SMART PLANNERS’ GUIDE TO HOTELntmads.blob.core.windows.net/demo/travelgroup/MCLegalHandbook… ·...

SMART HOTEL CONTRACTS

PLANNERS’ GUIDE TO

A LAWYER’S ADVICE ON 5 ESSENTIAL CLAUSES:• Force majeure• Cancellation• Liability

• Walking attendees• Construction/

renovations

M E E T I N G S A N D C O N V E N T I O N S

T H E E V O L U T I O N O F B U S I N E S S E V E N T S

There are myriad details that go into arrang-ing a meeting, many of which find their way into the complex agreement known as the hotel contract. In creating this docu-ment, it is important for meeting profes-sionals on both sides of the table to make

sure they are working on a level playing field, crafting understandable terms and conditions that are beneficial to both parties. Too often I find that there is a disconnect be-tween the planner and the supplier concerning the intent and the meaning of their contracts. In the following pages, we present what you need to know about five contract issues — force majeure, relocation (walking attendees), cancellation, liability and construc-tion/relocation, plus one sample clause for each. These clauses are offered only as an example and are not intend-ed to be representative of a uniform approach. Rather, they are a starting point for some of the most key parts of the meeting agreement, intended to give you a framework for negotiating, designing a successful event and protecting the interests of your organization.

One caveat: Before incorporating any of the five clauses into your contract, seek the advice of a competent legal advisor to make sure they have been worded correctly for your group.

Handling Meeting Nightmares P. 3

Should You Cancel or Fall Short? P. 5

Who Is the Responsible Party? P. 7

Refining Your Walk Clause P. 9

The Perils of Being First P. 11

C O N T E N T S

2 Meetings & Conventions • mcmag.com

MESSAGE FROM JONATHAN T. HOWE

Jonathan T. Howe, Esq., is a senior partner of the Chicago and Washing-ton, D.C., law firm of Howe & Hutton Ltd., specializing in meetings and hospitality law. Email questions to him at meetings-

[email protected].

Force majeure continues to be one of the most

misunderstood pro-visions of a meeting contract, though it is an everyday clause. Most often, it is thought of narrowly as an “act of God,” covering circumstanc-es where a meeting is canceled due to an unavoidable weather event such as a hurri-cane, earthquake or tornado.

But what if, say, your speaker, who is the main draw of the program, suddenly becomes unavailable due to a serious injury or illness, and based on that alone, a

significant number of your attendees drop their plans to attend? Such a situation can be covered by force majeure, if it is contractually defined as including such a “failure to perform” on the part of the speaker as well as you/your company for having promised his or her participation in the program.

In a more extreme case, suppose civil unrest, such as what occurred in Baltimore in April 2015, took place during your meeting, preventing attendees from getting to sessions or causing them to leave the host

city altogether? Would rioting in the streets be covered under the clause?

The key is in the language of the contract. With careful drafting, force majeure can cover an “act of human” as well.

LEGAL WORDPLAYMany times we find in contracts, and most particularly in force majeure clauses, language that clouds the issue of failure to perform. Force majeure is an artful term in the legal community and basically means that performance has been

Handling Meeting NightmaresForce majeure clauses can cover more than acts oF God

• Force majeure clauses

cover disruptions that

happen in the moment,

as the meeting is about

to begin, not happenings

that take place a year out.

• As the date of your

event nears, keep

abreast of news in the

destination to help you

stay prepared for any

last-minute adjustments

you might have to make,

whether that means out-

right cancellation or just

rerouting transportation

around blocked streets.

• Review your cancel-

lation or business-

interruption insurance to

make sure it covers all

the bases.

GOOD TO KNOW


Continued on page 4

L E G A L H A N D B O O KBY JONATHAN T. HOWE

made impossible, beyond the control of either party. My suggestion for greater understanding and clarity is to have a section in your contract that spells out what is excusable without liability to either party for events that may or may not occur. That means spelling out possible situations such as civil unrest, suddenly unavailable speakers, etc. (You’ll add to this list over time as you experience different situations.)

Over the years, we also have dealt with the term “commercial impracticability” in cases of nonperfor-mance. What does that really mean for meeting contracts? Generally, the doctrine of impracticability

excuses performance of a duty where that duty has become unfeasibly difficult or expensive.

In the speaker example, where attendees canceled as a result, would your

group have to take on the whole financial burden for the failure to fill the room block? Would it be fair for the speaker to share in the cost due? The courts would consider many

factors, but to avoid litigation, in such a case, good contract drafting would state specifically that if Speaker X is not available or Group B has not been able to fill the block, perfor-

mance is excused. The key is always

to spell out explicitly what will allow for cancellation or revision without liability. That’s an act of good planning. n

Handling Meeting Nightmares

Continued from page 3

Should events beyond the control of Hotel or Group, such as acts of God, war, curtailment or interruption of transpor-tation facilities; strikes (except those involving Hotel’s employees) or the imminent threat thereof; threats or acts of terrorism or similar acts; disease; State Department or other governmental or interna-tional agency travel advisory; corporate travel restrictions; civil disturbance, or any other cause beyond the parties’ control, which would make it illegal, impossible or, in the case of Group, commer-cially impracticable for the canceling party to perform its obligations

under the Agreement as they relate to the Event, such party can cancel the Agreement without liability upon written notice to the other party. Notice of cancellation may be sent at any time prior to the Event, provided the canceling party has met the requirements of this provision, has first used its best efforts to overcome the force majeure event and has sent the notice promptly thereafter. In the event Group decides to hold its Event despite such circumstances, Hotel shall waive any fees related to a reduced- sized Event (including any room and food- and-beverage attrition fees and any function- space rental fees) and shall offer Group’s guests any lower room rate offered to guests during the contracted dates.

SAMPLE CLAUSE: FORCE MAJEURE



Should You Cancel or Fall Short?IF numbers are weak, weIGh the cost oF cancellatIon vs. attrItIon

• How the resell clause is worded depends on the bargaining power of the parties. A planner who

could bring a large group back to the property will get more consideration than a small organization that has a much smaller block.

• The planner and the hotel should agree to make adjustments to the room block, comp-room opportuni-ties and so forth at agreed-upon dates leading up to

the meeting.• Contracts only cover legal issues; relation-ship and PR issues are up to the people

involved.

It happens. You contract for a block of 1,000 rooms, and

only 600 people are booked. Should you hold the meeting and pay a stiff attrition fee, or cancel and pay that price?

Both attrition and cancellation clauses are security blankets. Attrition compensates the hotel should the meeting’s room pickup fall short. Cancellation clauses pay either the hotel or the meeting host for lost business if one of the parties has to pull out of the deal entirely.

Cancellation sounds like it would result in a

stiffer financial bite to the planner, but that’s not always the case. Sometimes, canceling the meeting is more cost-effective. This underlines the need for planners to review these two clauses closely before making a decision.

PROVISIONS TO CONSIDERBefore you seal a deal, it is important that your cancella-tion and attrition clauses mesh, and they should not provide an unfair opportunity to either side. The contract should

require the property to mitigate any losses it sustains, so your organization gets credit against any charges you are asked to pay.

For instance, both attrition and cancella-tion sections should

have a resell clause, requiring that the hotel give your group credit for rooms it is able to fill with new business. But the wording here is important. The hotel might push to specify

EXTRA TIPS


Continued on page 6


that new room sales won’t be considered resales to be applied to the group’s room block unless the hotel has filled all other available space. On the other hand, your group would benefit from having all new room sales applied to reduce your group’s liability.

When negotiating contracts, also add provisions that will benefit both parties if you need to reduce the number of attendees, setting dates to review and readjust, if necessary. Hoteliers don’t want you to cancel, and they should be willing to help rearrange the terms.

BAD EXAMPLESMy firm once repre-sented a hotel con-cerning a contract that allowed the planner to cancel a year out without liability. One year and one day before the show, the planner canceled, leaving a big hole.

Several days later, the planner called back and said, “If you drop

your rates by X dollars and give me some perks, I’ll rebook.” I told the outraged director of sales to refuse.

Of course, some hoteliers have played dirty, too. Just after Sept. 11, one organiza-tion decided to go forward with its meeting, held in a property whose parent company was allowing groups to cancel without liability through Oct. 31. The program went on, but with substantially reduced numbers. The property still asked for a six-figure amount to cover attrition; had the event been canceled, there would have been no charge. The hotel ended up backing down to avoid a PR disaster.

Clearly, all parties should consider the legal right and the right thing to do before acting. n

Should You Cancel or Fall Short?


Hotel has no right to cancel or terminate this Agreement except for causes as specified herein. Hotel may not make any changes to the terms of this Agreement without the written consent of Group. If Hotel double- books the Event and is unable or unwilling to provide the guest rooms, function space or any related services agreed to in this Agreement, such action constitutes a breach of Hotel’s obligations to Group, and Group would be harmed. At such time, Group will be entitled to the following:

• Lost revenue experienced by Group and its attendees as a conse-quence of this action, including, but not limited to, any canceled Event attendee registration and all related

events as well as canceled exhibit space.

• Out-of-pocket expenses experi-enced by Group and attendees as a consequence of this action, including, but not limited to, staff time; the cost of researching alternate facilities; the difference in any increased costs to Group or displaced attendees of alternate facilities; nonrefundable fares, fees and deposits; communication of occurrence to parties involved; additional shuttle costs, and reprinting of materials distributed to attendees/exhibitors.

• Within fifteen (15) days after cancellation by Hotel, Hotel is obliged to return any group or individual deposits paid.

SAMPLE CLAUSE: CANCELLATION BY HOTEL



O ne basic purpose of a contract

is to assign responsi-bilities to the parties involved. Essentially, this means making a list of actions that are supposed to take place — or could take place — and putting in writing who will handle each of the ac-tions. Thus, if a prob-lem crops up during a meeting, whether in the meeting room, a guest room, the bar, the lobby, right outside the door or when it’s time to settle up, the contract covers everyone’s roles. The following are some examples.

FINANCIAL MATTERSStarting with the

money, all paragraphs relating to the master account must be specific. Spell out who has the authority to add charges to the master, and note that signatures (which must be readable) are required on all such purchases. Too often, someone charges something to the master, and the hotel staff member does not want to offend by calling it into question. If the contract solidly states that the organi-zation will honor charges only from authorized personnel, and the charge is unauthorized, the host won’t be responsible for that purchase.

One clause that is sneaking into con-tracts says that if an

attendee or attending company sponsors a hospitality suite under the aegis of the host organization, the host takes on the obligation to meet the cost of that suite and any attendant liability, such as liquor, that might arise during its use. Don’t accept that clause.

INDEMNIFICATION IN SHORTIndemnification clauses basically state that if I get sued for something that you did or did not do, you will “indemnify” me against any cost or loss I incur. Anytime you face a “one way” indemnification clause, delete it (unless of course it favors you

Who Is the Responsible Party?Important poInts about lIabIlIty, From expenses to bodIly harm

• Read your

contract with

an eye to what

additional liabil-

ity you might be

assuming for ac-

tions outside your

responsibilities.

• Individual

responsibility is

a linchpin. If you

are at fault, you

should be the

one who pays.

• If a clause

you’ve never seen

before shows

up in a contract,

investigate it

thoroughly. Ideal-

ly, have a lawyer

take a look at it

to make sure your

group won’t be-

come responsible

for actions you

can’t control.

• Remember:

Contracts assign

risk and reward.

TAKE NOTE


Continued on page 8


or your group!).However, if a

problem arises and you don’t have the clause in the contract, disputes as to who is responsible could arise — and then the respec-tive insurance compa-nies will fight it out.

Often, venues owned or operated by a government entity, such as a convention center or hotel that is owned or leased from the city or state, will refuse to indemnify your group and will require you to indemnify or protect attendees. This is based on the doctrine of sovereign immuni-ty: “The king can do no wrong.” In this case, the governmen-

tal entity is king. The exception is when a law allows claims against the entity.

ATTENDEE ACTIONSWho’s responsible if a lamp is smashed in a room, a physical

altercation takes place involving an attendee, or one of your guests makes off with the

hotel’s property?Lately we are seeing

some venue contracts making the event host responsible for any damage or liability committed by an attendee. Don’t allow that. Make sure your contract spells out that

issues of liability for an individual remain, appropriately, with the individual. n

Who Is the Responsible Party?


Hotel shall indemnify, defend and hold harmless Group, its officers, directors, employees and agents, and each of them, from any and all claims, actions, causes of action, demands, or liabilities of whatsoever kind and nature including judgments, interest, attorneys’ fees and all other costs, fees, expenses and charges that Group, its officers, directors, employees, agents and members, and each of them, may incur arising out of the negligence, gross negligence, or willful or wanton misconduct of Hotel, its officers, directors, employees or agents. The terms of this provision shall survive the termination or expiration of this Agreement.

Group shall indemni-fy, defend and hold harmless Hotel, its officers, directors, employees and agents, and each of them, from any and all claims, actions, causes of action, demands, or liabilities of whatsoever kind and nature including judgments, interest, attorneys’ fees and all other costs, fees, expenses and charges which Hotel, its officers, directors, employees and agents, and each of them, may incur arising out of the negligence, gross negligence, or willful or wanton misconduct of Group, its officers, directors, employees or agents. The terms of this provision shall survive the termination or expiration of this Agreement.

SAMPLE CLAUSE: LIABILITY/INDEMNIFICATION



One of an at-tendee’s most frustrating

moments is arriving at a hotel only to learn that her reservation is not going to be hon-ored and she is going to be “walked” — sent to a different property because the host hotel is full. From a meet-ing planner’s point of view, imagine how you’d feel if a VIP was walked. Not good.

Worse yet is when the hotel decides to walk all or a portion of your attendees, or to “relocate” your meeting space or one of your events to accommodate another event that the property has decided should take precedence over

yours (in other words, it will bring in more money).

When faced with the prospect of walking — whether it affects an individual, the whole group or your space — immedi-ately turn to your contract. Did you make it economically difficult for the property to push out your business?

MAKE YOUR WORDING WORKWhen designing the walking clause in your agreements, outline very specifically what it will mean for the hotel should it not be able to honor its obligations. Conse-quences should

include accommoda-tions at no charge at a similarly rated hotel nearby for anyone who is walked. If you originally were booked at a five-star hotel, you should be walked to a five-star. (For more attendee compensa-tion, see “Also Re-

quest...” below.)Considering the

embarrassment you and your group would suffer, the contract should state that the walking hotel will credit a set damage amount to the master account. That amount

Refining Your Walk ClausespecIFy the consequences should the hotel bump your attendees

• An apology from

the general man-

ager and an ameni-

ty (such as a bottle

of wine);

• Transportation

to and from the

meeting hotel,

based per on-

demand need;

• Referral of

phone calls re-

ceived for walked

guests to the alter-

nate property;

• Priority for

the first available

comparable room

at the original

hotel within two

days. After that,

the walking hotel

will be responsible

for all costs at the

second hotel, or

provide a room at

the original hotel,

per the guest.


ALSO REQUEST...

Continued on page 10


should be agreed to up front.

With these protec-tions in place, if I am a front-desk manager and I have the choice of walking one of your attendees vs. an attendee from a different group, guess who walks?

WHEN THE GROUP OR SPACE GOESNow the more serious issue: walking the

group, or relocating or canceling the meeting space or an event. Essentially, the same rules apply to both situations, but the contract also should state that the facility cannot relocate or cancel your space without your express written consent. Then specifically delineate the obligations of the hotel. You should be able to cancel the entire event, especially

all sleeping rooms, as a result of the contract breach. Spell out exactly what the damage amounts will include (but not be limited to), such as the following:

• All relocation costs;

• All incidental and consequential damages;

• Third-party vendor costs and fees, which might include airline ticket change

and/or cancellation fees;

• All differential costs between what would be paid vs. what the new costs might be;

• Attorneys’ fees and costs.

Make sure your contract is specific, with more than just dollar amounts, showing what your group will be entitled to recover in this situation. n

Refining Your Walk ClauseContinued from page 9


SAMPLE CLAUSE: RELOCATION

Should Hotel fail to honor the guar-anteed reservation of any confirmed guest(s), regardless of when or how the reservation was made, Hotel shall, at its own expense, provide:

• Free lodging at an equal or better nearby Hotel ap-proved by Group;

• Reimbursement of all additional transportation costs incurred by the

confirmed guest(s) for travel to and from the Event and any related group functions;

• Any communi-cations necessary for the guest(s) to inform family or work of their new location;

• A priority reser-vation for the first available room at Hotel;

• A fruit basket (or equivalent amen-ity) placed in the guest’s room upon

the guest’s return to Hotel;

• Placement of the name and phone number of any relocated guest(s) into Hotel’s phone system so that callers are directed to Hotel in which that person is staying;

• Letter of apology from general man-ager to guest;

• A credit to the Master Account of $____ for each night the guest is denied

a room equal to the reservation.

The above ac-commodations shall apply for as long as that guest(s) is de-nied lodging at Hotel consistent with the reservation. Hotel shall notify Group prior to relocating any Group guest, and Group reserves the right to deter-mine who will be re-located. If a walked guest refuses to return to Hotel when

lodging becomes available, Hotel will not be responsible for payment of any additional sleeping room and transpor-tation charges from that point forward.

Any and all walked room nights will be credited toward Group’s compli-mentary room nights and attrition fee, if any. They will also be included in Group’s final total room block pickup.


Every day brings news of con-struction and

expansion. Plenty of new venues are coming on line; plenty of old properties are undergoing major ren-ovations costing tens of millions of dollars; and new spas, meeting space and recreation areas are being added across the board. With so many hard-hat projects under way, meeting professionals are right to worry whether the venues in question will be able to meet their stated deadlines and contrac-tual obligations.

A LEAP OF FAITHIn most instances, properties are willing to give substantial financial discounts to

the first organization that books its new facilities. The planner who takes this opportunity, however, should be aware of what might happen should the opening be delayed.

In one situation, we represented a very substantial client that was going to be the first to use a major convention center. In the contract with the center, we required that a monthly progress report be provided from the construction site. The reports were most reassuring and, in fact, showed construction was on schedule for an earlier completion than anticipated.

The problem, however, was that

while the building was completed, the facility was not quite ready to fulfill the other obligations of the contract, such as providing signage, parking, audiovisual equipment and more.

In another instance, I scouted the conven-tion facility as the meeting date ap-proached and reported back to the organiza-tion, “Yes, I know where the breakout sessions will be because I saw the chalk marks on the floor.”

These lessons show that planners need to be sure their contracts require all services as well as the concrete to be in place.

With new hotels,

The Perils of Being Firstput precautIons In the contract beFore the dust settles

Hotel agrees that there will be no significant construction or remodel-ing to be performed in Hotel during the Event that might have a material effect on Group, its attendees and the Event. Hotel will endeavor to keep such activity from distracting or interfering with the use of meeting rooms or other facilities to be used during the Event. If it is reasonably anticipat-ed that there will be a significant interference

that might have a material effect on Group, its attendees and its Event, Group shall be entitled, at its discretion, to cancel this Agree-ment without penalty and seek damages from Hotel, or, at Group’s discretion, Hotel will arrange comparable meeting and guest-room facilities at a nearby or equivalent or better hotel over the same set of dates at no additional cost to Group.

SAMPLE CLAUSE: RENOVATION/REMODELING


Continued on page 12


similar issues might evolve. A property might be able to provide the sleeping rooms but not other amenities, such as the restaurant, fitness center or business center.

IN THE AGREEMENTIf your organization has decided to take the plunge and be first in, here are some issues to be sure are covered in your contract.

1. The facility should provide regular updates on the status and expected comple-tion of construction, covering all aspects of the project.

2. The facility should provide regular updates concerning all other amenities, from restaurants to the gift shop to the spa, including when they will be in place and fully functional.

3. The facility and the planner should create the opportunity to review the con-struction’s progress together. The planner should be able to determine whether the facility will be able to provide the support for their event that is expected under the basic contract.

4. The contract should specify the minimum that needs to be in place physically and give assurances that adequate numbers of trained staff at all levels will be on hand for all needs.

5. Any and all security issues should be addressed, includ-ing trained staff, evacuation plans, etc.

6. All appropriate government approvals, such as a certificate of occupancy, health and sanitation certificates, and safety require-ments must be met.

You don’t want the kitchen shut down 20 minutes before your banquet because of a failure to meet health codes. (Yes, this has happened.)

7. The venue should agree to be responsible for covering the cost of

relocating the event if the contract terms cannot be met.

The meeting planner and the venue representatives should agree upon the requirements the venue must meet to avoid cancellation of the event without liability. The key is good communication among the parties. n

The Perils of Being First

THE FACILITY

SHOULD PROVIDE

REGULAR

UPDATES

ON THE

STATUS OF

CONSTRUCTION




SMART PLANNERS’ GUIDE TO HOTELntmads.blob.core.windows.net/demo/travelgroup/MCLegalHandbook… ·...

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