On the very first day of my very first class in law school, the professor asked one unsuspecting wannabe, “What does the plaintiff want in every lawsuit?” After getting no coherent answer, finally the professor offered up what every plaintiff desires: money -- or, in legal terms -- a judgment with damages.
There are a multitude of cases that will result in the awarding of damages. These include personal injury judgments, the resolution of a breach of contract and cases where an agreed-upon amount is set forth in a contract. Since it’s most pertinent to meeting planners, what follows is a discussion of contractual damages.
Meeting professionals need to keep an eye out for the variety of terms used to describe damages, such as “anticipated,” “consequential,” “punitive” and the like.
In all contracts, I recommend that a specific amount of damages be spelled out in dollars and cents, followed by the formulas for reduction or mitigation of such damages. Those would be anticipated damages.
Consequential damages are additional losses incurred as a result of the basic harm. The refrigerator breaks down and costs $100 to repair, but in the meantime all that beluga caviar has spoiled, sending the consequential damages into the thousands of dollars. Thus, be aware of how damages are described in the contract. Avoid consequential damages if you are a supplier; try to get them if you are a planner.
Only a judge or a jury can award punitive damages -- which means punishment. These are not considered in pure contract cases.
What is the damage clause covering? Many meeting contracts provide the parties with a means to cancel an event. The damage paragraphs establish how much each party should pay if they cancel or otherwise fail to meet the contractual requirements.
Many people feel if there is not a cancellation clause or a damage clause in the contract, they can cancel with impunity. Wrong. You still would be in breach of the contract by not performing. For instance, if you agree to pay a certain amount for a room and you don’t pay, you’ve breached the contract and there is harm, and you will be obliged to pay the penalty.
The courts use various measurements to determine what the true loss is to the plaintiff following the breach. If there’s a good contract in place, the parties already will have agreed to a best estimate of those damages or to a number representing actual, or liquidated, damages.
The parties also will need to state that it is difficult to determine the actual amount the breach might cost, but that the amount established is reasonable in light of the anticipated or actual loss caused by the breach and the difficulties of proving such a loss.
Such contractual amounts can be reduced if a mitigation formula is written into the contract. The formula would allow rooms that are resold or business newly booked to offset the damages incurred. If such a provision is not in writing, you are going to have to pay the liquidated damages, even if the hotel sells out. Planners: Make sure a mitigation formula is included.
Often in discussions of damages, the question of reciprocity comes up. While some lawyers might hesitate to do this, both parties might agree to what we affectionately called in law school “the Arkansas swap.” For example: “If I cancel, I will pay you $50,000, and if you cancel, you will pay me $50,000.” Assuming the parties are reputable businesspeople, the court more than likely will uphold such a deal.
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@example.com.