With the introduction of the corona measures, many events and activities are postponed or cancelled. A large number of these events are fully or partially financed by sponsors.
What are the consequences for the organisers and sponsors?
In our article "Corona crisis and force majeure" you could already read about the impact of the corona crisis on contractual relationships.
Due to the continuation of the corona crisis, many events are cancelled. We refer to our article "Corona crisis and events" about the possible reimbursement of tickets due to cancelled events.
In this article we will elaborate on the consequences for sponsorship fees that have already been paid for events that cannot or may not take place due to the corona crisis.
1. What is sponsorship?
Before all, the nature of the sponsorship agreement must be determined.
Under the term 'sponsorship' agreements, agreements with very different commitments are brought together. Therefore we cannot simply speak of one standard type of sponsorship agreement with identical obligations for the parties.
First, one has to identify the type of agreement, that one is dealing with and what the obligations and expectations of each party are.
In addition, there are differences in forms of sponsorship agreements depending on the entity being sponsored, i.e. a company, a specific person, an object or, more specifically, an event/activity.
Below, we only discuss the sponsorship of events or activities.
2. The general consequences of "force majeure
In the event of force majeure, the contracting party is released from its obligation to perform what is promised without being liable to pay any compensation.
This means that the other party may also be released from its obligations.
This only applies if there is a definite impossibility to perform the obligation.
In the event of a temporary impossibility, the obligations must be performed as soon as the impossibility to perform ceases, and to the extent that the performance of the agreement is still useful.
3. The actual consequences of force majeure on sponsorship agreements
3.1 In case the event/activity is postponed
If the event is merely postponed, the contract or the (verbal) arrangements between the sponsor and the sponsored party must be fulfilled, albeit at a later date.
3.2 if the event / activity is cancelled?
If the event / activity is cancelled because of the corona crisis, the organizer can invoke "force majeure" in order not to execute his commitment, namely the organization of the event / activity.
It is important, however, that the event is effectively cancelled due to "force majeure", for example because it was planned during the period in which events were forbidden by the authorities (i.e. during the corona crisis). The event/activity may therefore not be cancelled solely on the organiser's own initiative.
The question that then arises is whether the sponsored person (the organiser) will be obliged to reimburse the sponsoring amounts paid.
First of all the contract has to be analysed to identify clauses that deal with such as situation.
If nothing has been agreed, then the Civil Code applies. The Civil Code provides that no compensation is due if the debtor - here the sponsored party - is prevented by force majeure or coincidence from the execution of his commitment, i.e. the organisation of the event/activity.
From that point of view only, the sponsored party does not have to reimburse the amounts already paid.
However, the sponsored party may not benefit financially from the force majeure situation. Therefore, he is obliged to verify that he will not enrich himself, if he keeps the amount paid for sponsoring.
In order to determine what the parties are obliged to do in the event of force majeure, they first have to consult their contract.
If there is no contract or the parties have not agreed when force majeure can be invoked and what should be done in that situation, the ordinary law can be invoked (see our article on "corona and force majeure").
We recommend the following:
- first check your contracts or have them checked;
- contact your contract party and try to find a solution together or have your counsel do so;
- always remain reasonable and ethical, given the circumstances;
- if you have any doubts, do not hesitate to contact us;
- only in the very last instance you address the court.
Please, do not hesitate to contact us. It goes without saying, that we can inform or assist you. You can always contact us on +32 (0) 02 747 40 07 or CoronaTaskforce@seeds.law.