the Philadelphia offices of the Holmes Business Law Firm today at 215-482-0285 for a consultation with an experienced local business lawyer.