December 01, 1999
Meetings & Conventions: Planner's Portfolio December 1999 Current Issue
December 1999 lawandplan.gifPLANNER'S PORTFOLIO:

The Law & the Planner

By Jonathan T. Howe, Esq.


Assume nothing& Make sure the contract addresses pricing specifically

Q:We had a meeting for which we turned to a conference planning company (let's call it Company X). We signed a contract with them, and they provided a meeting budget. My boss gave the budget a verbal OK. At the end of the conference, Company X billed us for banquet fees and other charges. (They contracted for F&B, recreation, master rooms and miscellaneous contingency charges. We paid Company X ahead of time, and they paid the hotel and other companies out of this money.) I became suspicious about some charges, and when I got original bills from the hotel and other companies, I found Company X was padding the charges to fit the budget we had verbally approved. The contract contains no language covering this. Company X says we're responsible for the overages. Are we?

Name Withheld

A:Sad to say, I have seen this situation before. We had a hotel client that was subpoenaed in a similar case. In that situation, the contract between the sponsor and an independent planner was specific about all charges, but the hotel, unbeknownst to the sponsor, had agreed to pay the independent a commission on the costs paid by the sponsor. This, plus overcharges, came to about $1 million.

The sponsor alleged fraud on the part of the independent. The planner's defense was it is "customary and usual" to take commission and to pad billings. I disagree. It is not "customary and usual" without a clear agreement between the parties.

To avoid such situations, contracts should address pricing specifically. If the fees charged by the independent are based on the budget, and if the contract stated this, the meeting sponsor is responsible for the overcharges. If the budget was merely an estimate, and if there is nothing in the agreement specifying that the sponsor will pay costs plus a certain percentage for administrative services, I feel the independent is not entitled to the additional money.

In our reader's case, he should determine whether it was clear that, once the budget was approved, he had signed on for a "package deal." When hiring some independents, the contract calls for them to arrange all aspects of the program, from beginning to end. Such programs usually are presented on a per person basis, and the independent's profit is built into the charge. If our reader signed such a contract, he would be responsible for the overage. From the way he described his circumstances, though, it doesn't sound like that is the case. For a definitive answer, he should take the contract to his lawyer, who should be able to determine whether he should pay up.

The lesson? State clearly what the payment obligations will be, spell out what rights the independent planner has to override of the original budget and whether she is entitled to any commission, and specifically outline how and when she will be paid. A contract's pricing clause should at the very least address:

  • Are the charges based on the cost of the meeting plus a percentage?
  • Is it a set per-head fee?
  • Who pays out-of-pocket expenses?
  • What are the hourly fees, and who will they cover?
  • Who gets the commissions, if any?
  • When are payments due?
  • Who is responsible for making deposits for services?
  • What refund will be made against deposits?
  • Who will be responsible for cancellation/attrition fees?
  • Is the independent allowed to exceed the budget?
  • Is there a cancellation fee due the independent planner?

    This advice should help you pay for what you get

  • 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.

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