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Event Contracts Q&A

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October 19, 2020
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Reading time: 6 min

HopSkip in partnership with Barbara Dunn and Lisa Sommer Devlin recently brought you part four of their webinar series Legalease With the Ladies ™. The HopSkip team collected event contract in advance of the webinar from planners and hoteliers to ensure the questions asked represented questions from the majority of the audience.  Download the recorded webinar here.

Check out the recap of the Q&A below:

 

How are you advising clients that are asking to cancel in 2021 when it is months away and so many things will continue to change? 

Conduct an evaluation both internally and externally. Understand your force majeure clause and how much function space is booked and many rooms are in your block. Focus on the facts and circumstances of the area of your meeting. Once the internal evaluation is done frame the decision around a go/no-go date. But at the end of the day, the organization needs to decide what’s in the best interest of the organization.

 

One of the largest struggles we as hoteliers are having is the clients that are continuing to exercise Force Majeure when in our particular state you can have 250 guests per room and there is nothing illegal nor impossible to host the event (and we have had other very successful events). 

One thing both hoteliers and planners need to keep in mind in light of COVID-19 is the topic of impossibility is social distancing. Social distancing is a critical element that comes into play here because you might not have the capacity of the event space that you need.

However, it’s important to remember that force majeure has two core elements. The unexpected event and the unexpected event has to make it illegal or impossible to have the meeting or event.

 

I’m sure you’ll say it depends on the contract, but is there anything we can do with the venue to let us make a “go or no-go” decision a little farther in advance?

Certainly, there should always be an ability to negotiate a business resolution. The hotel needs to understand the scope of the meeting so they understand why the group might need to make a cancellation so far out. If you give a hotel a good factual reasons as to why you need to make a go/no go decision by this date the hotel will be much more willing to work with you.

 

With the risk of hotels going out of business, I have been requesting hotels add that they will keep the client's money in escrow to help my client avoid loss of those funds.  The hotels are refusing to add it to the contracts.  And how would the process work of ensuring they did put it in escrow, or would that not be of concern if the contract at least stated it would be?

The point of escrow is to have a third party hold the funds. The reason why hotels don’t want to put your deposit into escrow is because they use those deposits to help fund their near-term cash flow. If you do go the escrow route be prepared to bear the cost and go through a paperwork process.

However, there is a more practical solution than going the escrow route. Look at the deposit schedule. Design and agreed to a deposit schedule that is not front loaded (i.e. paying higher deposits earlier). Also, if a hotel were to go out of business, standard bankruptcy laws would go into play and you would be paid out (eventually).

 

What is a good example of a contract clause to cover hotel cancellation?

Even if there is no clause and the hotel cancels, that hotel still owes you money as well as any cost incurred for finding that new location. That’s the law. Referred to as “breach of contract”. This is referred to as direct damages.

However, there are other damages like “indirect or consequential damages” for example, losing your sponsor of the meeting or attorney’s fees. Typically, you would not recoup those fees unless stated in the contract.

 

In the second webinar there was a discussion about “bad” contract clauses for adjusting attrition moving forward. Are there any other “bad” clauses that they have seen added to contracts that we should avoid for events after the pandemic?

The concept of the clause is not bad it is more that the clause itself is poorly worded. For example, clauses that are drafted very specially, i.e. COVID-19, that might seem beneficial to the group however that might be too narrow, and you can achieve the same objective with a wider net.

Amendments to the contract can also produce bad clauses because often that the syncing up of the amendment and the original contract clause.

 

How can we ensure that vendors are taking the appropriate safety measures? Same for exhibitors? Who is responsible at the end of the day?

Step one is ask the vendors what they are doing, understand that and make sure you are comfortable with the terms. You can certainly try and add an indemnification provision, a one-way street, into the vendor contract. Potentially, you could confirm with the vendor if they have insurance coverage and if they do ask the vendor to name the group as an additional insured under the insurance coverage. But at the end of the day, who’s responsible? It could be everyone if you do not take the necessary precautions.

Also, it is important to recognize that the key word here is “appropriate”. What does appropriate mean? That needs to be spelled out and agreed to. It gets risky telling other parties/vendors what is appropriate for them to have in terms of coverage because that can put you at more risk.

 

What is the best way to approach review dates with our partners?

Getting alignment internally first. That goes back to all the components of your meeting. Looking back at your timeline and tightening up and loose ends prior to having a conversation with you partners. Communicate to the hotel this is the date that you believe would be your go/no go date. However, it is vital to approach the conversation “hat in hand” because both parties are obviously not in ideal circumstances.

Setting a deadline now for a meeting 18 months away does not help anyone. Better to have a monthly meeting with your hotel partner and review where you currently are with the ability to hose the event and discuss any impacts and potential solutions.

Again, important to recognize that the operative word here is partner. Communicate to the hotel your concerns and explain why you have these concerns and here is how the current dates will impact our concerns.  

 

How do you postpone an event twice?

You can do an amendment again. But in most incases when you are getting to postponing twice it’s probably better to start over with a fresh contract. Reason being, every time you amend a contract you have to take the time to review all of the impacts to the contract like how the amendment affects the dates, rates, attrition, cancellation, concession- how does any of that change or not change. You must look at it.

You don’t want to have a patchwork quilt.

 

How to create a clause if the hotel is having competing groups with different self-enforced COVID-19 protocols?

This is more of an agenda topic in your pre planning meetings with a hotel and not necessarily something you can put in a contract because of the fact that there are so many moving parts.

 

What is the difference between termination and cancellation – does a contract need to include both?

A cancellation means you decide for business reasons to not move forward with the contract or the hotel decides they are going to cancel the group because they have a better opportunity. If you cancel a contract the non-breaching party (non-cancelling party) is entitled to damages.

A termination means the contract is treated like it never happened, aka force majeure, and everyone just goes their separate ways. Deposits will be returned since it’s included in the law but hotels might want to think about putting provision for a last minute force majeure situation where the group cancels the day of arrival and the hotel has already ordered all of the food and is now stuck with that cost.

 

When our organization returns to F2F in 2022, it will be hybrid, how we do make sure that within our hotel contract we are protected with AV needs (either using in house or third-party AV)?

Many hotels have exclusive arrangements with AV companies, but the question is always fair to ask if groups can use their own AV supplier. Of course, the hotel has the right to ask questions about the AV company to ensure that proper insurance will be in place. However, its important to note that some hotels have labor unions tied to their vendor agreements so they might be constrained by having to use a particular AV vendor.

However, on the groups side, If you are using a vendor and you are pivoting your event in some way that changes the AV services needed, you need to ensure there is appropriate language that references that need for flexibility.

 

How has attrition changed post COVID-19?

It depends. The timeframe of post COVID-19 is the critical driver of the flexibility planners should expect to receive in terms of attrition. For example, hotels will try and be flexible for events happening in Q1 2021 but as time goes on hotels need confirmation of real business on the books and we expect to see that flexibility decrease.

Also, as a friendly reminder even if you have an agreement with the hotel for no attrition you still need to include an attrition clause and have language that states you are no obligated to fill any part of the block. In summary, if your contract says nothing about attrition that means you own 100% of that block.

 

Resort Fees & Cleaning Fees – if certain amenities are not currently available – are hotels flexible on this?? What are hotels offering in return? 

A resort fee needs to be spelled out what is included and if an amenity is critical to your event that needs to be defined in the contract. (i.e. the spa) as a critical component to making your event a success.

 

Event Insurance - how does this impact (if at all) Force Majeure. How should our insurance clause read? What kind of insurance should third party event agencies have?

Be clear that event insurance and Force Majeure do not cover the same thing. Force Majeure covers the expense side of your meeting. Event cancellation insurance covers the revenue side of your meeting.

Although any policy bought after January 2020 most likely does not cover covid-19 it is still recommended to consider making a business decision around event insurance if your meeting is a revenue generating event.

 

Can negotiation be done via email and be considered binding? Or part of the contract?

No. If it is not in the written contract it doesn’t exist. You can certainly negotiate the contract in email but if the output of that negotiation does not make it into the contract it is not included.

 

Download the full version of the Q&A webinar here.  If you are interested in learning more about the Legalease With the Ladies ™ webinar series and to find more resources about event contracts head over to the HopSkip Blog.  

 

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