Creating a Cancellation Policy for Your Business

From personal crises to acts of God, an event may not come to fruition for many reasons. But regardless of whether a celebration is canceled for a breakup or a global pandemic, your business shouldn’t bear the costs of missed opportunities and unpaid work.

“An event that cancels without the ability to book something else in the spot leads to lost revenue and potentially unreimbursed hard costs,” explains Vijay Goel of Bite Catering Couture. “For caterers and venues with high overheads, cancellations can drive substantial losses.”

And while it might seem unfair for a client to shoulder that expense (especially if they’re not at fault), Goel notes that “a high-quality event insurance policy can be used to cover risks on the client side,” saving your company from taking the financial hit.

So, encouraging all clients to secure event insurance is a solid first step. But when it comes to protecting your business’s interests, all roads lead to your contract. The terms in your client agreement should outline a clear cancellation policy that recognizes your clients’ rights while preventing significant losses to your company.

If it’s time to freshen up your cancellation policy, keep reading for tips and ideas from experienced event professionals.

Hire a legal professional

First and foremost, don’t write, update, or change your contract without consulting a legal expert! You wouldn’t expect an attorney to pull off a 150-person wedding, so stay in your lane and let a professional ensure your contract is legally sound.

“Having a way that all parties are covered is well worth investing time and money,” assures Jen Sulak of Weirdo Weddings. “Hiring or bringing someone in to look over your needs and requests as a business owner will always be more efficient when you have a lawyer present as you are constructing cancellations.”

An airtight contract will help you sleep better at night, but it also stands in your favor if a client ever attempts to sue or take legal action over a canceled event. 

Consider what makes sense for your business

No two businesses are alike. As such, your cancellation policy will look different than others in the industry. Only you know how much time, energy, and resources go into your work, so you must decide what makes sense given the circumstances.

“There isn’t an ‘industry standard’ way of doing things when it comes to cancellation policies in the events world,” confirms Leah Weinberg of Oduberg Law, LLP. “You have to make sure that your cancellation policy feels right to you and adequately compensates you should a client cancel their event.”

When considering a cancellation policy, Weinberg encourages business owners to “determine whether you want to distinguish between the cause for the cancellation of the event.” For example, canceling due to financial challenges is a different situation than if a wildfire ravaged the neighborhood surrounding the event venue, so think about whether you’re open to having separate policies for force majeure events and self-cancellations. 

Sulak also reminds event pros that a cancellation policy goes beyond the client agreement. Business owners should have an internal plan to address any losses within the business. 

“Detail what this looks like for you not only in time but in money aspects,” Sulak encourages. “If someone cancels, you need to have a plan in place for the financial aspects to be affected. Whatever that looks like for your business, you will need to stick to it. Take a look at the overall picture of what could happen and detail it out.”

By stepping back and considering the full weight of a cancellation, you’ll better understand what you can—and can’t—accept in terms of reasoning, timing, and services rendered. From there, a legal professional can help you put it into clear and binding terms of agreement.

Cover your bases

A cancellation policy can only protect your business if it’s written in your contract. And if the parameters aren’t clear, people can take advantage of your hard work—even when you’ve acted honestly and transparently.

First and foremost, “make sure you have a ‘cancelation for any reason’ clause in your contract that protects you as the vendor should you want to release the clients from their contract for any reason,” encourages Lilia Shatnaya of Plume and Stone Invitation Studio. 

Beyond force majeure and self-cancellations, Shatnaya offers an important reminder: “You have the right to walk away from a client who you are just no longer a fit with or who is rude and aggressive, and as long as you have it in your contract, you are protected.”

So, a cancellation-for-any-reason clause can save your bottom line regardless of the reason, especially if a client relationship is not working for you.

If you intend to retain or collect money for services not yet performed, Weinberg also notes the importance of including language about liquidated damages in your cancellation policy. 

“This says that your damages as the vendor would be hard to quantify if the client cancels, so being able to retain the amounts already paid and/or collect the balance of your fee is a reasonable estimate of those damages and isn't intended as a penalty,” Weinberg explains. “This is language a court is going to look for should your client challenge your right to keep or collect your fee when the event hasn't taken place.”

Again, working with a trusted attorney is the best way to ensure your cancellation policy is irrefutable and without loopholes.

Tie up loose ends

Keeping your contract updated with a foolproof cancellation policy is essential. But when it comes time to use it, be sure to follow up with an amendment to the original terms. Securing a signed agreement to cancel protects your business in the long term. 

“If the client decides to cancel their contract with an event pro, always make sure they sign a cancelation agreement,” Shatnaya urges. “This will make sure that you both agree to the terms of the cancelation, and you will no longer be liable for anything in the original contract.”

There’s no such thing as being too safe, so take all the precautions to recoup your losses from a cancellation while safeguarding against malicious litigation. 

Note: The tips provided in this post are for informational purposes only; they do not and are not intended to constitute legal advice. Please consult with an attorney to discuss updates to your cancellation policy.