Publications - COVID-19
Unforeseeable Circumstances and Terms of Trade - Part 2
26 March 2020
As is the case with most things pertaining to the COVID-19 pandemic, events have moved quickly since our last article published about terms of trade.
After going through a number of interim stages, the Australian government has now banned all non‑citizens from entering Australia with effect on and from midnight 20 March 2020. All residents returning must undergo a 14 day isolation period, and on 24 March 2020 the Prime Minister put a ban on all overseas travel effective at noon on 25 March 2020 (with only some very limited exceptions). A list summarising the recent history of the governments decisions in relation to this is found at the end of this article. Most recently the Government has announced the implementation of the Commercial Tenancies Code which seeks to provide relief for Landlords and Tenants experiencing financial distress as a result of the COVID-19 pandemic.
In our previous article, we looked at the importance of your terms of trade and how to deal with cancellations and refunds as well as unforeseeable circumstances and the concept of frustration of a contract. Some of the specific examples, subtleties and distinctions that we drew in that article are now significantly less relevant with the most recent decisions.
On and from 20 March 2020, the determining factor is now whether a traveller is unable to travel to and enter Australia to enjoy the travel arrangements that were arranged in accordance with a contract between you and them. If they cannot get here, due to government decree, that will mean that the contract will almost invariably be “frustrated” irrespective of what your terms of trade, or clauses dealing with cancellations and refunds, may say.
We then need to look at what the consequences of that frustration might be.
The contract will be at an end, but you as the travel provider may well have incurred costs to third parties (for example, accommodation providers) and may have even paid for those.
This will put an onus on you as a travel provider to endeavour to obtain a refund. If you are not able to, then the doctrine of frustration should come to your aid (all other circumstances being equal – which unfortunately they never are). This will be at least to the extent that the amount you have to refund are reduced by any amounts that you are out of pocket to third party suppliers. Whilst this is small comfort and may still be argued about, at least it is helpful to recognise that there is a principle of law in relation to this that gives a small amount of relief.
The law in respect of refunds is codified in the Frustrated Contracts Act 1978 (NSW) (there is similarly named legislation in Victoria and South Australia, however, none of the three pieces of legislation are uniform). The starting position is that any amount paid prior to frustration must be returned to the payer irrespective of whether there has been any performance.
However, when there has been partial performance of a contract prior to frustration the party that performed is entitled to the “value of the agreed return for the performance”.
Further, where a party has undertaken work, such as paying money or doing or suffering any other act for the purpose of giving performance under the contract, and has suffered a loss, the performing party shall be paid by the other party to the contract an amount equal to one-half of the amount that would be fair compensation for the loss. In other words, if there is a loss it is to be borne by both parties and not just one.
We said in the previous article (written before the ban of non-citizens entering the country) that if you are faced with these circumstances you need to work with your customers to try to reach a consensus as to what alternatives might be possible. Now there won’t be any such alternative options and you will need to be working with your suppliers in relation to cancelling ongoing bookings and negotiating refunds.
Your own terms of trade with your customers nevertheless should be reviewed to see if there is anything else in them that comes to your aid. For example: a provision that may entitle you absolutely to view your terms in such a way as to create no obligation to refund amounts of money which have already been on paid. We recommend you consider how those terms might be amended for the future once the current pandemic is over.
Current Governments Bans and Enforcements
Queensland
State of emergency enacted. Police can detain anyone suspected of being a risk to public health. Incoming Travellers must self-isolate for 14 days. (Borders now closed)
Effective from 6 February 2020, in force until further notice.
Victoria
Four-week state of emergency enacted. Police can detain anyone suspected of being a risk to public health.
Effective from 12:00pm on 16 March 2020, in force until 13 April 2020.
ACT
State of emergency enacted. Police can detain anyone suspected of being a risk to public health.
Effective from 16 March 2020, in force until further notice.
Australia Wide
Attending, organising and allowing of mass gatherings of 500 or more people outdoors or 100 or more people indoors are banned.
Effective from 16 March 2020, in force until 29 June 2020.
New South Wales
Certain business prohibited from trading such as pubs, clubs and casinos.
Effective from 16 March 2020, in force until 29 June 2020.
Australia Wide
Any cruise ship leaving from a foreign port will be denied entry to Australia.
Effective from 16 March 2020, to be reviewed after 30 days.
Australia Wide
Anyone who returns from overseas after 17 March 2020 is to be self-isolated for 14 days.
Effective from 17 March 2020, in force until further notice.
Australia Wide
Level 4 Travel Ban enacted. Advice provided by Department of Foreign Affairs and Trade to not travel overseas at all and for all Australian Citizens overseas to return home as soon as possible.
Effective from 18 March 2020, in force until further notice.
Australia Wide
Non-Citizens entering the Country are banned.
Effective from 9:00pm on 20 March 2020, in force until further notice.
South Australia
Any non-essential travellers to the State are self‑isolated for 14 days. (Borders closed)
Effective from 4:00pm on 21 March 2020, in force until further notice.
Tasmania
Any non-essential travellers to the State are self‑isolated for 14 days. (Borders closed)
Effective from midnight on 20 March 2020, in force until further notice.
Western Australia
Borders closed.
Effective from 1:30pm on 21 March 2020, in force until further notice.
Northern Territory
Borders closed.
Effective from 20 March 2020, in force until further notice.
Lord Howe Island
Only residents and essential personal are permitted to travel to Lord Howe Island. Returning travellers must self-isolate for 14 days
Effective from 22 March 2020, in force until 18 June 2020.
Australia-Wide
Travelling overseas banned under Biosecurity Act.
Effective from midnight on 25 March 2020, in force until further notice.
Australia-Wide
All passengers arriving into Australia are required to enter a 14-day isolation period at a state-run quarantine centre.
Effective from midnight on 28 March 2020, in force until further notice.
New South Wales
Non-essential domestic travel is banned under Public Health Order.
Effective from 31 March 2020, in force until 29 June 2020.
New South Wales
Ban on persons gathering in a public place of more than two people without reasonable excuse.
Effective from 31 March 2020, in force until 29 June 2020.
Where can I find more information?
If you would like advice in relation to your own personal circumstances, please contact us.
After going through a number of interim stages, the Australian government has now banned all non‑citizens from entering Australia with effect on and from midnight 20 March 2020. All residents returning must undergo a 14 day isolation period, and on 24 March 2020 the Prime Minister put a ban on all overseas travel effective at noon on 25 March 2020 (with only some very limited exceptions). A list summarising the recent history of the governments decisions in relation to this is found at the end of this article. Most recently the Government has announced the implementation of the Commercial Tenancies Code which seeks to provide relief for Landlords and Tenants experiencing financial distress as a result of the COVID-19 pandemic.
In our previous article, we looked at the importance of your terms of trade and how to deal with cancellations and refunds as well as unforeseeable circumstances and the concept of frustration of a contract. Some of the specific examples, subtleties and distinctions that we drew in that article are now significantly less relevant with the most recent decisions.
On and from 20 March 2020, the determining factor is now whether a traveller is unable to travel to and enter Australia to enjoy the travel arrangements that were arranged in accordance with a contract between you and them. If they cannot get here, due to government decree, that will mean that the contract will almost invariably be “frustrated” irrespective of what your terms of trade, or clauses dealing with cancellations and refunds, may say.
We then need to look at what the consequences of that frustration might be.
The contract will be at an end, but you as the travel provider may well have incurred costs to third parties (for example, accommodation providers) and may have even paid for those.
This will put an onus on you as a travel provider to endeavour to obtain a refund. If you are not able to, then the doctrine of frustration should come to your aid (all other circumstances being equal – which unfortunately they never are). This will be at least to the extent that the amount you have to refund are reduced by any amounts that you are out of pocket to third party suppliers. Whilst this is small comfort and may still be argued about, at least it is helpful to recognise that there is a principle of law in relation to this that gives a small amount of relief.
The law in respect of refunds is codified in the Frustrated Contracts Act 1978 (NSW) (there is similarly named legislation in Victoria and South Australia, however, none of the three pieces of legislation are uniform). The starting position is that any amount paid prior to frustration must be returned to the payer irrespective of whether there has been any performance.
However, when there has been partial performance of a contract prior to frustration the party that performed is entitled to the “value of the agreed return for the performance”.
Further, where a party has undertaken work, such as paying money or doing or suffering any other act for the purpose of giving performance under the contract, and has suffered a loss, the performing party shall be paid by the other party to the contract an amount equal to one-half of the amount that would be fair compensation for the loss. In other words, if there is a loss it is to be borne by both parties and not just one.
We said in the previous article (written before the ban of non-citizens entering the country) that if you are faced with these circumstances you need to work with your customers to try to reach a consensus as to what alternatives might be possible. Now there won’t be any such alternative options and you will need to be working with your suppliers in relation to cancelling ongoing bookings and negotiating refunds.
Your own terms of trade with your customers nevertheless should be reviewed to see if there is anything else in them that comes to your aid. For example: a provision that may entitle you absolutely to view your terms in such a way as to create no obligation to refund amounts of money which have already been on paid. We recommend you consider how those terms might be amended for the future once the current pandemic is over.
Current Governments Bans and Enforcements
Queensland
State of emergency enacted. Police can detain anyone suspected of being a risk to public health. Incoming Travellers must self-isolate for 14 days. (Borders now closed)
Effective from 6 February 2020, in force until further notice.
Victoria
Four-week state of emergency enacted. Police can detain anyone suspected of being a risk to public health.
Effective from 12:00pm on 16 March 2020, in force until 13 April 2020.
ACT
State of emergency enacted. Police can detain anyone suspected of being a risk to public health.
Effective from 16 March 2020, in force until further notice.
Australia Wide
Attending, organising and allowing of mass gatherings of 500 or more people outdoors or 100 or more people indoors are banned.
Effective from 16 March 2020, in force until 29 June 2020.
New South Wales
Certain business prohibited from trading such as pubs, clubs and casinos.
Effective from 16 March 2020, in force until 29 June 2020.
Australia Wide
Any cruise ship leaving from a foreign port will be denied entry to Australia.
Effective from 16 March 2020, to be reviewed after 30 days.
Australia Wide
Anyone who returns from overseas after 17 March 2020 is to be self-isolated for 14 days.
Effective from 17 March 2020, in force until further notice.
Australia Wide
Level 4 Travel Ban enacted. Advice provided by Department of Foreign Affairs and Trade to not travel overseas at all and for all Australian Citizens overseas to return home as soon as possible.
Effective from 18 March 2020, in force until further notice.
Australia Wide
Non-Citizens entering the Country are banned.
Effective from 9:00pm on 20 March 2020, in force until further notice.
South Australia
Any non-essential travellers to the State are self‑isolated for 14 days. (Borders closed)
Effective from 4:00pm on 21 March 2020, in force until further notice.
Tasmania
Any non-essential travellers to the State are self‑isolated for 14 days. (Borders closed)
Effective from midnight on 20 March 2020, in force until further notice.
Western Australia
Borders closed.
Effective from 1:30pm on 21 March 2020, in force until further notice.
Northern Territory
Borders closed.
Effective from 20 March 2020, in force until further notice.
Lord Howe Island
Only residents and essential personal are permitted to travel to Lord Howe Island. Returning travellers must self-isolate for 14 days
Effective from 22 March 2020, in force until 18 June 2020.
Australia-Wide
Travelling overseas banned under Biosecurity Act.
Effective from midnight on 25 March 2020, in force until further notice.
Australia-Wide
All passengers arriving into Australia are required to enter a 14-day isolation period at a state-run quarantine centre.
Effective from midnight on 28 March 2020, in force until further notice.
New South Wales
Non-essential domestic travel is banned under Public Health Order.
Effective from 31 March 2020, in force until 29 June 2020.
New South Wales
Ban on persons gathering in a public place of more than two people without reasonable excuse.
Effective from 31 March 2020, in force until 29 June 2020.
Where can I find more information?
If you would like advice in relation to your own personal circumstances, please contact us.
|
Emma Davies
Senior Associate Bradfield & Scott Lawyers Telephone: 9233 7299 Email: edavies@bradscott.com.au |
