English Premier League suspended due to Covid-19 – what next for contractual obligations?

Background

The Premier League’s initial decision to suspend the season until at least 4 April 2020 (and now until 30 April) due to Covid-19 came less than 24 hours after it publicly confirmed that matches would take place as usual. The announcement sent shockwaves through the world of sport and made clear, with painful finality, that sports competitions are not immune from the pandemic viral outbreak. UEFA underlined this once more, with its announcement that EURO 2020 would be postponed by 12 months to allow more time for football clubs to complete their domestic seasons.

The suspension – and possible eventual cancellation – of the Premier League impacts every facet of English football – from clubs, season ticketholders, sponsors, players and employees, to suppliers, investors, broadcasters and betting companies. In terms of legal consequences, it has caused particular disruption to the well-established system of contractual obligations based on prepayment and long-term investment, such as brand sponsorships and season tickets.

We summarise below some of the key contractual aspects that various stakeholders may consider in order to get some much needed clarity on what recourse is available if they or their counterparties cannot perform contractual obligations due to Covid-19 and/or cancellation of the Premier League season.

Release of performance obligations

Parties may look to release themselves from their obligations if the contracts in question contain a force majeure clause or under the doctrine of frustration.

Force Majeure

A force majeure clause provides that both parties will be released from their obligations under a contract if an act, event or circumstance occurs which is beyond the reasonable control of the parties that makes performance of the contract impossible. However, where such clauses are broadly drafted or unclear, there is a risk of protracted disputes and costly litigation.

The Premier League has contracts with its member clubs to provide the opportunity for those clubs to play in the division. Whether and how the Premier League season resumes seems likely to be a source of consternation. Should the Premier League decide to cancel the remainder of the season due to Covid-19, the likes of Liverpool FC, who currently sit at the top of the table in their bid to win a first League trophy for over 30 years, would want to continue or be awarded the trophy based on their current position. But taking the status quo could also relegate clubs, with considerable financial consequences, without giving them the chance to turn their fortunes around. Stakes are also high for the teams looking for qualification for European competitions.

These clubs may argue that such cancellation or premature determination is a breach of the Premier League’s obligations to its member clubs to facilitate the 2019/20 season. If the contracts between the Premier League and its member clubs contain a force majeure clause, and the definition of force majeure includes references to “disease” or “pandemic”, this may cover Covid-19 as an unforeseen event releasing the Premier League from its obligations.

However, the threshold is high and extremely fact-specific. For example, the Royal Moroccan Football Federation was not able to appeal the fine imposed by the Africa Football Confederation for its refusal to host the Africa Cup of Nations tournament in 2015 due to the Ebola virus, since this was not considered a force majeure event. In this case, performance was considered to be only “difficult”, rather than “impossible”.

Frustration

If there isn’t a force majeure clause in a contract, the common law doctrine of frustration may release parties from their contractual obligations where there is a frustrating event. A frustrating event is one that is unforeseen, not caused by either party, and which renders performance of the contract impossible to fulfil.

Stakeholders may consider whether the Premier League deciding to suspend or cancel the rest of its season is a frustrating event due to the “purpose” of the contract between a member club and the relevant stakeholder no longer being possible. Similarly, clubs that pay rent to landlords or councils for use of their stadiums might argue that the cancellation of the Premier League (being the foundation of the contract) would release the club from its obligation to pay the remainder of the season’s rent.

However, parties should consider their legal position carefully before relying on such arguments. Generally, frustration will not apply where an event is contemplated by a force majeure clause and the doctrine typically applies in only extreme scenarios.

Consumer Rights Act 2015

If matches are suspended or cancelled, season ticketholders may seek a refund for the value of the matches they were prevented from attending.

The contractual principles discussed in this post may be helpful in assisting a ticketholder to get their money back. However, the specific club’s ticketing policy will also need to be reviewed. Many clubs’ terms and conditions state that they will have no liability to season ticketholders if matches are cancelled, rescheduled or played out of view of the public. Further, a stadium is not a public place but the private property of its owner, who has the right to restrict access to the stadium. In relation to season ticketholders who have already paid for access, such restriction needs to be justified, and the governing body’s suspension of the season is likely to be justifiable.

However, since the terms that season ticketholders sign up to are unilaterally agreed by the relevant club and affect the rights of consumers, the Consumer Rights Act 2015 may apply to protect consumers against unfair standard terms in such contracts. Just as the OFT investigated and recommended amendments to Manchester United FC’s season ticket policy under consumer law, whether the OFT would investigate clubs’ liability clauses for cancelled, abandoned or postponed matches remains to be seen.

Termination

There are two main sources for termination rights: under common law or contractual provisions.

In an attempt to cut costs, some clubs may look to terminate contracts with suppliers such as facilities management services, security firms or waste removal companies on the basis that the provision of such goods and services cannot be performed as a result of the season being suspended and possibly cancelled by the Premier League.

However, parties seeking to enforce such provisions should consider two things: the relevant notice periods under the contracts and whether common law provisions might apply. Contracts are likely to have specific notice provisions that typically allow a period of time for the defaulting party to remedy the breach before a termination right arises. Similarly, an express termination provision may set out the full extent of the parties’ respective rights and remedies arising out of any termination to the exclusion of common law. In this scenario, if clubs elect to terminate supplier contracts on the basis of express provisions, it may preclude them from a claim for future loss of any breach committed.

Damages

Legal claims for damages for breach of contract appear a likely consequence of the sporting world’s response to the fast-developing Covid-19 outbreak. Where one party breaches its contractual obligations, the non-defaulting party may be entitled to damages under both the contract and common law for losses suffered.

Broadcasters have contracts with the Premier League which give them the right to televise a number of live matches. If the Premier League decides to cancel the rest of its season, broadcasters may argue that such non-performance is a breach of contract by the Premier League and claim for the losses suffered by broadcasters from not being able to televise those matches.

However, even if successful, there are restrictions on the recovery of damages, including a duty on the broadcasters to mitigate its losses. For example, broadcasters would be expected to take steps to reduce the damage already caused from the suspension or cancellation of the Premier League by replacing what is televised during those prime-time slots.

Comment

If and when the sporting calendar resumes, in whatever form that may be, stakeholders across the sporting world will likely still be feeling the legal effects of the decisions made by football’s governing bodies, clubs and key sponsors.

Ultimately, the legal implications of Covid-19 and its impact on this Premier League season, as well as many other sporting events, will differ on a case-by-case basis. Parties should review the key provisions in their contracts as early as possible, assess the obligations at risk and communicate with counterparties to reach a legal and commercial agreement.