COVID-19: Frequently Asked Legal Questions

By Scott McKenzie (Director), Chelsea Davine (Associate) and Patrick Simon (Associate)

Faced with the reality that current government restrictions are unlikely to be lifted any time soon, both businesses and consumers are feeling widespread uncertainty about their rights and obligations in the time of COVID-19.

This article addresses some common questions we have been receiving in relation to the plethora of new legislation that state and federal governments have hurried through over the past few weeks, including:

Can a business continue to charge me for goods or service that are unavailable due to COVID-19 restrictions?

Many businesses are specifically prohibited from operating under the current government restrictions, and will therefore be unable to provide services to customers who have already made payment.

Under the Australian Consumer Law (ACL)  a business is prohibited from taking payment for goods or services if the business cannot reasonably expect to be able to supply them – regardless of whether your contract specifically allows you to ‘freeze’ or defer a supply.

Businesses that offer services on a subscription model (such as gym memberships) are allowed to charge subscription ‘freeze’ or ‘holding’ fees, but only if specifically permitted to by the terms and conditions of your subscription contract. If a business has deducted a payment for a service that cannot be provided due to COVID-19 restrictions, you should request that the business refund the deducted amount.

Unfortunately for consumers, the ACL prevents a consumer from taking action against a provider of services that fails to comply with a consumer guarantee as a result of an act, default, or omission of any person other than the supplier. This means that if a business has already charged you for services, but are prevented from providing them due to the current government restrictions, you may not be able to rely on the consumer guarantees under the ACL.

Despite this, you might be entitled to seek a refund under the terms and conditions of your contract, or any cancellation policy announced by the business.

If you have made an upfront payment for a service that covers a period in which the service cannot be provided due to COVID-19 restrictions, and you are not entitled to a refund under the terms of your contract, we recommend approaching the business directly to request a voucher or credit.

If there have been changes to a service or the way it is being delivered, do I still have to pay the provider?

Many businesses are currently being forced to adapt the way that they deliver services to customers, such as yoga instructors moving to online remote classes rather than group classes in a studio.

Whether you are obligated to continue to pay a service provider that has made changes to a service will depend on whether the change materially impacts the ability of the provider to provide the service that you originally contracted for.

If the changes significantly affect the nature of the service, and current government restrictions do not prevent the provider from offering a substantially similar service, you may be able to seek a refund or cancel the service.

Are businesses allowed to use COVID-19 as an excuse to increase prices?

Generally, businesses are entitled to set their prices in reflection of the market demand for a particular good or service – as long as they have not made misleading claims about the reason for the increase.

In certain circumstances however, businesses that excessively increase the prices of products that are critical to the health or safety of vulnerable consumers (e.g. face masks) might be found to have engaged in unconscionable conduct under the ACL.

Businesses could also run into trouble if they engage in ‘price gouging’ behaviour, such as misleading customers by creating an impression that the market value of particular goods has increased due to limited availability.

I bought tickets to an event, but it has been cancelled. What can I do?

The current government measures have placed strict restrictions on public gatherings, and have resulted in the cancellation of most, if not all, public events. As previously mentioned, it is unlikely that ACL consumer guarantees will be enforceable against the organisers of cancelled events during the COVID-19 pandemic.

We recommend carefully reviewing the terms and conditions of your ticket to clarify whether you could be entitled to a refund of the purchase price. Alternatively, you may wish to contact the organiser directly in order to request a voucher or credit.

I’m a director of a company, what does this mean for me personally?

Generally, directors face personal liability if their company trades while it is ‘insolvent’ (i.e. it cannot pay its debts as they become due). In recognition that more companies will temporarily be at risk of trading whilst insolvent while we weather the COVID-19 storm, the government has introduced a temporary expansion of the safe harbour provisions. This will protect directors in respect of debts incurred by their company in the ordinary course of business within the six month period from the date of the laws passing. The upshot of this is that directors will have a bit more breathing space to focus on keeping their business afloat over the coming six months, without worrying about the risk this could pose to them personally.

Importantly, these exceptions will not apply where the debts are incurred dishonestly, or there is fraud involved.

What do the changes to statutory demands mean for me?

Previously, a creditor could issue a statutory demand for repayment of a debt over $2,000. The indebted party would then need to pay the debt within 21 days of the demand, or the creditor can apply to the court to appoint a liquidator, and seek to recover the debt that way.

The government has temporarily increased this threshold to $20,000, and increased the payment period to six months from the date of the demand. This is designed to prevent creditors pushing companies into liquidation to recover debts, and recognises that many otherwise viable businesses are likely to struggle with paying their debts over the coming months. This temporary change is designed to assist businesses to ‘trade out’ of the COVID-19 disruption. Whilst creditors cannot issue statutory demands for lower amounts, you should carefully consider the terms of your finance agreement, and if in difficulty making your repayments, consider discussing this informally with your creditor.

On the flip side, you should also be cautious about providing credit in light of these changes, as the increased threshold to make a statutory demand may make it difficult to recover the funds.

What support is available and where should I look for further information?

The Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 (Cash Flow Boost Act) became law on 24 March 2020. The Cash Flow Boost Act provides a much-needed short term cash injection for small and medium-sized businesses in a time of crisis. You can read our more detailed article about the Cash Flow Boost Act here.

The Government is also offering to guarantee 50% of new loans for eligible small and medium enterprises under the Coronavirus SME Guarantee Scheme, to help these businesses ride out the COVID-19 disruption. This is designed to enable smaller and medium businesses to access credit, and encourage lenders not to ‘tighten the purse strings’ too severely. You can read more about the Scheme on the Treasury website. The government has advised that you should approach your financial institution for more information if you are interested in the Coronavirus SME Guarantee Scheme.

Should I be contacting my landlord?

Until the Commercial Tenancies Code (Code) is enacted in law by your state or territory, it is not 100% clear what the exact parameters will be. We have set out a broad outline of the Code here in more detail.

In the meantime, the parties to a lease may wish to proactively negotiate a pathway forward with their landlord. Some common items for discussion include:

  • the provision of a rent-free period, often in exchange for a higher rent when the business returns to normality;
  • ‘deferring’ the rent for a period, with this amount of time being added later onto the term; and
  • changing the rent calculation mechanism under the lease for the period of disruption (e.g. pegging the rent payable during the period of disruption to the turnover of the business).

The principles outlined in the Code will also provide a useful basis for any discussions between landlord and tenant.

We have set out a more detailed discussion of lease considerations here.

Landlords and tenants are in an unprecedented position. The Code requires both parties to negotiate tailored arrangements which address the impact of the pandemic. These negotiations should be handled with care to ensure that this unique opportunity is used appropriately.

When should I be looking at my contract?

Force majeure clauses are often included in contracts. The effect of these clauses will turn on their specific wording. If you are concerned about your ability to meet your obligations under a contract, it may be worth getting some advice about your options.

Force majeure clauses (i.e. clauses which deal with unforeseeable circumstances that prevent someone from fulfilling their obligations under a contract) are not commonly included in leases. If your lease does contain a force majeure clause, it should be carefully analysed to determine its impact.

Insight Authors…



Scott has been recognised as a leading commercial lawyer in Australia. He is held in high regard for his strategic mindset and is renowned for being technically sharp. Scott’s practice covers all aspects of commercial law, with a strong emphasis on complex transactions and business co-ownership matters. Scott is focused on leading by example. He provides precise advice and tenaciously protects his clients.

Accredited Specialist in Commercial Law.




Patrick in his element figuring out legal issues. He passionately delves into the detail and relentlessly pursues solutions. Outside of office hours, Patrick has been known to moonlight as a musician with his instrumental math-rock trio. If you have a legal problem, Patrick’s creative and practical solutions will be music to your ears.




Chelsea loves working with business owners. She helps to steer them in the right direction by providing robust and practical legal advice. Chelsea is passionate about being cutting edge, and is heavily involved in the Victorian Society for Computers and the Law. When she’s not at work you’ll find her in the saddle, guiding her horse with the same dedication and finesse.


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