Pending legal action for failing to deliver on a contractual guarantee

[Sleepless In Saxmundham]

Hi all and thank in advance to anyone providing advice that might help me. Do forgive me if this isn’t quite in the right forum, I’m new here! It seemed that “legal” and “creditor” might be appropriate as it will certainly involve one.

 

My scenario: Having worked as a conference producer for 8 years I decided to go self-employed back in November and run events myself for private clients. It took me a while, but I gained one! The brief was to create and run 2 networking events for them in London and Brussels in early May. I agreed to having it worded in the contract that I am responsible for securing 30 attendees for each event as I thought it would be a piece of cake and, sadly for me, it’s not gone well. It’s worded that I guarantee a minimum of 25 and they’d be entitled to a pro-rata refund if I fell short. I’ve not even 10 for each.

 

The problem: They paid me in full prior to commencement back in January and the money, £23500, has been virtually all spent. I’ve paid out for venue hire, AV, caterers, travel, etc; plus being self-employed I’ve needed to draw on it to pay my outgoings each month. My client is a well-known corporate with a well-staffed legal department and I know they will, perhaps rightly, come down hard on me when I report back to them to say the campaigns have failed and that it’s game over. Now don’t get me wrong, I’m not trying to wriggle out of this. I’ve been paid in good faith and, whilst I think the client is partly to blame, the onus was on me to deliver and I have failed. When we last met in March, my client said that if I do not deliver they will seek recompense and/or legal action.

 

My question: I’m very worried as to how this will play out. It’s without question they will ask for their outlay back from me and maybe also compensation for the money they have paid to fly people out to the events themselves. Put simply, I don’t have it. Personally, I have no assets or savings that I can tap in to. However, I got married last summer and my husband owns the house we live in and does have savings. I want to face this alone and if I need to pay them back over time then I would gladly do so. My concern is that if it went to court then his situation would be taken in to consideration and he would be forced to bail me out.

 

Can anyone please help me with some advice? I’ve tried so hard to make this all work and now not only do I face the collapse of my venture but quite frankly fear the potential knock-on effects this could have at home. I’ve been stupid and really don’t know what to do.

 

Thanks for reading & in advance for any guidance,

Kelly.

[steampowered]

Hi and welcome to CAG, I think you are in the correct place.

 

In a large corporate, it is not the marketing department's decision to start litigation. They'd have to go through management and involve group legal. I doubt the company would bother suing you to be honest, especially if you are an individual with limited assets and given that we are talking about a pretty small sum of money in the context of a large company.

 

What exactly does the contract say? If the contract says you have to refund the money if you don't secure 25 people, that's what you have to do. But if the contract simply says you guarantee 25 attendees, then you are in breach of contract, and the legal remedy is damages for that breach of contract, but the company has to prove what those damages are. I'm not sure how a company could legally prove loss for not having enough people at a networking event.

 

Personally, I would just be up front about it - explain what you have done and why it hasn't worked. If you can salvage the situation, you should probably try to do that. If the situation is not salvageable, then I think you just have to face the music ASAP - so that the person instructing you can mitigate their losses and minimise the amount of internal embarrassment.

 

If you do get asked for repayment then you can make the point that the money has been spent and you are not in a position to repay it. I doubt the suggestion of monthly payments is going to be attractive - this company doesn't sound like a bank and won't have the capacity to monitor monthly payments unless I guess they sell it to a debt collector. This money will be coming out of the department's budget for the year - anything you pay back in the next financial year is not likely to be credited back to their budget so won't matter to the people you are dealing with day-to-day.

[Sleepless In Saxmundham]

Hi Steampowered. First and foremost, thanks for taking the time to write such a detailed reply. That's really helped!

 

In answer to your question regarding my contract, the following wording applies:

1 - Kelly will provide 30 attendees per event with a minimum guarantee of 25 attendees per event. Should this not be achieved, then [CLIENT] will be entitled to a pro-rata credit or refund, less expenses, per missing attendee.

 

It is, however, not specified as to how this is to be calculated. On reflection I am hoping that I can simply subtract all my operational costs and expenditures from the initial £23500, divide the remainder by 50 (guaranteed attendees) then multiply it by the missing number and make that as an offer of settlement to the client. Then I can see if I can afford it or not. What do you think?

 

Thanks again!

Kelly.

[steampowered]

I see - the wording is quite clear that the client is entitled to a pro-rata refund if you don't get 25 attendees.

 

There are two ways to calculate this - either (1) you deduct expenses from the £23.5k and then divide pro-rata, or (2) you divide the £23.5k pro-rata and then deduct expenses.

 

The wording suggests to me that option (2) applies, although nothing to stop you putting forward a calculation based on option (1) and let them raise it if they disagree.

 

Mind you, if you can only get 10 attendees, they may not want to go ahead with the event so it is worth having an open conversation with them.

[Sleepless In Saxmundham]

Indeed, I have some thinking to do.

 

Another question. Would I be able to include the funds I drew for my living expenses and outgoings within "expenses"?

[steampowered]

Indeed, I have some thinking to do.

 

Another question. Would I be able to include the funds I drew for my living expenses and outgoings within "expenses"?

 

I would have thought the reference to "expenses" would only cover outgoings relating to organising the event. I doubt it would cover personal expenses and living costs.

 

When you say 'withdrew', what does that mean? Were you contracting through a limited company?

[Sleepless In Saxmundham]

No, replace "drew" with "spent" - my mistake!

 

Based on your advice I'm going to arrange a meeting with them next week to explain what's happened and show them what I've done. Assuming we can eventually find an amicable way through it then great. If they come back to me with something else then I'll re-post on this thread.

 

Thanks again for your time & help, it's very much appreciated.

 

Kelly.

[steampowered]

No worries, good luck!

[king12345]

Can't you simply find another 15 people to attend?

£50 for sitting down all day will get people fighting at the doors.

That way you will cut your losses and will not lose credibility.

I'll come along for £50 if you want