The Law & The Planner
Your Contract Questions Answered
What to know about force majeure, cancellation, more
by Jonathan T. Howe, Esq.May 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 email@example.com.
• Make sure your contract covers contingency plans if the hotel winds up being oversold.
• Craft your cancellation clause so you have the right to renegotiate or limit your exposure.
• Never agree to an indemnification clause unless the venue signs on to it, too.
• Know that you are entitled to damages if a hotel cancels, even when there is no cancellation clause per se.
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During a recent M&C webcast on "Understanding Meeting Contracts" (available for free viewing at mcmag.com/webcasts), a number of fantastic questions came to the fore. Here are some we couldn't get to in the time allotted.
What recourse does a planner have if the hotel is oversold?
contract should include a very specific provision on this. What are the
obligations of the property to the attendees and to you? You want to
make the alternative of walking your attendees very economically
unattractive to the hotel, vs. walking a transient traveler.
recently concluded a case in which a property had favored a more
profitable piece of business and ended up owing money to a smaller
group, thanks to a strict requirement of compensation to not only the
organization but also to the individual attendees who were walked.
Protect your confirmed guests with strong contract language.
I have a clause in my contracts saying the hotel cannot cancel for any reason other than force majeure. Is that OK?
answer will depend on the reach of the force-majeure clause. Remember
that so-called acts of God are things over which man, woman or child has
no control. A hurricane, flood or other natural disaster would excuse
performance regardless of the presence of the clause.
areas where you would be permitted to cancel or limit your liability
need to be enumerated. Personally, I prefer to call the clause "Rights
of Cancellation Without Liability" as opposed to "force majeure." It is
then much clearer and can be broader than acts of God.
instances, you might not want to cancel entirely, so design your clauses
to give you the right to renegotiate or limit your exposure. If 40
people can't reach your meeting because of weather issues, do you really
want to cancel the whole meeting for 150 people? No, you want to be
able to reduce your attrition liability.
What is the difference between "indemnification" and "hold harmless"? Should these both be mutual?
sign an indemnification or a hold-harmless clause (which are the same
thing) that isn't mutual. The only exception is when you are dealing
with convention centers, which usually are owned by government entities
and essentially are immune from liability. Read the clauses very
carefully; make sure they do not conflict with insurance rights, as most
insurance policies do not cover contractual obligations. If confronted
with a one-way clause, no clause at all is the better option.
In the absence of a cancellation clause covering the hotel's actions, do I have any rights if the hotel cancels?
If the hotel cancels, it is in breach of contract and you would be
entitled to damages. If the hotel attempts to mitigate by relocating
your meeting, you still will be able to recover damages based on the
difference between what you would have paid vs. what you had to pay, the
costs you incurred in relocating the program and the like. Incremental
damages such as airline fees, etc., generally are not covered unless
they are spelled out in the contract.