I will address the claim and her allegation of frustration of contract first.
Frustration only occurs if the contractual terms are "impossible" to perform - as such, there is a high evidential bar to this and the courts are generally reluctant to confirm a contract is impossible. What the court would expect from you in the Covid situatoin is simply to offer an alternative date for the claimant.
There are essential terms in the contract - they pay money to you, you provide the accommodation to them on a specific date. There is no cooling-off period for a holiday booking on a specific date, which then begs the question of whether this contract is void due to the current situation.
If one of these essential terms is not able to be carried out, in this case due to an external event being the pandemic, you can refuse a refund as long as you offered an alternative date.
The key term here is "force majeure", or an "act of God" clause - meaning that if performance of the contract is impossible then the parties can agree to suspend their obligations - for the duration of the force majeure, or in this case, for as long as the service cannot be carried out due to the lock down.
Therefore, you were within your rights to offer a future date (after the lock down, which will not last indefinitely) and when you are then in a position to resume your contractual obligations and provide the service.
The guest cannot attend for the holiday due to travel restrictions, which means you cannot let the property to them - this is outside of your control. You can therefore agree to postpone the date unless your contract allows a refund in this situation.
In terms of court proceedings, your defence needs to say that this is not a situation where the contract was frustrated. This is because the external event meant a temporary inability to offer the accommodation (not a permanent inability to do so). You would therefore say that force majeure applies and that you offered an alternative window - meaning performance of the contract could still go ahead but the claimant chose not to accept your proposal. Therefore, the claimant has terminated the contract on their own accord. You will also say in your defence that others are happy with being offered a 2 year window. Plus, with SARS and MERS outbreaks previously, there is an argument the claimant should have either taken out travel disruption insurance, or paid via credit card to ensure a similar event such as Covid was covered. You need to say in your defence you put the claimant to strict proof that this is a case of frustration of contract when a two year window to rebook has been offered.
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