CONTRACTING AGAINST ACTS OF TERRORISM

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The Law & the Planner

By Jonathan T. Howe, Esq.


CONTRACTING AGAINST ACTS OF TERRORISM

Does your meeting agreement clearly address the unthinkable? In light of Sept. 11, it should

Sept. 11, 2001, brought shock, dismay, outrage and fear. The devastation has had and will continue to have dramatic impact on the meetings industry.

While many voices declare life will not be "business as usual," we should conduct the usual business. We need to consider necessary changes in the day-to-day approach taken in negotiations, both from the supplier's as well as the planner's point of view.

FORCE MAJEURE
January 2000's The Law & the Planner addressed "force majeure," or what some call "Acts of God" clauses, which cover incidences that warrant the cancellation of a meeting without penalty. That article cited natural disasters such as hurricanes, but a carefully worded clause also can cover terrorist attacks.

Consider using the following wording.

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.

Part of this clause that has raised many questions recently concerns how long the effects of an act of God can be used as an excuse to cancel the contract. After Sept. 11, many hotels waived cancellation fees for several weeks and in some cases through the end of October, but not all properties took such concrete steps. You can avoid uncertainty by defining a set period of time or a set of conditions for which cancellation or modification will be accepted. For example, add a paragraph to the contract saying if your event is scheduled within, say, 45 days of a force majeure incident, you reserve the right to reduce your block or otherwise cancel the contract. Also, you can outline ways activities might be changed in view of unforeseen circumstances.

The inability of attendees to arrive at the site because of delays or flight cancellations also is considered an act of God, and any deposits made are to be refunded to the party who made the deposit.

CONTRACT TERMS
Often when reviewing contracts, I find clauses that contradict each other. Planners must reassess attrition and cancellation clauses and make sure they are subject to the force majeure clause. For meetings that depend on multiple facilities and suppliers, make sure the force majeure, cancellation and attrition clauses are consistent through all agreements -- from convention centers to transportation to entertainers, among others.

INSURANCE
Many organizations have purchased cancellation insurance. Such policies usually cover more than the decision not to hold the meeting; they're really "business interruption" insurance. The coverage, however, while broad, might not cover acts of war or terrorism. The insurance industry is reevaluating what circumstances should be considered an insurable risk.

Such policies would not cover a voluntary cancellation of a meeting unless there were adequate issues over which the insured had no control that led to the decision not to hold the event.

SECURITY
Many planners are now reevaluating the security at their meetings. For my thoughts on this subject, see "Lining Up the Security Force," The Law & the Planner, August 2001.