Former Liverpool manager Bill Shankly once famously said that "some people believe football is a matter of life and death... I can assure you, it is much, much more important than that." This statement perhaps demonstrates the initial hardline stance taken by the English Premier League regarding the Coronavirus pandemic that has the entire sporting and entertainment world reeling from the effects, grounded economic activities and cast a forlorn shadow over the entire entertainment industry. Just recently, the Billboard1 published a list of over 70 events that have been canceled since the outbreak of the virus in January 2020. The online tabloid also reported that over 20,000 music shows have been canceled or postponed worldwide, between late 2019 when the virus was first discovered in Wuhan, China and March 2020, and China's entertainment industry alone has lost over 2 billion yuan ($286 million). In total, the sports industry has recorded the cancellation of over 2000 sporting events2 which were supposed to hold within the year affecting the sports, fans, sponsors, sport company owners and the world at large.3
As at Friday, March 13, 2020, the Italian Serie A, the German Bundesliga, the French Ligue 1 and the Dutch Eredivisie had all suspended their respective leagues. At about 9:00PM BST, the Premier League released a statement insisting that the games scheduled for the weekend would go ahead as scheduled. Two hours later, Arsenal Football Club released a statement on the club's social media platforms confirming that its Manager, Mikel Arteta had tested positive to the dreaded illness. Almost immediately, Chelsea Football Club released its own statement confirming that forward, Callum Hudson Odoi has also tested positive to the disease.4 With these developments, the Premier League endured an anxious wait on the next steps to take in a season that has already been blighted with news of games being played behind closed doors. The Premier League was eventually forced to do the inevitable with the announcement by the League body of the suspension of all games till April 30th, 2020 at the latest5. In the music and movie industry, quite a number of shows and movie premieres have also been canceled or suspended due to the outbreak of the coronavirus. In the movie industry,Mulan which is set to premiere globally on March 27, 2020 was suspended from premiering in China on February 4, 2020; The Flacon and the Winter soldier which is currently being shot at Prague has shut down production following travel restriction in the Nation on March 10, 2020.6 The new James Bond movie, No time to die which was supposed to premier on March 31, 2020 has also been suspended till November 12.7 In the music industry, South by Southwest (SXSW), an annual media festival in Austin, Texas, was canceled on March 6, 2020 due to the outbreak; Coachella was postponed to the weekends of October 9 and October 16; Adobe canceled its annual live summit because of growing concerns about the coronavirus; Facebook also canceled its annual Global Marketing Summit in San Francisco, which was supposed to host 5,000 people. Instead, the entire event will take place online, to mention but a few.8
At the root of these developments are subsisting contractual relationships with events sponsors, kit sponsors, title sponsors, and broadcast sponsors. With no reprieve in sight from the Coronavirus Pandemic, what becomes of these contractual relationships? Put differently, in the event that the sporting season is canceled, what becomes of the existing contractual relationships with the likes of BT Sports and Sky Sports standing to lose as much as 1 Billion Pounds from their existing TV rights deal? With UEFA, the European football governing body set to hold crisis talks on Tuesday, March 17, 2020, on the next steps to take on the remaining rounds of the UEFA Champions League, the footballing world faces the grim prospect of canceling an entire football season. This article examines the commercial and legal implications of the coronavirus pandemic in sports and entertainment. In practical terms, the article discusses the common law concepts of frustration and force majeur in sports.
The Common law doctrine of frustration and force majeure.
The most fundamental rule of contract law is "pacta sunt servanda-a contract must be observed." A party that fails to perform as promised is strictly liable for breach of contract, "even if he is without fault and even if circumstances have made the contract more burdensome or less desirable than he had anticipated."9 He must perform as promised-come what may--or pay damages that are economically equivalent to performance.10 That legal liability for failure to perform is what makes a contract a contract, and not merely a promise." Nevertheless, over the centuries, and for good reason, the common law developed a number of doctrinal exceptions to the strict rule of pacta sunt servanda, impracticability and frustration among them. The impracticability doctrine11 will excuse a party from performing (or paying damages) when events or changed circumstances make performance impossible or exceedingly difficult. And the frustration doctrine will excuse a party from performing (or paying damages) when events or changed circumstances render the other party's counter performance worthless to it. These "twin doctrines" both operate to excuse a party for whom the anticipated value of a contract is destroyed by an unexpected event during the executory period-that is, the time span from signing to the completion of performance. Impracticability governs the case of a radical rise in the cost of performance; frustration governs the reverse case of a radical drop in the value of counter performance12. And, as default rules, impracticability and frustration are appropriate subjects for the forward standard clause analysis.
A party to a contract may be excused from performing (or paying damages) when events or changed circumstances during the executory period render performance impossible or exceedingly difficult13. From this doctrine, we can use the forward analysis to anticipate the standard clause analog. But this has already been done: it has long been known that the Force Majeure clause is the standard clause analog of the impracticability doctrine. That is to say, the Force Majeure clause addresses the same issues that the default impracticability doctrine would address, and it resolves those issues in the manner expressly described.
FORCE MAJEUR CLAUSES - SALIENT CONSIDERATIONS
What is a force majeure clause? The literal interpretation from French is "greater force". However, the expression "force majeure" has acquired a commercial usage which is widely recognized by businessmen and lawyers. The general principle is that a party to an agreement should not be liable for the non-performance of its obligations due to an unexpected event outside its control.
The general rule is that a force majeure clause must include the event in question in order to excuse (or, in some cases, merely suspend) performance. Many force majeure provisions include reference to an "action" or "order" from the government. While these will provide a clear contractual basis to excuse performance in the event of a quarantine, suspension of a league or competition. In the case of a sports league or international competition like the Olympics, the events organizers and broadcast sponsors would remain at daggers-drawn on the appropriate remedy for this situation. However, the proper interpretation would be dependent on the relevant wording of the clause. The position of the law is that for force majeur to apply, the specific event must be captured in the contract. Did anyone really foresee Covid-19?
"Some force majeure clauses contain references to "epidemics," "pandemics" or "quarantines." These provide a more general and flexible basis for invoking a force majeure clause and extend to situations that are not clearly covered by an explicit directive from the government"14.
"Finally, some force majeure clauses are highly generalized and only refer to "any Act of God or other circumstance beyond the control of the parties." Others include specific examples ("fires, floods, earthquakes, tsunamis, wars, terrorist attacks, strikes, civil unrest...") and then conclude with a catch-all phrase like "or any other circumstance beyond the control of the parties which they cannot overcome through reasonable and diligent efforts." Whether this kind of language captures COVID-19 related disruptions likely will vary significantly from jurisdiction to jurisdiction"15
Sponsors of the Olympics, broadcast sponsors and kit sponsors would likely seek a refund of their investment in the event of an outright cancellation of the respective competitions. The clubs and relevant events organizers would seek to invoke the force majeur clause. To successfully invoke force majeur, regard must be had to the specific wordings of the contract.
Some force majeure clauses also contain references to "epidemics," "pandemics" or "quarantines." These provide a more general and flexible basis for invoking a force majeure clause and extend to situations that are not clearly covered by an explicit directive from the government.
"Finally, some force majeure clauses are highly generalized and only refer to "any Act of God or other circumstance beyond the control of the parties." Others include specific examples ("fires, floods, earthquakes, tsunamis, wars, terrorist attacks, strikes, civil unrest...") and then conclude with a catch-all phrase like "or any other circumstance beyond the control of the parties which they cannot overcome through reasonable and diligent efforts." Whether this kind of language captures COVID-19 related disruptions likely will vary significantly from jurisdiction to jurisdiction"16. The point remains that the broadcast, kit and event sponsors would be able to recoup a substantial portion of their investment unless the counter parties can successfully invoke and establish a trigerring force majeur event which is expressly included in their respective contracts. In practice, the party seeking to invoke the force majeur clause would have to issue notice of inability to perform its contractual obligations. With the Premier League announcing a suspension of all football matches and trainings till April 30th, 202017, the Premier League and constituent clubs continue to wait with bated breaths on when the football leagues can resume again. As for the Euros and the Olympics, common sense eventually prevailed with both major sporting events suspended till next year. The contract detailing the terms underpinning the legal relationship between events sponsors, kits sponsors, and broadcast sponsors would usually contain a force majeure clause that would expressly state the events that would constitute a force majeure.
With the humongous investments made by the events organizers, broadcast sponsors and kits suppliers, the commercial landscape for the existing legal relationship appears bleak at the moment. With the likes of Sky and BT sports set to lose over 1Billion Pounds from the existing TV deal which was only signed in 2019, if the English Premier league season gets cancelled as speculated, we are bound to witness interesting litigation from the parties. The two companies are already contemplating asking for a refund from the Premier League. The same applies to BNP Paribas who are the events sponsors for the Indian Wells Tennis tournament which has already fallen victim to this pandemic. The TV rights for the Premier League which is into the second year is a bit more complicated with the season already having played almost 30 games. To successfully rely on a force majeure clause, the clause must contemplate an epidemic or pandemic and expressly stipulate how the liabilities would be apportioned between the parties in the event of an occurrence of one of the contemplated events.
The frustration doctrine
The frustration doctrine serves to excuse a contracting party from performing not because it has become more difficult or impossible to perform (as in the case of impracticability), but rather because the other party's counter-performance has become worthless.18 When an unexpected event during the executory period totally frustrates a party's primary purpose in making the contract, the frustration doctrine provides doctrinal grounds for walking away from the contract:
In general, while impracticability "operates to the advantage of parties that are bound to furnish goods, land, services, or some similar performance," frustration "operates to the advantage of parties that are to pay money in return for those performances."
The English case of Krell v. Henry19 was the first to recognize the doctrine20. In that case, the liability of the defendant to pay the rent agreed by the parties for the cancelled coronation of King Henry the VII came up for determination. The Court in that case held that theimpossibility doctrine was not directly on point, however,cancellation of the coronation did not render the defendant's, Henry's performance-to pay the rent-impossible. To the contrary, the cancellation had no effect whatsoever on Henry's ability to tender the funds21. ' The court nevertheless ruled in his favor by analogizing from impossibility to create a new excuse doctrine, that of frustration.22 Because the apartment was rented for the specific "purpose of seeing the Royal procession," once it was cancelled, the court held, the "foundation" of the contract was "frustrated" and Henry was accordingly excused from his promise to pay the rent23. This position was further affirmed in a subsequent case which incidentally is almost on all fours with Krell in the 1904 case of Chandler v. Webster.24
However, 40 years on, the decision in Chandlers case has been overturned to recognize situations where a party who has paid money, may recover its money after the frustrating event has occurred. The case of Fibrosa SA v. Fairbairn Lawson Combe Barbour Ltd25where the Court held that the plaintiff was entitled to recover the down payment, not because of an implied term of the contract, but as a matter of a quasi-contract: as money paid for a consideration that had totally failed.
The authors take the view that the principle of frustration may not apply in this case since the substratum of the contract remains in existence. This is further confirmed by the suspension of the relevant events. Accordingly, while Covid-19 may serve to suspend the obligations of the counter parties for the events, kits and broadcast sponsors, it may not be enough to excuse performance of the obligation. Fibrosa's case as a matter of fact, serves as a further confirmation that the sponsors may recover their investment for the relevant periods of the contract affected by Covid -19.
Liability to fans and season ticket holders
Apart from sponsors, contractors or service providers who ordinarily would have signed a written contract and likely incorporated a force majeure clause in their contract, the vast majority of spectators in the sport & entertainment industry are the fans who have either bought a single ticket for a live show or sporting event; or season ticket holders. The direct consequences of the suspension of an event with a timeline, indefinite suspension, or cancellation of a live event will equate to an indirect termination of the contract.
At common law, it is generally accepted that a ticket is simply a limited license to enter a premises, and accordingly, a venue operator or event organizer may impose terms and conditions on that ticket and its ticketholder. However, this principle has been supplanted — or at least supplemented — in many countries by statutes governing the sale and resale of event tickets. Manchester United in the penultimate week traveled to Austria to play the first leg of the round of 16 games in the UEFA Europa League against LASK and following the announcement by UEFA that the game would be played behind closed doors, refunded the ticket costs to its over 2000 traveling fans.26 While a lot of people commended this gesture by the club, this might as well be due to the terms of the contract contained in the tickets or in compliance with the consumer protection legislation in the UK. It is noteworthy, however, that it is the only club that took this step.
The common law principle of privity of contract would prevent a ticket holder who re-purchased a ticket from a prior holder, from claiming a refund. Accordingly, only fans and spectators who purchased from the club or authorized agents would be able to get a refund. However, such fans and spectators of a canceled event may be able to recover directly from the other unauthorized resale outlets depending on what the refund policy says.
In sum, and from a legal point of view, a ticket is a contract between the producer or broadcaster of the show and the audience member. Any change related to the show, therefore, means that the producer/broadcaster does not fulfill his end of the contract, and must refund the viewer if they so wish. The fact that the show is postponed or moved forward (day or time) or that the venue has changed does not alter this reasoning27.Ultimately, the holder of a ticket may recover for a total failure of consideration.
Ramifications for employment contracts in sports
Like other businesses, sports clubs employ or otherwise engage a host of individuals for different types of work. Aside from the coaching staff and players, a sports team is likely to employ or otherwise engage a variety of other people such as medical staff, catering staff, and academy staff.28 Most of the terms of the contract are expressly provided for in the employment contracts of such persons. Terms such as the duration, salary and notice period, any garden leave term and any restrictive covenants. These express terms are usually not exhaustive. In the same vein, some other terms are implied in the contract and would apply regardless of whether the parties expressly provided for them or not. Part of the employee's duties in this regard have been held to include the duty of good faith and fidelity as well as the duty to obey reasonable instructions.29 On the employer's part is a duty to take care of the health and safety of the employee. As for the players, they owe an additional duty to train to be fit for selection. Both parties owe an implied mutual duty of trust and confidence.30 The position of the law is that a breach of the duty of trust and confidence by a football club amounts to a repudiatory breach of contract which entitles the employee to terminate the contract without notice and claim constructive dismissal. Likewise, breach of the duty of trust and confidence by an employee entitles the club to summarily dismiss.
What happens where players of a sports team are compelled to continue to play on the instruction of the league/regulatory body despite the palpable threats posed by this pandemic? Would the players allege a breach of the duty to take care of their health and safety? Would they be able to allege a repudiatory breach of contract by their employers and sue for constructive dismissal? Brazilian club, Gremio Football31 club had their players wearing face masks over the weekend to protest the non-suspension of the Brazilian league amid the Coronavirus scare. On the other hand, can the club summarily dismiss a player or coach who refuses to train and play on the ground of the risks posed by this pandemic? Even where there is an understanding to suspend ongoing games to protect players and coaching staff, is there still an obligation on the part of a player to train and maintain fitness? Would a refusal to train amount to a breach of the obligation to obey lawful instructions by the employee?32 Would the player or Manager be excused because a supervening event has rendered the performance of his contract impracticable? Again, it is not unusual for clubs and sports teams to include incentives in players' contracts such as appearance-based bonuses and packages. Some clauses reward team performance such as winning a trophy or qualifying for a continental place. Would it be reasonable for players to demand such bonuses should the season become canceled as a result of the pandemic? Much would indeed depend on the facts of each case.
The strict application of the frustration doctrine is entirely proper, for the doctrine strikes right at the heart of the core principle of contract law-pacta sunt servanda.33 The future is inherently unpredictable. If courts were to regularly excuse parties from their contracts because events turned out differently than expected-which presumably happens in nearly every case where a party has come to view a contract as unprofitable or imprudent it would undermine the fundamental nature of a contract as a legally enforceable promise. For this reason, courts and commentators agree that the use of the frustration doctrine should only be applied in deserving cases.Chandlers case heralds the common law position that where a party successfully pleads frustration, parties will maintain status quo and are only entitled to liabilities which inured prior to the supervening event. Thankfully, Fibrosahas come to ameliorate what was viewed by some legal jurists and commentators as a harsh principle of law. In any event, the salutary lessons of the Covid-19 Pandemic should teach sports teams, franchises and entertainment outfits the need to include appropriate force majeure clauses in their contract to appropriately deal with such situation.
1 https://www.billboard.com/articles/business/touring/9323647/concerts-canceled-coronavirus-list accessed March 12, 2020.
2 The BNP Paribas Open in Indian Wells is cancelled. Also cancelled were the Xi'an Open, scheduled for April 13 to 19, and Kunming Open, pencilled for April 27 to May 3. Both events were to take place in China.
3 https://www.espn.com/olympics/story/_/id/28824781/list-sporting-events-canceled-coronavirus, accessed March 12, 2020
4 Although in a recent post on his official Instagram page, he has come out to say that he is healthy and certified free from the virus.
5 On March 26th 2020, the Football Association of England voided the entire football season in the lower tiers of English football with only the EFL and the Premier League the only tiers with a realistic chance of playing again this season.
6 https://www.nme.com/blogs/all-the-films-and-tv-shows-suspended-due-to-coronavirus-2624269 accessed March 12, 2020.
7 https://www.bbc.com/news/entertainment-arts-51744374; accessed March 12, 2020
8 https://www.businessinsider.com/major-events-cancelled-or-postponed-due-to-the-coronavirus-2020?IR=T accessed March 12, 2020.
9 Dermott v. Jones, 69 U.S. (2 Wall.) 1, 7 (1864); Restatement (Second) of Contracts § 1 (1981) (defining a "contract" as a promise "the performance of which the law ... recognizes as a duty"). But see 14 JAMES P. NEHF, Corbin on Contracts: Impossibility § 74.2 (Joseph M. Perillo ed., rev. ed. 2001); Hans Smit, Frustration of Contract: A Comparative Attempt at Consolidation, 58 COLUM. L. REv. 287, 288 (1958).
10 Richard Craswell, Contract Remedies, Renegotiation, and the Theory of Efficient Breach, 61 S. CAL. L. REv. 629, 636 (1988); Oliver Wendell Holmes, The Path of the Law, 10 HARV. L. REV. 457, 462 (1897) ("The duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it,-and nothing else."). But see Gregory Klass, A Conditional Intent to Perform, 15 LEGAL THEORY 107, 108 (2009).
11 This doctrine applies more n the
12 See Downing v. Stiles, 635 P.2d 808, 814 n.6 (Wyo. 1981).
13 See Aquila, Inc. v. C. W. Mining, No. 2:05-CV-00555, 2007 U.S. Dist. LEXIS 80276, at *13-16 (D. Utah Oct. 30, 2007)
18 Lloyd v. Murphy, 153 P.2d 47, 50 (Cal. 1944);
19 1903 2 K.B. 740 (C.A.)
20 See, e.g., Friedrich Kessler Et Al., Contracts: Cases and Materials 930 (3d ed. 1986).
21 See Subha Narasimhan, of Expectations, Incomplete Contracting, and the Bargain Principle, 74 CAL. L. REV. 1123, 1178 (1986).
22 Aaron J. White, Note, Rendered Impracticable: Behavioral Economics and the Impracticability Doctrine, 26 Cardozo L. REV. 2183, 2189-90 (2005).
23 Krell, 2 K.B. at 750, 754.
26 The back of the tickets sometimes indicate that the tickets may be refunded if the performance lasted only a certain time, usually 1 hour.
28 See Nick Demarco, QC; Football and the Law- employment law and football at page 80.
29 See Kevin Keegan v. Newcastle United Football Club Ltd (2010) IRLR 94
30 See Williams v. Leeds United Football Club (2015) IRLR 383; Farnan v. Sunderland Association Football Club Ltd (2016) IRLR 185.
32 See the case of Lou Macari v. Celtic Football Club (1999) IRLR 15 787.
33 See Waddy, 606 S.E.2d at 230 n.10; Arthur Anderson, Frustration of Contract-A Rejected
Doctrine, 3 DEPAUL L. REv. 1, 1(1953).
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