How to Approach Force Majeure In Your Hotel Event Contracts

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.

In this video, you'll learn how to approach Force Majeure clauses, and whether they may or may not need to change as a result of COVID-19.

Check out what Barbara Dunn (Partner at Barnes & Thornburg LLP, representing groups) and Lisa Sommer Devlin (Devlin Law Firm, P.C. representing hotels) have to say in Legalease With the Ladies- powered by HopSkip!

Video Transcript:

How to approach force majeure in your hotel event contracts 

Lisa: Hi, I'm Lisa Sommer Devlin, an attorney that represents hotels and resorts.

Barbara: Hi, I'm Barbara Dunn, an attorney that represents groups.

Lisa: And this is Legalese with the Ladies. Today we're going to talk about Force Majeure clauses and how they may or may not change as a result of the COVID 19 epidemic. The first thing you have to remember is that a Force Majeure clause is not needed at all in your contracts. If something happens that truly makes the performance of your contractual obligation impossible. The law will step in and excuse you from your obligations. You also have to remember that before last year nobody had ever heard of COVID 19. There was no mention of it in anybody's contracts and yet thousands and thousands of events were cancelled without liability, because of the epidemic and the pandemic.

The thing you need to know is that a Force Majeure requires two elements. First, something unexpected happens. And as a result of that unexpected thing, the parties are unable to perform. The law again will step in if that occurs. But if you have a specific clause in your contract the terms of that clause will determine whether or not you are excused from your obligations. My personal opinion is that as a result of COVID 19, nothing really needs to change as a result of Force Majeure clauses. The only exception might be is that I'm seeing more and more people put in time limitations on their Force Majeure clause. Because this was the first time that we ever had what I would call a rolling Force Majeure. Something that started and then kept going.

Usually a Force Majeure is something finite in time like a fire or a flood or hurricane and this was a little bit different. So, other than maybe adding timelines when the Force Majeure can be invoked, I don't think a lot of changes are necessary. Barbara, what are you thinking?

Barbara: Lisa, I agree with you. Force Majeure provisions don't need to change as a result of COVID 19. However, groups really do need to focus in on their Force Majeure provisions. Because in fact, they do matter and many groups in the past that have had good (what I'll call bread and butter) elements of a Force Majeure clause were served very well during the pandemic, in terms of cancellations. And I agree both on the part of groups as well as the hotels that the Force Majeure cancellations work very well. You raise a couple of really good points Lisa, and obviously the focus there are the two elements of the clause. The first is the grocery list of the bad things that can happen. And the second being, okay something on the grocery list happens therefore performance is rendered, impossible, illegal, commercially impracticable.

So, I think the first part on the grocery list is just coming to the realization, we're not going to be able to list every possible thing that could happen. And many groups spend a lot of time and effort trying to negotiate pandemic and CDC warning and WHO warning and all the rest. At the end of the day, it typically doesn't matter because most of those grocery lists have a catch-all provision either at the beginning of the clause or the end. For example, or anything beyond the party's control including but not limited to or at the end and any other cause beyond the party's control. So, it's that catch-all bucket. So, as long as you have a catch-all phrase I'm comfortable with the list no matter what it looks like.

The one catch-all I'll say is sometimes what I'm seeing now Lisa, are clauses where the grocery list is capped. I mean how many of you go to the grocery store and you have four things on your list. You probably come out of the store with more than four things. When it's capped, it's capped and that does concern me that you would limit those items which could be the subject of a Force Majeure provision. Would you agree with that?

Lisa: I would agree that illegal or impossible are good terms. I would agree that you can have a grocery list if you want it. Something that I've talked about with some of my clients recently is not have that grocery list at all. All you really need to say is that if something happens that is beyond the control of the parties that prevents their performance, then they're excused. And you don't have to go into that thing of whether or not it's listed or not listed. I think it's really important to examine your terms and see if they are objective rather than subjective. Because I'm seeing a lot of people requesting things like fear for personal safety. Well, fear for personal safety is a subjective thing that I'm not going to agree to add to that grocery list.

And as a matter of fact, I don't even agree to add pandemic or epidemic. First of all, we're in the middle of a pandemic now, so that would already be applying. But there's lots of pandemics and epidemics that wouldn't prevent performance. So, I think keeping your list small and keeping that including but not limited to what Barbara talks about is fine. You know the bottom line is that it's a lot like what the Supreme Court said about pornography. It's difficult to define, but I know it when I see it and that's true here. Nobody was fighting over Force Majeure clauses last summer when the world was shut down. The only reason we're having disputes going forward is we're trying to figure out when you pull that plug or when you pull that trigger to get away from the event.

That's something the parties that should consider to put in their contract whether it's 60, days 90 days, whatever it is depending on the nature of your event. A point at which you're going to decide whether in fact you can exercise that clause. Are you doing that, Barbara?

Barbara: Yeah, Lisa to some extent I am just raising that point. As you know the groups can have meetings that range from very small board meeting to a very large city-wide trade show. So, to say that the call if you will would have to be made as to the go/no go for this meeting three months out isn't necessarily realistic. Often while certainly Force Majeure events as you mentioned earlier can happen sooner inside a week before the meeting or a day before the meeting. In this case, more planning time needs to take place. So, having a longer window there may be what the group is seeking. Again, I do think it's one strategy that could address that. The other thing you mentioned is the fact that the grocery list doesn't have to specify anything, which is great. I'm okay with that too as long as it has a catch all. Go shopping at the store and I just pick out whatever it is I need. I think that's okay, I agree with you.

And then just on the point of the standard of impact I know you mentioned it prevented, illegal, impossible, this is really I think the most important part. I think the concept at least of commercial impracticability is one that has come up a lot. Because even if it literally isn't impossible for a group or a hotel to perform, it may be business-wise impracticable. And that's the key here to look at. That's why I think the parties should talk about this up front. They should agree to what that standard means and when it can be invoked. I think all of that is good, but again I agree with you. We don't need to go back and do a lot of tinkering just good nuts and bolts bread and butter however you want to describe it is really what I think is needed in a Force Majeure provision.

Lisa: And I agree with that. And I hate to talk about legal magic words, but there are some words under the law that really make a difference whether and how you're using them. A lot of people are wanting to put in impractical. That's not a legal standard under Force Majeure and it's very subjective at what point is it impractical and practical to have an event. Some people put in inadvisable. Well, who gets to decide when it's inadvisable? So, I stay away from those subjective terms and stick to the legally defined terms illegal, impossible, commercially impracticable. I avoid using terms like material impact or inadvisable or fear for safety because again those are subjective and then you're just buying yourself more disputes. So, I agree with you on that Barbara.

Barbara: Lisa, you know two more points that come up in the clause. First, what if the clause applies, but the group chooses to perform the contract anyway. Yet, they're going to have reduced attendance let's say and this is certainly something that we're dealing with. And I think you and I would both agree on the fact that no matter whether the clause addresses that situation or not, the group would be able to perform at a reduced level. The hotels are willing to have some business over no business. Obviously, it's a point that the parties need to talk about. Doesn't necessarily need to be in the contract but a lot of times it is added in there. So, that's probably one point.

Then another thing I'm seeing is the fact that in order or I should say prior to invoking Force Majeure, there's a requirement that the group in the hotel have to talk about how they could make the meeting work. Again, we acknowledge that I understand the parties would do that. My only concern is that that's in a requirement that's set up. So, for example if the group could perform or the hotel could perform the contract, if the group split lunch sessions into two groups and had it or changed their meeting in a material way that the clause wouldn't apply. So, I think that's a good example Lisa, of over tinkering with the clause to the point where you've really hurt yourself on both sides. When in fact, deal with it as it might come have the communication with the hotel. Don't put all of your eggs if you will, I'm going back to the grocery metaphor.

Don't put all of your eggs in that one basket of Force Majeure, because not every problem is solved that way.

Lisa: Well, and you'll hear Barbara and I say this over and over again in this video series. It's always important to have a conversation with your business partner to see if you can resolve the problem. You're always better coming to the table to discuss things than coming to the table saying, ‘This is our position and this is what we're doing.’ Right Barbara?

Barbara: Absolutely, I agree. Again, that conversation rather than confrontation is key. And here again no matter whether your Force Majeure clauses has been signed and sealed for many years now or whether you're negotiating a contract as new. It's really going to depend on that conversation making it clear what your expectations are up front on both sides. I think that's going to be an important element going forward. And again, not necessarily looking to over tinker the clause or address every situation. But in fact, use it for what it's designed for the circumstances in which again are beyond either party’s control.

Lisa: I think that's a good place to wrap up on this one. Thank you for joining us on Legalese with the Ladies. Please you leave your comments below and we'll look forward to seeing you on our next video.

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.