A Handshake Isnt a Contract

Meetings & Conventions: Planner's Portfolio February 1999 Current Issue
February 1999 Jonathan HowePLANNER'S PORTFOLIO:

The Law & the Planner


A Handshake Isn’t a Contract

If you have space “on hold,” it may not be there when you need it

Q: Our annual conference is in its 14th year and was held at the same hotel in 1996 and 1997. In 1998 and 1999, the property was under renovation, preventing us from holding our event there. However, we did have its space on hold for 2000, which was confirmed to my predecessor by a hotel account manager in April 1997. The manager is no longer with the hotel. When I began my job this year, I found out the space on hold for us had been given to another group without prior notification to us. We are now left without a venue for our conference in 2000 and I must pursue other options, which is detrimental to the event, as the property is the only hotel in the area large enough to host us. Do we have any recourse against the hotel for releasing “space on hold” without first notifying us? I have the written statement of the official hold.

Name withheld

A: The crux here is this: What does “space on hold” mean, and what happens when space is sold out from under the meeting professional? The answer is found in the basics of contract law.

In order for a valid contract to be in place, several things must occur. First, there must be an offer and there must be acceptance by the other party on the same terms and conditions as pre-sold by the maker of the offer. The maker of the offer controls the method by which it can be accepted.

When one party says the space is on hold, this is not legally binding on either party each can walk away without liability. Why? Because at this point there is no contract. What the hotel did, without other facts to refute this, was make a statement to induce the sponsor to hold the meeting there; it did not create a contract to hold the space.

There are many ways a hotel or supplier can make this offer. It can say specific dates are “open” or give the sponsor “right of refusal” or say, “We will hold these dates until...,” etc. What this really represents is the term for which the offer is open.

If the offer is not accepted within a reasonable period of time, the offer expires. The key here is that the hotel can withdraw the offer at any time, even by virtue of choosing a later date. For example, the “offer” says the dates will be held until May 15, so accepting after May 15 doesn’t count. Such a response would be a counteroffer. The hotel can accept the counteroffer if the dates are still open, reject it or do nothing. Note also that before the cutoff date, the hotel can withdraw the offer without any liability because a contract isn’t in effect.

No contract can arise unless the parties have acted within the agreed upon period for acceptance. Unfortunately for the planner who inherited this situation, the hotel was free to take the business, reject it and/or make other arrangements.

Unless a valid contract requires the hotel to honor “space on hold,” there is no legally binding obligation. Three legal theories come into play here:

Agreements to make a contract in the future. An agreement to agree does not create a contract. This merely states there may be an opportunity in the future for the parties to get together. If either one of the parties decides not to go forward, that ends the opportunity.

Statement of intention. Many times people indicate an “intent” to go forward. “Space on hold” is such a statement. In no way is the party who makes that statement obligated to maintain it.

No definite offer in place. Here, saying “space is on hold” merely means that someone has made a notation in his or her diary concerning the space. For example, you may have plans to have lunch with someone and you place it on your calendar. Does that legally obligate you to have lunch with that person? Obviously, it does not because it is not a contractual obligation. In the meantime, someone else might make a better offer.

Having said all this, I must add a business comment. When a hotel indicates that space is on hold, or a meeting planner indicates that “we intend to conduct our program at your hotel,” both parties are obligated to tell the other when circumstances change. This is not a legal question, but an issue of good business practice and maybe even of ethics. One of my favorite Ronald Reagan theorems was “always trust, but always verify.” Here the planner assumed that the “space on hold” meant a contract was in place.

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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E-mail your concern to askhowe@cahners.com and look for expert advice in a future edition of this M&C column. We regret all questions cannot be answered.

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