Evolution of Force Majeure Clauses after COVID

The information provided in this video does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information in this video may not constitute the most up-to-date legal or other information. Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter.

Introduction:

In the rapidly evolving world of contract law, the understanding and application of force majeure clauses in hotel event contracts have come to the forefront.  HopSkip recently hosted a webinar with top attorneys to unravel the intricate force majeure clause within the hospitality and events industry context. 

In this video, Sean Whalin (Co-founder and CEO of HopSkip) sits down with Barbara Dunn (Partner at Barnes & Thornburg LLP representing groups) and Lisa Sommer Devlin (Devlin Law Firm, P.C. representing hotels) to demystify these complex clauses in the context of the hospitality and events industry.

This blog post is a comprehensive summary of their discussion, offering valuable insights into the practical implications of these clauses.

After COVID-19, are you seeing any change in verbiage in force majeure clauses?

TL;DR:

• One legal perspective highlighted was the preference for more specific force majeure clauses, emphasizing government restrictions rather than illnesses like COVID as key disruptors.
• Another point of focus was the two components of the clauses: the list of potential disruptive events and the standard of impact, essentially defining when a situation is legally impossible or not permissible.
• It was suggested that the inclusion of a catch-all provision is vital and that limiting clauses to 'foreseeable' events could be risky.
• Both attorneys recommend reviewing the entire clause, considering the list of events and the standard of impact.
• The overarching consensus is that force majeure clauses should be clear, specific, and should address the legality and possibility of performance in unpredictable circumstances.
  
  
  

Video Transcript:

0:00 | Sean Whalin

After COVID-19, are you seeing any change in verbiage in force majeure clauses?

00:18 | Lisa Sommer Devlin

This is an issue that reasonable minds can differ. That's something they teach you about in law school. Two lawyers approaching the same thing the same way may have different opinions about it. I'm much more stringent in force majeure clauses than other lawyers. Some people say you can list anything you want in your force majeure clause so long as it requires the event to be illegal or impossible. 

It only matters if you list the moon and the stars and if the moon and the stars make it illegal or impossible. I disagree with that. I like to keep my clauses more narrow because I see many circumstances and have seen since COVID where the group claims we can't come because of COVID or we can't come because of whatever it is. Therefore it's illegal or impossible, and the hotel is disputing it. So I like to avoid disputes to the extent I possibly can.

01:11 | Lisa Sommer Devlin

Certainly, I am pushing back very hard on anything related to COVID, disease, epidemic, etc. because in my position, none of those things prevent meetings; government restrictions prevent meetings. So I'm being very narrow in my clauses, but I know others disagree and have broader clauses. And I think, Barbara, you might be one of those people, right?

01:37 | Barbara Dunn

Lisa, yeah, I don't know that I'm necessarily broader in the language, but I think it's a good opportunity to focus again on the clause's two components. That first component is the grocery list of things of force measure events, examples which could impact the event, and then the second, as you point out, is that standard of impact, illegal, impossible, and the rest. And while many of you have heard me say for a long time that the standard of impact is commercially impracticable, x percent of the folks can only come sometimes. 

I think there are workable ways to address that. But I want to focus on the first part of that grocery list. We've become accustomed to that list, always having a catch-all statement or any other cause beyond the party's control or including, but not limited to what I see, many contracts that go back to what my comment earlier about reading carefully, that first of all, don't have a catch-all statement.

02:36 | Barbara Dunn

So that means, and perhaps to your point, Lisa, it's a narrow clause. If it lists five things, it's five things, that's it. Forget the Icelandic volcano unless it's on that list right now. There are strategies there, and for the most part, in most instances, the groups can get a catch-all provision. So I would put that on your radar screen as well. I am seeing words like unforeseeable, if any, unforeseeable event. 

So pausing on that point, foreseeability are things that we know of today, now that we're signing. And while COVID and related emergencies might be lifted, many other things are going on right now. And that means that if any of that is foreseeable, by the time you sign the contract, you're prevented from raising it later. So I think that is in and of itself a concern, too, because even a potentially foreseeable hurricane striking in a hurricane zone during hurricane season is that foreseeable.

03:40 | Barbara Dunn

And therefore, if the hotel got destroyed, would that be an issue? So I raise that just to say I'm not necessarily seeing different things. But, as it relates, there's so much focus on the standard of impact, right? So there has been sort of a lack of focus on the grocery list part. And that part does need review and renewed interest. Whether it's narrow, has a catch-all, or is limited to unforeseeable events, those are things that the groups and hotels should be looking at. 

At the end of the day, I agree with Lisa. The clause doesn't have to have a chapter and verse of everything. We've not only talked about this for many years. Theoretically, we've all lived it in these contracts. We need to go back and say if something bad happens, and we need to point to this list and the powers that be say, can we cancel or can we perform, have a smaller meeting and not get hit with room attrition fees or food and beverage items.

04:43 | Barbara Dunn

I'm going to go to that clause, and I'm going to want to say, oh, it was an Icelandic volcano. Is that on the grocery list? Check if yes. What did that do to performance? Is the hotel still open? Is it possible to perform? Or are half of our folks not going to be able to travel again? Those are the considerations. 

So I think that's the guidepost, Sean. As Lisa and I continue to work through these on the forest majeure side of some nuances, which are things we haven't focused on as much. But I recommend that there be a focus on both sides.

Conclusion:

The need for more precision, understanding, and a focus on legality and feasibility during unexpected situations shows how complex and important these legal provisions are. People have different opinions, but most agree that we need to carefully write and thoroughly examine these clauses.

The future of contract law, especially in the hotel and event industry, depends on how well we all understand and use force majeure clauses. As we move forward, the things we learn from this discussion will help us create and negotiate these important legal documents. This will prepare us to face future challenges with insight and strength.

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The information provided in this video does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information in this video may not constitute the most up-to-date legal or other information. Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter.