Is it legal for a children's entertainment company (that provides services like face painting and balloon animals) to take full payment up front to reserve a client's date? It would be in order for the company to keep the balance if the client cancels at the last minute for a non-emergency like rainy weather. The client would have signed a contract stating the balance is non-refundable should they cancel within a week of the event, due to the fact that all other requests for their date will be turned away once their event is booked.
That's normal contracting
Alice is offering to appear in her role as (American Mc Gee's) Alice to people. She wants to get paid, so she has a standard 3-clause contract:
- Client pays fee upfront, Alice will appear at scheduled time.
- If client cancels less than 7 full days from the event, Alice keeps the money
- If Alice cancels due to emergency, client gets back 80% of the fee
That outlines a pretty standard service contract, and there is no illegal clause in this. Even if clause 3 is missing, the contract itself is valid.
It would be in order for the company to keep the balance if the client cancels at the last minute for a non-emergency like rainy weather.
Not necessarily. However, the language of the contract for Alice is clear: if the client cancels close to the event, that creates an economic loss for Alice as she can't just fill in the gap from the canceled event. The amount of damage is well known too: the fee for one event not being servable by Alice, so the expected damages caused by the client canceling is exactly the fee that the client had to pay upfront. It's not a punitive clause, as there is no more "fine" higher than the expected damages to Alice - it is just making Alice whole.
If the client would have wanted a "rainy weather-cancel" clause, then he should have negotiated the service contract with Alice to include something like "In case of rainy weather, Alice appears via Facetime at 12, but refunds 30% of the fee" or whatever both parties can agree to.
In germany, the basic situation is as described in Trish's answer - if the contract says that no refund is offered, that is generally legal.
However, the client is entitled to a (partial) refund if they can prove lower actual damages.
Under German law, a contract for providing specific goods or services is called a Werkvertrag.
About cancelling a Werkvertrag, BGB § 648 says:
The customer may terminate the contract at any time up to completion of the work. If the customer terminates the contract, then the trader is entitled to demand the agreed remuneration;
So far, customer has to pay. However, the next part says:
however, the trader must allow to be credited against them what they save due to the contract being cancelled or what they acquire or wilfully fail to acquire from other use of their labour. [...]
So, if the provider either saves expenses (e.g. by not having to buy food or face paint), or if they can get different work to fill their time (e.g. paint faces at a different party), they must refund that money.
For this reason, the terms and conditions (Allgemeine Geschäftsbedinungen, AGB) of German businesses often contain clauses allowing the customer to prove the specific damages. For example, a car dealer used this clause:
Verlangt der Verkäufer Schadensersatz, so beträgt dieser 10 % des Kaufpreises. Der Schadensersatz ist höher oder niedriger anzusetzen, wenn der Verkäufer einen höheren oder der Käufer einen niedrigeren Schaden nachweist.
Translation by me:
If the seller demands compensation for damages, the compensation will be 10% of the sale price. The damages will be higher of lower, if the seller can prove higher damages, or if the buyer can prove lower damages.
This clause was confirmed to be valid by a court in 2010, but only because it explicitly allowed proving lower damages - otherwise the court would likely have thrown it out.