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by Jonathan T. Howe, Esq. | June 01, 2011
Takeaways

A contract with a third-party supplier can be terminated at any time.

Third-party contracts need to spell out exactly what will happen regarding compensation if the agreement is terminated.

The courts might award damages to the third party based on the theory of "quantum meruit" -- what one has earned, or the reasonable value of the services already rendered.

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During a recent M&C web-cast, "Legal Pit­falls for Planners" (listen to it for free here: bit.ly/hUXAAs), we did not have a chance to respond to all of the questions that were raised by participants. Below is advice on two important issues of concern.

Termination of Agency The question: What right does an organization have to terminate the services of a third party, especially when the third party relies on a commission for compensation purposes?

In these instances, the law of agency is very clear. Such agreements can be terminated at any time, at which point the third party no longer will have the authority to create binding agreements or to act on behalf of the principal. However, this does not mean that the agent loses the right to be paid for services rendered.

Thus, for the third-party planner who relies on commission income or other payments coming in the future, the contract needs to be very specific as to what will happen in the event of termination. Conversely, the planner hiring third-party help might want to reserve the right to terminate the agreement without liability for future compensation, including what percentage of the commission would go to the original third-party firm at each stage of the process if the relationship is terminated.

What does the hotel do in such situations? If the hotel is told not to pay a given agent and a second agent appears, the hotel basically is going to say, we will pay one commission but we will not pay two. No money should be paid out until the dispute has been resolved. The contracts between the third parties and the host organization are going to be the determining factor.

In other cases, the hotel contract has a provision that a commission is due and payable to the third party, and no other agreement has been made. What rights do the parties have in this situation? If the contract has not been amended or if it provides that the money will be paid regardless of changes to the agreement, the original third-party planner is entitled to the commission.

If the contract has been amended and the compensation taken away from the original agent, the question still remains whether that agent is entitled to any payment or to be vested in the future. In most cases, the third party will assert that the commission is earned at the time the contract is signed, and only the amount due can change, depending on performance.

Clarity in the contract will keep you out of court.

Music Licensing Another question: Are planners obligated to pay for music licensing? Answer: The sponsoring organization is responsible for the music licensing and fees due to performing-rights societies such as ASCAP, BMI and SESAC for all music and snippets thereof played during an event. Neither an individual planner nor the band has the right to license the public performance of music.

Learn more about music licensing during our free web-cast, "Music Licensing: What Event Planners Must Know," July 20, 2 p.m. EDT. Click here to register (bit.ly/ilkidV).