Cancelled festival and a force majeure clause

Frustration at common law requires an unforeseen event outside the control of either party that renders performance impossible, illegal or radically different from what was promised: Taylor v Caldwell (1863) 3 B & S 826; Davis Contractors Ltd v Fareham UDC [1956] AC 696. A red wind warning coupled with a local authority direction to remove temporary structures would ordinarily make performance impossible or illegal, and would be a classic frustrating event. However, the parties have expressly allocated the risk of 'government order' and 'adverse weather' to Atlantic through the force majeure clause. Where the contract provides for the event, the court generally gives effect to the clause rather than applying the doctrine of frustration. The clause is wide and covers the local authority direction. The first question is therefore whether the clause is exhaustive. It says Atlantic 'shall not be liable' and 'may retain the deposit'. That is a clear risk-allocation provision. The common law doctrine of frustration is unlikely to override it. Shannon's argument that the contract is frustrated is therefore weak on the actual facts.

The clause says Atlantic 'may retain the deposit as a booking fee'. The word 'may' is permissive, but in context it is likely to mean that Atlantic is entitled to retain the deposit if the specified event occurs. The clause is not a penalty clause because it is not triggered by a breach by Shannon; it is triggered by a specified event beyond Atlantic's control. The deposit is also not a mere forfeiture on breach. For a business-to-business contract, there is no general statutory fairness control equivalent to the consumer unfair terms regime. The court would nevertheless construe the clause strictly. Atlantic would need to show that the €30,000 was genuinely a booking fee and not an arbitrary sum. The fact that Atlantic incurred no costs is relevant to whether retention is a genuine pre-estimate of its loss, but the clause does not describe the sum as a pre-estimate. A court might read 'booking fee' as compensation for reserving the marquee and losing other bookings. On balance, if the clause is clear, Atlantic can retain the deposit. If the clause were ambiguous, the contra proferentem rule would favour Shannon.

If the contract were frustrated and the force majeure clause did not govern, the 1943 Act would apply. Under the Act, money paid before the frustrating event is recoverable, but the recipient may deduct expenses reasonably incurred before the event in performing the contract. Atlantic had not erected the marquee and incurred no costs. Shannon therefore would be entitled to recover the €30,000 deposit. The Act also allows the court to award compensation for any valuable benefit conferred before discharge, but Shannon conferred no benefit on Atlantic beyond the deposit itself. The result would be that Atlantic could not keep the deposit. The contrast with the contractual force majeure clause is important: the clause, if effective, displaces the statutory default and allows Atlantic to retain the sum. Shannon's best argument is therefore that the clause should be construed narrowly, or that 'booking fee' does not permit retention of the whole deposit where no expenses were incurred.