Deposits, cancellation and force majeure clauses in arts contracts.

This article is for informational purposes and general commentary only. It does not constitute legal advice and does not create a solicitor-client relationship.

Arts work is booked long before it happens and paid for in stages. A venue takes a deposit to hold a date. A producer promises a fee for a season that is months away. A festival signs an act for an outdoor stage that the weather might close. When everything runs to plan, none of this matters. It matters when a booking falls over, because then the money already paid, and the money still owed, has to land somewhere. Three clauses decide where: the deposit, the cancellation fee, and the force majeure clause. This note explains what each one does, when a court will not enforce it, and what happens when a contract says nothing at all.

What is a deposit and can the other side keep it?

A deposit is money paid up front as a sign that the party paying it means to go through with the deal. It does two jobs at once. It is usually part of the total price, so it counts towards the fee. And it is security, so if the paying party walks away without cause, the other side can keep it. That second job is what makes a deposit different from an ordinary instalment. A true deposit is generally forfeited if the payer defaults, even if the other side has lost less than the deposit, or nothing at all.

There is a limit. The forfeiture only holds where the deposit is a reasonable amount. Australian courts have long treated a deposit in the order of ten per cent of the price as reasonable and safe to forfeit. A much larger sum called a deposit can be struck down, because at some point it stops being earnest money and becomes a threat held over the paying party. If a venue asks for a fifty per cent deposit and calls it non-refundable, the label does not settle the question. A court can still ask whether that amount is a genuine deposit or a penalty dressed up as one.

What is the difference between a deposit and a part payment?

The difference decides whether you get your money back. A deposit is security and can be forfeited on default. A part payment is simply money paid towards the price in advance, with no security function, and it is recoverable if the contract ends and the payer has not received what the payment was for. The same transfer of money can be either, depending on what the contract says and what the parties intended.

This is why the words in the contract matter. If a producer pays a venue and the agreement calls it a deposit and says it is forfeited on cancellation, the producer is likely to lose it. If the agreement calls it a part payment towards the hire fee and says nothing about forfeiture, the producer has a far better claim to it back if the booking does not proceed. A party paying money in advance should know which of the two it is before the money leaves the account, not after the booking collapses.

When is a cancellation fee a penalty?

Many arts contracts fix a cancellation fee, often on a sliding scale, so that a party who pulls out closer to the date pays more. A fee of this kind is enforceable if it is a genuine attempt to cover the loss the cancellation causes, or to protect a real interest of the other side, such as a venue that has turned away other hirers to hold the date. It is not enforceable if it is a penalty.

The High Court has set the test. In Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30 and again in Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28, the Court held that a clause is a penalty where the sum it requires is out of all proportion to the legitimate interest the other party is protecting. The old shorthand was that a penalty is a sum that is extravagant and unconscionable compared with the greatest loss that could follow. A cancellation fee set at a level that roughly reflects the loss a cancellation causes will stand. A flat fee that bears no relation to any real loss, and simply punishes the party who cancels, can be cut down or refused. The point of the clause should be to compensate, not to deter.

What does a force majeure clause do?

Force majeure is a clause that says what happens if an event outside the control of the parties stops the performance from going ahead. Fire, flood, storm, a public health order, the loss of the venue, the death or serious illness of a headline act. A force majeure clause names the events it covers, then sets out the result: usually that the affected party is excused from performing while the event lasts, that the contract can be suspended or ended if it lasts too long, and, above all, what happens to money already paid.

A force majeure clause only does what it is written to do. It is a creature of contract, not a general rule of law, so it does not exist unless the parties put it in. If the clause lists specific events, an event not on the list may not be covered, however plainly it was beyond anyone's control. And the clause should deal with the deposit. A well drafted force majeure clause says whether a deposit is returned, kept, or credited to a rescheduled date when the triggering event strikes. A clause that excuses performance but is silent on the money leaves the parties to argue about the deposit later, which defeats much of the purpose of having the clause.

What happens if there is no force majeure clause?

If the contract has no force majeure clause and an outside event makes performance impossible, the parties fall back on the common law doctrine of frustration. A contract is frustrated where, without the fault of either party, something happens that makes performing the contract impossible or radically different from what was agreed. The leading Australian statement is Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337. Frustration is not easy to establish. A contract is not frustrated just because it has become harder or less profitable to perform. The change has to go to the root of the bargain.

Frustration is also blunt where a force majeure clause is precise. Frustration brings the whole contract to an end automatically at the moment of the frustrating event. It does not suspend the deal for a few weeks and let it resume, and it does not let the parties reschedule. A force majeure clause can do all of those things. That is the practical reason to draft one rather than rely on frustration: the clause lets the parties choose a measured result, where the doctrine imposes an all or nothing one.

Do the frustrated contracts laws help with money already paid?

At common law, when a contract is frustrated the losses lie where they fall. Money already paid is generally not recoverable, and money already due stays due, which can leave a party who paid a deposit for a cancelled event with no way to get it back. Some states have passed legislation to soften that result. In New South Wales the Frustrated Contracts Act 1978 adjusts the financial consequences of frustration, including the recovery of money paid before the contract ended and an allowance for work already done. South Australia and Victoria have their own schemes.

The Australian Capital Territory has no equivalent Act, so a frustrated contract in the ACT is governed by the common law, with its harsher default that losses lie where they fall. This matters for a Canberra producer or venue. Where the New South Wales statute might allow some recovery of a deposit paid for an event that could not proceed, the common law in the ACT may not. The safer course in every jurisdiction is not to rely on the frustration rules at all, but to write a force majeure clause that says what happens to the money, so the outcome is the one the parties chose rather than the one the default law hands them.

Can unfair contract terms law challenge a deposit or cancellation clause?

It can, in the right case. Since 9 November 2023 the Australian Consumer Law prohibits a business from proposing, using or relying on an unfair term in a standard-form contract with a consumer or a small business. Many performers and small arts companies meet the small-business test, which covers a business with fewer than 100 employees or annual turnover under 10 million dollars, and much of the paperwork in the sector is standard form, handed over with no real chance to negotiate.

A term is unfair, in broad terms, where it causes a significant imbalance in the parties' rights, is not reasonably necessary to protect the party who benefits from it, and would cause detriment if relied on. A clause that lets a venue keep a large deposit and also sue for the full fee, or a cancellation term that binds one side but not the other, is the kind of term that can be challenged. The regime carries large penalties for businesses that use unfair terms, so it has weight. It does not rewrite a fair allocation of risk, and it does not touch a genuine deposit or a fair cancellation fee. It is a check on one-sided terms, not a way out of a bargain the party simply regrets. The way the regime applies to arts agreements is set out in the note on the Australian Consumer Law for events and ticketing.

What producers and performers should check before signing

Read the money clauses first. Find out whether the up front payment is a deposit or a part payment, and whether it is forfeited on cancellation. Check the size of any deposit against the ten per cent yardstick, and treat a much larger non-refundable figure as something to question, not accept. Look at the cancellation fee and ask whether it reflects a real loss or simply punishes the party who pulls out, because a fee that only punishes may not be enforceable.

Then look for the force majeure clause. Check that it lists the events that could realistically stop the event, including weather for an outdoor show and public health orders, and check that it says what happens to the deposit when one of those events strikes. If there is no force majeure clause, the parties are left to the doctrine of frustration and, outside New South Wales, South Australia and Victoria, to a common law that may not return a deposit at all. For a small local booking a careful read is usually enough. For a season, a tour or a festival, where the sums are larger and the ways it can fall over are more numerous, have the money and force majeure clauses drafted or reviewed before signing. The related terms of an engagement are set out in the note on performance and engagement contracts, and what a venue hirer should check is in the note on venue hire agreements.

Frequently asked.

Can a venue keep my deposit if I cancel a booking?

If the money was paid as a genuine deposit and the contract says it is forfeited on cancellation, the venue can usually keep it, even if it lost less than the deposit. The main limit is size. Australian courts treat a deposit in the order of ten per cent of the price as reasonable and forfeitable, but a much larger sum called a non-refundable deposit can be challenged as a penalty. If the money was a part payment rather than a deposit, you have a much better claim to it back.

What is the difference between a deposit and a part payment?

A deposit is security. It shows you mean to go through with the deal and it can be forfeited if you default. A part payment is just money paid towards the price in advance, with no security function, and it is generally recoverable if the contract ends and you did not receive what the payment was for. The same transfer can be either, so the words in the contract and the parties' intention decide which one it is.

When is a cancellation fee a penalty and unenforceable?

A cancellation fee is enforceable if it is a genuine attempt to cover the loss the cancellation causes or to protect a real interest of the other side. It is a penalty, and can be cut down or refused, where the sum is out of all proportion to that interest, or extravagant compared with the greatest loss that could follow. That test comes from the High Court in Andrews v ANZ (2012) and Paciocco v ANZ (2016). A fee that only punishes the party who cancels, rather than compensating the other side, is at risk.

What is a force majeure clause?

A force majeure clause says what happens if an event outside the control of the parties, such as fire, flood, a storm, a public health order or the loss of the venue, stops the performance going ahead. It names the events it covers and sets the result: usually that the affected party is excused while the event lasts, that the contract can be suspended or ended if it lasts too long, and what happens to money already paid. It only covers what it is written to cover, because it is a creature of contract, not a general rule of law.

What happens if a show is cancelled and there is no force majeure clause?

The parties fall back on the common law doctrine of frustration. A contract is frustrated where, without the fault of either party, an event makes performance impossible or radically different from what was agreed, as explained in Codelfa Construction v State Rail Authority of NSW (1982). Frustration is hard to establish and blunt when it applies: it ends the whole contract automatically and does not allow suspension or rescheduling, which is why a force majeure clause is the better tool.

Can I get my deposit back if a contract is frustrated?

It depends on the jurisdiction. At common law the losses lie where they fall, so a deposit is generally not recoverable. New South Wales, South Australia and Victoria have legislation that adjusts the financial consequences of frustration, and the Frustrated Contracts Act 1978 (NSW) can allow some recovery of money paid before the contract ended. The Australian Capital Territory has no equivalent Act, so the common law default applies and a deposit may not come back. Writing what happens to the deposit into a force majeure clause avoids the question.

If you are a performer, producer, venue, or independent practitioner and this raises a question about your own situation, Aaron Kernaghan and the team at Brady & Associates Lawyers can give you tailored guidance. Call 0421 717 019 or contact the firm.

This article is for informational purposes and general commentary only. It does not constitute legal advice and does not create a solicitor-client relationship. It reflects the law in Australia as at 21 September 2026, with a focus on Commonwealth law and New South Wales and ACT practice. The law changes and applies differently to every set of facts. Written by Aaron Kernaghan, Brady & Associates Lawyers.

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