24 March 2020, This advice has been approved by Consumer Affairs Victoria.
What happens if my domestic clients choose to cancel due to COVID-19? Can I claim cancellation costs?
To answer this question, it is useful to think of two scenarios. In the first example, the health authorities have issued explicit advice, under the State of Emergency declaration, restricting non-essential travel to your area.
Such an instance would trigger a ‘frustrated contract’ under the Australian Consumer Law and Fair Trading Act 2012, which means it is impossible to perform or carry out a contract due to events beyond all parties’ control.
In this scenario, the customer would be entitled to a refund of any payments already made. However, the law may also entitle you to any reasonable expenses you incurred before the customer cancelled.
If there are no restrictions on domestic travel and your business is still operating, the contract is still valid and your cancellation policy can be applied.
The best solution in both these circumstances is to talk to the customer to negotiate alternative arrangements.
For example, hold the deposit over to be used at a different time. This is a frequently used strategy by tourism operators who have been through a crisis – a postponement or a deferment of a booking means you can hold onto the deposit at a time when every dollar counts.
This advice should be read in conjunction with Consumer Affairs Victoria’s online factsheet “When customers cancel – guidance for tourism businesses” https://www.consumer.vic.gov.au/products-and-services/business-practices/contracts/guidance-for-tourism-businesses