The Law & The Planner
Contract Q&A: Lines of Contention
Fielding Reader queries on negotiatING terms and more
by Jonathan T. Howe, Esq.July 1, 2012
Jonathan T. Howe, Esq.
A senior partner of the Chicago, St. Louis and Washington, D.C., law firm of Howe & Hutton Ltd., specializing in meetings and hospitality law. E-mail questions to him at meetings-
• Be wary of those across the table who insist their clauses are non-negotiable because of company policy or other standardizations.
• Make sure your contract language covers every eventuality that could affect your meeting, including reasons to cancel that might not be a problem for a similar meeting in a different industry.
• For more answers to contract questions, including who should sign contracts, visit mcmag.com/web exclusives.
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Our recent M&C webcast on "Understanding Meeting Contracts" (watch it for free at mcmag.com/webcasts) brought up more great questions than we had time to answer. Some of them we addressed in May (bit.ly/MF8CT9); this month we field some more.
How far can I push when the hotel says certain terms are "corporate policy," making it sound like you can't negotiate further?
Everything is negotiable, at least to a point. But pick your fights based on your needs. When something is advanced as corporate policy or I'm told, "We have always done it this way," I take exception and give my clients the opportunity to vote with their feet. There are other hotels that might not have such restrictive policies.
In negotiating, what you bring to the table makes the other side want to do business with you. If obstacles are thrown in your face on the basis of "corporate policy" or the like, and if it is important to go forward, insist on seeing that policy and finding out where it originated to explore whether it can be waived or abandoned. I have found some wiggle room at convention centers, too, even when the policy might be part of the law or regulation governing the operation of the facility.
What is the difference between liquidated damages and a cancellation fee?
Liquidated damages are an amount agreed on by the parties during negotiations that covers what would be paid if certain parts of the meeting or contract happen or do not happen. A cancellation fee is just that, the amount to be paid for the privilege of canceling the contract without liability.
Note: With both these fees, the nonbreaching party has no obligation to mitigate the damage -- they don't have to offer you the chance to hold the meeting at another time or to renegotiate the amount of the damages once the breach has occurred. Thus, it is imperative to require in the contract, mutually, that the nonbreaching party try to minimize or mitigate those damages. This will reduce the risk factor for the noncomplying party.
As a financial institution, we add a line in our cancellation clause that emergency closure of the stock market for more than 24 consecutive hours allows us to cancel. Why do we get a lot of push back?
If I were the hotel I would push back. Clauses like this must show a direct tie to the event and why the closure of the stock market would adversely affect group attendance. I would also be wary because 24 hours is a very short time, and there is no mention of how far in advance of the meeting the closure needs to happen in order to allow the organization to bail out of its responsibilities. Such details are necessary to help all parties make informed decisions.
This question also raises an interesting point: Depending on the nature of your organization, there might be singular circumstances that could disrupt your event, similar to the shutdown of the stock exchange for a financial group. Insist on including language to cover such reasons to cancel or at least to reduce the potential for attrition if you decide to go forward with the program anyway.