Answers to Your Pressing Hotel-Contract Questions

Jonathan T. Howe 2016

I answered questions from participants recently during a spirited Q&A at Northstar Meetings Group's 2018 Destination Texas hosted-buyer event, held at the Renaissance Dallas Hotel in December. Following are some of the issues facing your peers.

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See the answers to these extra queries and more at our Northstar Meetings Group website.
• When is a commission earned, and is an independent planner entitled to money after a business relationship is over?
• How do we get participants to buy in to room blocks?
• When should you use contract riders?
• What happens when a group doesn't have needed access to the loading dock?

What are good arguments for removing arbitration clauses in contracts?
With these clauses, you are agreeing that one person or a panel of people will decide how the contract issue should be solved. But litigators like myself love to go to court. We get three bites of the apple -- once in court, once on appeal and once in state supreme court -- sometimes four times if the case gets to the U.S. Supreme Court. With arbitration, it is just as expensive as going to trial -- a good arbitrator can cost as much as $5,000 a day -- and the decision is final, there's no appeals process. I actually like going to mediation first, which works very well if both parties are of a mind to settle realistically. And there doesn't have to be a clause in the contract requiring mediation; you can choose that route at any time. 
An association management company gets a new client that has two contracts in place, both with food-and-beverage minimums that are higher than the organization's registration revenue for the event. Is there any recourse?
About all you can do is ask for mercy, but be up front. The hotel -- both parties, actually -- will benefit from coming to a compromise. So see if you can renegotiate. Walking away from the contract -- no liability to either party -- might be the right move. You probably won't be able to do that if you're two weeks out, but it doesn't hurt to try, and it's definitely worth considering if there's plenty of time before the event.
How are today's force majeure clauses being misinterpreted?
In a situation like a hurricane, an earthquake and the like, a so-called act of god has made it impossible for either party to perform -- it was beyond their control. A lot of lawyers don't know the true definition of this clause, and too many people confuse it with other reasons why parts of a contract could be renegotiated. Clean up this clause, and cover the other issues with their own paragraphs. For instance, if you contract with a five-star hotel two years out and, as the time of the event approaches, the hotel has dropped to a two-star level, you should have reserved the right to cancel or renegotiate without liability. If your event is taking place in the Caribbean in January and you have people coming in from Fargo, N.D., who might be stranded by a snowstorm, specify that you have the right to renegotiate your room block without liability in such an instance. Make sure all the contingencies are covered in the agreement from the start, and that these clauses appear in all contracts with all suppliers for that event.