If we cancel an event or service due to COVID-19, do we have to offer refunds?
To some extent, the answer depends on what the service or event is.
If the service is in a regulated sector (such as air travel) then there are mandatory provisions regarding refunds, cancellations or delays. If your business is not in a regulated sector, whether you have to refund payments will basically hinge on 2 things:
- what the contract terms say; and
- statutory rights set out in the Consumer Rights Act 2015 (“CRA”).
If the contract says you can withhold refunds where the service or event is cancelled due to events beyond your reasonable control (remember, consumer contracts shouldn’t use terms like force majeure) then you may be able to retain payment. However, the CRA may still step in to rescue the consumer. If the clause that allows you to withhold payment is unfair to the consumer then you cannot rely on it. There is a specific legal test for this which is fairly complex. You can find more information on unfair terms here.
As a general rule, the law tends to favour consumers, so the probability of consumers getting a refund is quite high.
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If your business needs legal support with any issues arising from COVID-19, please get in touch with Amelia Collins.
All information in this document is accurate at the time of writing. It is meant for general information only and is not legal advice.