Mark Pestronk
Mark Pestronk
Q: Hurricane Irma badly damaged a villa in St. John that we had booked for a client's family's Christmas stay. The client had just made a $10,000 deposit by wire transfer. The villa owner claims that he needs to keep the money to make repairs in order for the villa to be ready in time for Christmas. However, my client wants his money back. Is my client entitled to a refund? If he can't get one, could he have any recourse against our agency?

A: The answer depends on the terms of the agreement between your client, on the one hand, and the villa owner or villa rental agency, on the other hand. The agreement may well have terms and conditions covering this situation.

For example, there may be a specific clause regarding what happens in case of a hurricane, such as this: "No refunds are made under any circumstances including acts of God, such as hurricanes." In that case, the client would not be entitled to a refund, even though it would obviously be unfair if the villa were apparently destroyed.

Although your client would not be entitled to a refund, he is still entitled to the villa rental, and the villa's condition must be suitable for an enjoyable family vacation. So, if it turns out that the villa is not ready, your client is entitled to sue the villa owner for breach of contract and obtain damages that would be equal to or greater than a refund.

More likely, however, the agreement probably has a general "force majeure" clause. This means that a party is excused from performing its part of the agreement if it is prevented from doing so by forces beyond its control, such as a hurricane. Contrary to popular belief, a force majeure clause does not automatically entitle the paying party to a refund, unless the contract so provides.

Even if the contract does provide for a full refund in cases of force majeure, your client may still not be entitled to a refund if the force majeure event just occurred but contract performance is months away, as Christmas is now. So your client would probably have to wait until it is clear to both parties that the villa cannot be ready on time.  

The same difficulty would probably prevent your client from recovering the deposit from his travel insurance company, if he has purchased a cancellation policy. The insurer would undoubtedly take the position that it is too early to ascertain whether you will have a loss.

If, as often happens, there is no written contract at all, or your client never signed the contract, U.S. law does not impose a force majeure condition on informal contracts. So again, your client will have no remedy unless it turns out that the villa is not ready by Christmas, at which time he could sue for breach of contract. Being very frustrated at this point, your client may look to your agency for a remedy.

Your agency would not be liable for a refund unless your agent made a misrepresentation that led the client to sign the contract. For example, if your agent said, "You can go ahead and sign because villa owners must provide refunds when a hurricane strikes," and if the client could prove that it was said, the client would have a good case against your agency.

On the other hand, your agency would not be liable merely for the villa owner's failure to provide a refund, any more than a real estate agent would be liable if the house burned down before the buyer could close on the purchase.
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