Consumer Implications of Coronavirus

Consumers’ Rights for Corporate Abuses Related to COVID-19

To be sure, everyone is rightly focused on stemming the tide of COVID-19. But as this joint effort is underway, opportunistic companies have quickly begun to take advantage of consumers. 

For instance, I ordered hand sanitizer via Amazon Prime. My order’s total cost was around $25, and Amazon Prime guaranteed me two-day shipping, which, considering the circumstances, Amazon advised would be closer to four weeks. But then, Amazon added, if I wanted my shipment in only two weeks, Amazon could do it—for an extra $50! 

Similarly, I attempted to return three Southwest Airlines tickets. Under normal circumstances, cancelled Southwest tickets result in a credit good for a year. I was hoping that due to my trip’s cancellation Southwest would refund my purchase price. Not only did Southwest refuse my refund request—instead giving me an expected credit—Southwest kept the $75 I’d paid in Early Bird fees for early seating despite Southwest never having acted on or otherwise committed any resources to my Early Bird request. Southwest simply insisted on keeping my unused Early Bird charge because its contract, which Southwest and I created under far different circumstances, said it could.

These are only a couple of examples of the bourgeoning opportunities for companies to mistreat consumers due to our shared crisis. Will colleges return to students (or their parents) the unused tuition costs because of students needing to learn remotely instead of in classrooms where they could enjoy the full college experience they paid for? What about insurers making good on coverage to stores or restaurants that are required to close? 

Regarding workplace issues, what about an employer who insists on staying open and having employees—including elderly and compromised ones—attend work? If employees get sick, does the employer’s insistence trigger the labor laws or premises liability for the employer having maintained an unsafe workplace? Or what if an employee refuses to attend work? Can the employer fire this employee, and does it matter that the person is employed at will? 

And what about other service industries like health clubs or yoga and spinning studios? If members can’t take classes, are they entitled to refunds of their dues? Or if someone get sick while working out, is the club liable?

These are only a few of the legal issues that we can expect to emerge when the dust settles. And when it does, anyone who winds up out-of-pocket needs to know the answer to three questions:

  1. Do I have rights that could allow me a recovery?

  2. If I do, what are these rights?

  3. How can I most effectively enforce my rights?

Since most arrangements between people that result in costing consumers money are rooted in contact (whether express or implied or in writing or orally), the parties’ contract is the first place to look. If the contract contains a force majeure clause (a force majeure event refers to the occurrence of an event that is outside the reasonable control of a party and that prevents that party from performing its contractual obligations), this will usually excuse the company from performance. But where a company insists on keeping all or part of consumers’ money for a contract that the consumers cannot perform, consumers should consider whether they may apply a force majeure clause bilaterally, meaning from their perspective.

If the contract doesn’t contain force majeure clause—and most consumer contracts won’t—the common law doctrine of frustration (or impossibility) of performance could prove a worthwhile consumer tool. The doctrine of frustration tends to apply if:

  1. The underlying event is neither party’s fault;

  2. The event occurs after the contract’s formation and the parties did not foresee it; and

  3. Because of the event, it becomes physically or commercially impossible for the parties to fulfil the contract, or the event transforms the parties’ obligation to perform into a radically different obligation than they initially undertook.

The doctrine of frustration of performance results in the parties’ contract automatically ending, meaning the parties should no longer be bound to perform their future obligations. So when considering this doctrine’s application to my Southwest situation, it might require Southwest to refund me—and countless others—not only my Early Bird fee but also my entire air fare.

Finally, statutory remedies might exist to help consumers. For instance, if your landlord seeks to evict you for your failure to pay rent because your employer has closed and you have no income, virtually all states’ landlord-tenant statutes provide robust rights to aggrieved tenants under even normal circumstances.

And speaking of statutes, perhaps by the time this disaster is done the federal government will pass a statute concerning consumer damages for unrefunded money relating to cancelled flights, sporting events, entertainment, and education as well as shameful price gouging as in my Amazon example.

But because consumer relationships are often governed by contracts (e.g., Amazon’s terms and conditions, airlines’ contracts of carriage), if a company refuses to refund your money because of either party’s frustration of performance, look at your contract. This review won’t be easy, but the exercise will provide a valuable stepping off point concerning your rights—my first point above from which the second and third points follow.

So don’t stop doing commerce. Just know that when vendors inevitably gouge you, take advantage of you, or otherwise rip you off during this challenging time, you might have powerful legal remedies that make you whole.

Daniel Karon
Karon LLC
Lecturer in Law Columbia Law School and the University of Michigan Law School
Columnist Law360
Author, The Last Class Action

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