Contract Cancelation – when protection is key
Hotel and event contract cancellation can lead to hefty consequences.
While the contractual and monetary aspects are important, considerations should be made for brand presentation as well. During the planning process, a “drop dead date” should be identified; if there is any uncertainty, this is the date upon which your company must evaluate risk and reward and make a final decision whether or not to go. This decision should be made in consideration of employees, other guests expected to attend the event, and those who will be expected to provide for or service the event.
Though brand perception and people-first deliberation weigh heavily on this decision, you should still be aware of the potential legal and monetary repercussions. There is often a cancellation fee. Similarly, a hotel can cancel an event even weeks or days before it is meant to occur, and the hotel will be responsible for any damages associated with breach of contract.
Despite the many external factors that may impact an event, there are steps you can take to protect yourself, your event, your people, and your ability to make informed choices regarding execution.
With the uncertainty of the COVID-19 pandemic, many meeting and event planners have adjusted how they negotiate termination stipulations in their contracts. Both contracts and the negotiation process have been fundamentally altered by the events experienced by event planners and suppliers alike. While many cancelations and terminated contracts are evaluated on a case-to-case basis, now is an important time to get reacquainted with “force majeure” clauses. The experiences of the last few years have shown us quite clearly that force majeure and cancellation clauses can no longer be minimized or ignored. The “It won’t happen to us” mentality can no longer be accepted.
What is a Force Majeure Clause?
“Force majeure,” or “greater force,” is a French term generally used in legal documents to account for the possibility of a circumstance so great in force that it would constitute both parties being released from a contract free of liability. This creates protection for both parties in case an event, out of their control, occurs making execution of the contract inadvisable, commercially impractical, illegal, or impossible.
A complete clause would address many types of potential catastrophes that could prohibit attendees from traveling to, from, or through a location, including military conflict, labor disputes, extreme weather, and anything that may pose a significant risk to the health and safety of intended attendees—including an epidemic or pandemic.
Another consideration that may be included in a force majeure clause is “frustration of purpose doctrine.” Frustration of purpose defenses become applicable when the main reason for the event “has been made substantially more burdensome.” However, it is important to note that the purpose must be explicitly noted in the contract, and the agitating factor must be something neither party could have reasonably predicted.
Why Force Majeure?
There is a marked difference between termination and cancellation. Termination of an event (or contract) refers to calling off an event in response to something that is mentioned or covered in the contract. Termination should result in no penalties.
Cancellation, on the other hand, leaves the canceling party vulnerable to consequences. If someone simply changes their mind with no extenuating circumstances, a cancellation has occurred.
The beauty of a force majeure clause is that it allows for termination rather than cancellation, allowing both parties protection from any consequences.
How Does This Impact Negotiations?
Aside from “attrition and cancellation-performance clauses, force majeure clauses are the most contentious parts of a contract to negotiate,” says industry lawyer, John Foster, Esq. It is important to remember that this is a negotiation process; event planners should not immediately accept the first thing a hotel proposes. In order to ensure thorough protection, both sides should have robust language that reflects the realities of our post-COVID-19 world.
The Applied Meetings & Hospitality Solutions Difference:
AM&HS understands these issues since we negotiate contracts frequently. We also leverage our hotel experience, coupled with our long success of executing programs, to provide the very best contractual terms and results for our clients. Contact us today for more information!