Should a Golf and Country Club Provide a Refund on Prepaid Fees Due to Closure Because of Coronavirus?
The Law Likely Requires At Least a Partial Refund of Prepaid Fees Due to Closure of Golf Courses and Country Clubs; However, How Hard a Club Member Pushes the Issue Should be Carefully Considered Lest the Club Member Offend the Club and Lose the Opportunity to Return in the Future.
A Helpful Guide On How to Evalute a Legal Position Regarding Prepaid Green Fees Involving Golf Club Membership Contracts
FORE! Unfortunately, that is a sound unlikely heard for quite a while and for golfers who have waited through a long winter and prepaid substantial fees for golf club memberships, whereas the government mandated closure of non-essential businesses, including golf and country clubs, is very disappointing to say the least. Furthermore, whereas membership at some clubs can cost thousands, even tens of thousands of dollars for the most prestigious clubs, the loss of use of such a significant investment may be quite substantial.
The closure mandate arises as an enforceable Order prescribed by O. Reg. 82/20 to the Emergency Management and Civil Protection Act, R.S.O. 1990, c. E.9, and was made effective on March 24 2020. As an unfortunate result, many golf and country club members are now looking at a much shortened season, perhaps even a fully lost season of the Covid19 Crisis is significantly prolonged.
Generally, golf club membership agreements are prepaid in full prior to an upcoming golfing season or paid with a substantial initial deposit followed by subsequent installments. In either way, the golf club receives monies from members in advance. This arrangement is common and usual and generally viewed as fair and reasonable so as to enable planning and ensure good annual budgeting. As a benefit, members receive privileges such as VIP treatment including priority reservations, use of special facilities, and at members only clubs, the prestige of exclusivity. Furthermore, whereas golf is, in addition to recreational often a social activity, many businesspeople will often use a prestigious golf club membership for purpose of a casual outing in which to conduct a meeting or business networking as a means of hosting and entertaining clients or prospective clients.
Golf and country club membership contracts commonly also include a discount package for food and drink consumables in the restaurant and bar facilities; however, this also comes with a contractually stipulated commitment to spend a certain minimum within the club facilities. Failure to meet the minimum spend expectations may result in a loss of various member discounts or other privileges. Of course, with closure of a country club, and thus closure of the restaurant and bar facilities, there is an now an inherent conundrum as to how a member will be able to meet these spending expectations and whether the country club may, and will, impose the penalities for failing to meet the spend quota.
Rights and Duties
The law generally favours the principle that where a bargain is made, and paid for, the goods and services must be delivered. As below, the applicable laws are fairly broad and are generalized enough as to apply to golf and country club memberships; and accordingly, members who are without receipt of purchased services as promised within the membership package, and where such failure of receipt is out of the control and without the fault of the member, such as golfing privileges inaccessible due to government mandates closures, members may be, and quite likely are, legally entitled to refunds or rebates. However, whereas membership opportunities, especially at a prefered club, may be quite limited, members may need to think long and hard whether to push the issue of refunds or rebates lest the access to membership be lost. Essentially, members will want to evaluate the club politics before raising voices in demand of refunds and rebates.
A golf and country club membership agreement may include a clause referring to a force majeure event. A force majeure is, typically, an unexpected and unpredictable event outside the control of the parties to a contract. A force majeure clause within a golf and country club membership may refer to events such as weather disruptions, among other things, and perhaps even be detailed and broad enough to include a pandemic such as the Covid19 Crisis. Where a contract contains a force majeure clause, the contract will address special terms of understanding for how the parties will treat the contract in such circumstances. Whereas a force majeure clause, if any, will be unique to the standard agreement of each specific country club, each force majeure clause will require a specific review.
In the current situation, being the Covid19 Crisis, the inability of a country club to provide access and use of the golf course and other facilities arises due a lawful Order by the government in response to a public health emergency. Accordingly, any inaccess occurs as an lawfully imposed mandate rather than as a result of any failure to perform as per the contractual agreement with the country club. Essentially, the hands of the country club are tied. The country club is forbidden from providing, at least temporarily, what was promised within the membership contract.
When a contract becomes impossible to perform due to an outside force beyond the control of the parties to the contract, such as where a country club is unable to provide access due to a government mandated closure, the country club is without fault and therefore without a breach of the contract. Instead, the contract may be deemed frustrated as opposed to breached. Accordingly, the club member, having prepaid for the benefits promised within the contract will be unable to successfully sue the country club for a breach of the contract.
Where a contract becomes frustrated due to unexpected and unforeseen circumstances beyond the control of the parties to the contract, the law may deem the further obligations within the contract as a nullity; and accordingly, the parties to the contract are thereby relieved of the further obligations within the contract. This is stated within section 3 of the Frustrated Contracts Act, R.S.O. 1990, c. F.34 where it is said:
3 (1) The sums paid or payable to a party in pursuance of a contract before the parties were discharged,
(a) in the case of sums paid, are recoverable from the party as money received for the use of the party by whom the sums were paid; and
(b) in the case of sums payable, cease to be payable.
With the above said, rarely with a country club membership is the entire contract an impossibility whereas parts of the agreement likely involved access to club facilities and varoius events, among other things, during the winter months; and accordingly, some benefits were already received and some further benefits remain possible once the closure mandates are lifted by the government. The concern for partially received benefits is addressed by sections 3(2),(3) of the Frustrated Contract Act wherein the party, such as a country club, having partially performed services, including incurring the expenses associated with those partially performed services, receives some protection against providing a complete refund for what may now be, or may become, a contract terminated without fault of either party but due to an incident outside the control of the parties that makes the contract, or remainder of the contract, impossible to fulfill.
A country club member who prepaid for a membership may want a refund, or partial refund, for services which are now, and becoming more so as the Covid Crisis stretches on, delayed due to the government mandated closures. As above, the country club member may hold legal rights that would warrant, and result in, a refund or partial refund if the issues were pushed forward; however, the country club ultimately holds the right to decide whether to enter into a future contract, such as whether to offer to renew a membership for the 2021 season. Accordingly, a member who holds membership with a particular country club may wish to proceed very carefully with any legal demands, if proceeding at all, so to avoid damaging the relationship and thereby avoid the risk of needing to relocate to another, unfamiliar, country club.
Statutory Rights to Invoke Cancellation
In some circumstances, such as where a club membership was to commence and is now delayed, and if such continues delayed, the statutory provisions within section 26 of the Consumer Protection Act, 2002, S.O. 2002, Chapter 30, Schedule A, provide the consumer, being the club member, with a right to cancel the contract if the delivery of services as contracted for are delayed by thirty days or more. Specifically, the Consumer Protection Act, 2002 says:
26 (1) A consumer may cancel a future performance agreement at any time before delivery under the agreement or the commencement of performance under the agreement if the supplier,
(a) does not make delivery within 30 days after the delivery date specified in the agreement or an amended delivery date agreed to by the consumer in writing; or
(b) does not begin performance of his, her or its obligations within 30 days after the commencement date specified in the agreement or an amended commencement date agreed to by the consumer in writing.
Where a consumer does wish to cancel an agreement per the rights within the Consumer Protection Act, 2002, if any, there are very specific procedures including notice requirements that must be followed.
The Covid19 Crisis is unprecedented and unprecedented legal issues are occuring. Exactly how the law will address various legal issues remains unclear. When disputes arise, by being proactive, maintaining respectful communication and compassionately appreciating that everyone is experiencing unexpected difficulties, the parties to contracts, such as country club memberships, can best ensure that legal issues are avoided or minimized and that quality ongoing future focused relationships are maintained.