January 01, 2000
Meetings & Conventions: Planner's Portfolio January 2000 Current Issue
January 2000 lawandplan.gifPLANNER'S PORTFOLIO:

The Law & the Planner

By Jonathan T. Howe, Esq.


New twists to the old disaster clause offer additional protection

The 1999 Atlantic hurricane season, which produced five fierce Category 4 storms, caused many a meeting to be canceled. No one has control over these “acts of God,” so who is responsible for a property’s lost revenue?

Consider this hypothetical case: The Friendly Insurance Co. books its incentive trip at Happy Island Resort. The contract includes the following boilerplate acts of God clause, which has not been evaluated in a long time.

Force Majeure The parties’ performance under this Agreement is subject to acts of God, war, government regulation, terrorism, disaster, strikes, civil disorder, curtailment of transportation facilities, or any other emergency beyond the parties’ control, making it illegal or impossible to perform their obligations under this Agreement. Either party may cancel for any one or more of such reasons upon written notice to the other.

Then the island is hit by a hurricane. Many roads are impassable, and the airport is closed. But the resort hardly suffers. Friendly cancels its program, believing no cancellation fee is due because the hurricane was an act of God. The resort feels Friendly owes the cancellation fee, saying the force majeure provision is not applicable because performance was not “impossible.” Side roads to the hotel were passable, and an alternative airport was open to small planes. The resort sues to recover the cancellation fee.

I am a proponent of having an acts of God clause. The lack of it could result in a dispute. But in this situation, was there a failure or inability to hold the meeting?

The key issue is whether the event would have turned out as it was envisioned originally. A small airport was available, but it would not have provided the same kind of access to the venue. Also, the hotel was not in a position to offer the usual amenities either at the property or in surrounding areas.

To avoid ambiguities, we individualize most acts of God clauses to concentrate on the integrity of each program. Consider the following substitute clause.

Force Majeure Either party may cancel this Agreement without liability as a result of acts of God over which neither party has control government regulation, terrorism, disaster, strikes of others than those employed by the parties, civil disorder, unavailability of transportation facilities consistent with those in existence at the time of contract, or other factors over which neither party has any control making it impossible or illegal to perform materially respective obligations within this Agreement. Either party may cancel this Agreement with notice to the other.

The inability, for whatever reason over which either party has any control, to conduct the program consistent with those conditions that existed at the time this contract was entered into shall also be cause. Impossibility of performance shall mean the inability to conduct the program as originally contracted for full performance.

The parties may, however, agree to go forward on such terms and conditions that may be negotiated, but such obligation shall only be in accordance with the Agreement. The inability of attendees to arrive at the site as preplanned as a result of delays or cancellations shall also be considered an act of God. Any deposits made shall be refunded to the party who made the deposit. Time is of the essence.

What is new? First, the clause defines “inability to perform.” It does not require 100 percent destruction of services. Second, either party may cancel for factors that can be controlled. Everyone involved needs to be specific as to what constitutes proper reasons for cancellation.

The above clause is designed to inspire further debate. Feel free to share your opinions.

Jonathan T. Howe, Esq., is a senior partner in the Chicago and Washington, D.C., law firm of Howe & Hutton, Ltd., which specializes in meetings, travel and hospitality law.

Back to Current Issue index
M&C Home Page
Current Issue | Events Calendar | Newsline | Incentive News | Meetings Market Report
Editorial Libraries | CVB Links | Reader Survey | Hot Dates | Contact M&C