You Prepaid: Can You Get a Refund if They Cancel?
Imagine you're hosting a conference in a week, but a hurricane destroyed the venue. Awful news, right?
Now what happens, do you have to refund customers? Do vendors have to refund you?
Let’s flip it, what if one of your vendors cannot make the conference because a hurricane destroyed their warehouse, but you still want to move forward with the event?
When an unexpected force majeure occurs, the biggest question for clients is often financial: What happens to prepaid vendor payments and customer ticket fees?
How Does Force Majeure Work in the Events Industry
A force majeure clause excuses performance when extraordinary events outside anyone’s control like natural disasters, government restrictions, or public health emergencies, etc., make the event impossible to go forward. In the event industry, force majeure is especially impactful because events are date-specific, and vendor contracts are interconnected.
However, force majeure does not automatically guarantee a refund from vendors. Payment outcomes depend on each of the contracts you signed with your vendors and what was in the customers' terms of service when they bought the ticket.
What Happens When a Force Majeure Event Occurs?
You need to look at your contract and follow it closely while clearly documenting the process along the way. Common items that should be in the contract are:
Whether the event qualifies as a force majeure event
Who needs to provide notice of the force majeure event
Whether rescheduling is allowed
What payment is due, what payment can be refunded, and what payment can be credited
Whether the cancellation of one vendor allows you to terminate the other contracts of the other vendors
How Does Force Majeure Apply to Event Vendors?
You may have different terms with each vendor because each vendor operates under a separate agreement.
One vendor may allow rescheduling; another may retain payment for work already completed, while another may refund only services not yet performed. Even when the same force majeure affects everyone, clients should expect different results across vendors. Issues can become even more problematic if one vendor experiences a force majeure that does not affect the other vendors.
Pro Tip: If you can, align all vendor terms, but recognize most vendors will have their own form contract. Thus, you should track the force majeure terms for each vendor.
How Are Prepaid Payments Handled When There is a Force Majeure?
In many contracts:
Deposits are often non-refundable
Payments are earned as work progresses
Vendors may keep amounts tied to actual costs or completed services
Pro Tip: Look for fairness when possible. Do not agree to pay work that was never done, but if the vendor did some of the work and it was completed properly, consider whether you can compensate them for the work.
How to Negotiate Force Majeure
The best way to protect yourself is by negotiating the terms carefully before booking the event. You should consider:
Tying payments to milestones and structure payment schedules so that the money is paid as work is completed.
Defining what funds are refundable, nonrefundable, and available for credits.
Contracting what reasonable efforts are required to reschedule the event if cancellation occurs.
Whether there should be contingency clauses related to the work being performed by multiple vendors that are connected.
Pro Tip: You may want to ask for credits instead of refunds. Vendors are often more flexible offering credits toward a future date than returning funds. However, this only works if you believe the event can be rescheduled quickly, or within a time that does not harm your business from a cash perspective.
How Does Force Majeure Apply to Event Customers?
You can control the terms for your customers attending the event.
Whether you choose to give refunds or credits is up to you. Not providing any refund will lead to consumer protection issues and reputational risk. Whatever you choose the terms of when you will issue refunds, credits, whether the ticket is nonrefundable should be explained in the terms and conditions when the customer purchases the ticket.
Don’t Overlook Event Insurance
As you can see, contracts alone may not fully protect prepaid funds. Event cancellation insurance can help cover non-refundable deposits and gaps between vendor agreements, especially for large or high-risk events, and could be a good fit depending on your business.
Final Thoughts
Force majeure events can impact you differently depending on what each vendor contract says. Clients who understand how prepaid payments work, negotiate thoughtfully, and plan for contingencies are far better positioned to handle cancellations without major financial loss.