Cancellation Policies and Refunds

The standard practice among most business owners in the wedding industry is to require 50% non-refundable deposits from their clients.

Mary Lee Herrington, Esq.

I’ve been thinking a lot about these deposits and cancellations recently – from both the client’s and business owner’s perspectives. From a wedding/event business owner’s perspective, the non-refundable deposit is crucial to their livelihood – after all, their calendars are booked months (sometimes over a year!) in advance and they often turn away other work and other requests from would-be clients in order to commit to that particular event. But, what happens or should happen to paid monies when there is an unforeseen circumstance beyond either party’s control? – such as, a sudden health issue, pregnancy, or a natural disaster?

I’ve seen so many contracts that are surprisingly unclear on the issue of refunds and the transferability of deposits/paid fees, especially where it involves these unexpected life developments.

Sometimes it is not very straightforward and business owners will have to weigh other business-related factors, not just the legality of liquidated damages (i.e., the non-refundable deposit amount when the client cancels/breaches). Business owners will have to consider preservation of goodwill, reputation (after all, we do live in the age of Yelp), and the time involved in arguing with an unhappy customer. That is to say, you want to be understanding of unexpected circumstances that lead to some form of cancellation or request to reschedule, however business owners also have to balance the desire to be fair and considerations of retaining good will with the bottomline, which, for small businesses, is not insignificant (losing a date during high wedding season most likely means losing potentially thousands of dollars in revenue, since there is a very high likelihood that, depending on the time when the cancellation occurred, the vendor wouldn’t be able to fill that date with another job).

This is where it’s important to really think through what circumstances would be okay for you and your business to agree to refunds or transferability of deposits and paid fees. In the context of weddings, you have a date far into the future and your service – whether you are a stationer, planner, florist, designer, caterer – often begins months in advance. What specific parameters should be imposed on refunds, bearing in mind the time/work you’ve already put in?

What about a rescheduled date? – even if they wish to continue retaining your services, a new date may very well mean re-doing a lot of the work that you have already completed, in which case, do you charge a new deposit? – do you transfer the deposit and paid fees but add an additional fee to cover the additional time/work involved specifically related to the cancellation?

What about when it’s not the client’s decision/cancellation/change of heart, but you (the business owner’s) or your employee’s? What do you do with that “non-refundable” deposit when you must cancel the booked event due to a health issue, sudden health issues involving family members, or other personal circumstance that you had no control over or no idea about when booking the job?  What do you wish to do if cancellation were indeed due to your own circumstances, yet you have worked on the event for quite a few months, perhaps even beyond the monetary value of the deposit?

So, here’s my best practice tip: when thinking through these hypotheticals, revisit your cancellation clauses. Consider if you want to impose limitations or drop-dead dates. Consider what makes sense from a business/fiscal standpoint and reputation, then make sure the clause covers your bases. Basically, it’ll be easier for you to hark back to the contract where the clients had agreed to the explicit cancellation policy than for you to shuffle awkwardly on your feet when/if the awkward time comes.

{ Photo by Marianne Taylor }