by Jonathan T. Howe, Esq. | November 01, 2008
In two decisions, coasts apart, the courts indicated they don't want to mess around with ambiguous and unworthy claims, but they will let you sue and be sued.

West Coast
In 2003, an organizer of a religious holiday event entered into two agreements for future events with a hotel on the West Coast, each with cancellation/attrition clauses. The property later sued the host for attrition fees from the first contract and for cancellation damages on the second.

For the first event, which was held in 2005, some 1,360 room nights over the course of several days were blocked. Following the event, the property issued an attrition charge for 370 room nights that were not used. Since the second event was canceled, the hotel sued, seeking a combined total of $135,232.50 in liquidated damages.

At the trial, only one witness, the owner of the host organization (who also acted as his own attorney), testified, arguing the attrition clause only applied if certain rooms were released. His attempt to "spin" the interpretation of the clause fell on deaf ears. The trial court disagreed, as did the U.S. Court of Appeals.

The appellate court stated that basic contract rules of interpretation required that in order for witness testimony to be relevant and admissible, the contractual language had to be susceptible to a differing interpretation. The court quickly concluded that the objective intent of the contract, rather than the subjective intent of one of the parties, controls its interpretation. The fact that the witness/defendant had an undisclosed intent or understanding was irrelevant. Thus, it's what you signed that counts.

When viewing the entire contract, the court stated that the interpretation of the attrition clause that was advanced by the plaintiff was consistent with the plain intent expressed by the printed words. In other words, the host booked the rooms, he didn't use them, and therefore he had to pay for them.

When turning to the 2006 event agreement, the court reaffirmed that the approach advanced by the plaintiff was acceptable and that there was no error by the trial court in assessing the liquidated damage amount.

The court also rejected a contention from the defendant that the hotel had not tried to help the host mitigate the damages. As noted in previous articles, in order to raise the question of the failure to mitigate, the defendant has to show that the actions of the plaintiff did not meet his legal obligations. The burden of proving losses that could have been avoided by reasonable effort and expense is borne by the party who has broken the contract. In the end, the host was responsible for the entire $135,232. And 50 cents.

East Coast
In the second case, the defendant, a hotel company, was sued in Connecticut, the state of residency of a group of plaintiffs, for failing to honor reservations at one of its hotels in Pennsylvania. The individual plaintiffs had booked rooms in order to attend church meetings.

The hotel argued the case should be transferred to Pennsylvania but first asked that it be thrown out, because it was the organization itself that had contracted for the rooms, not the individual plaintiffs. The court dispatched that argument by noting that the members of the organization were third-party beneficiaries of the contract and therefore had standing to sue for breach of contract and to seek enforcement of the agreement in their own right. The court then upheld the individuals' rights to sue in Connecticut, which is where things stood at press time.

The message here is that contracts are contracts and will be enforced.

Jonathan T. Howe, Esq., is a senior partner in the Chicago, St. Louis and Washington, D.C., law firm of Howe & Hutton Ltd., which specializes in meetings, travel and hospitality law. Legal questions can be e-mailed to him at [email protected].