The Stakes Have Never Been Higher: Top Contracting Mistakes to Avoid
01 September 2020- 39 min read
01 September 2020- 39 min read
HopSkip recently presented part three in the Legalease With the Ladies ™ webinar series, “The Stakes Have Never Been Higher: Top Contracting Mistakes to Avoid”. Barbara Dunn and Lisa Sommer Devlin provided an insightful conversation sharing insight around contracting best practices and mistakes to avoid, whether COVID-19 is present or not.
Check out below a recap below of some of the top event contracting mistakes to avoid. Interested in accessing the full webinar content? Click here.
These are the most common disputes when it comes to contracts. Handwritten changes on a signed contract are illegible, incomplete, and not countersigned/initialed. Usually these handwritten changes to contracts happen at the end of the quarter or at the end of the year but it’s not an excuse to get sloppy.
Also, it’s not reasonable to only send a PDF for review. It’s important to send the contract in a word document so either partner can edit and track notes and changes digitally.
It’s very important for both the planner and hotel to understand and document the full legal name of the party who will be liable (aka who will be paying the bills). This is especially important to figure out up front in the RFP process.
Another thing to think about…..if you’re an association you might actually have more than one signer, like the board of directors, and it’s important to communicate those details to your hotel partner and be sure to include a timeline of signature.
Mistake #3: Using undefined terms
You should assume that the contract must be interpreted by a person with zero knowledge of the industry. It’s never a good idea to think “we discussed this, they know what we intended”. Also, stay clear of using abbreviations.
Mistake #4: Addendum vs amendment
We know the terms contract addendum vs. contract amendment have often been used interchangeably but they are actually very different and it’s important to understand how……
An addendum clarifies but does not change the existing agreement. An amendment changes terms already contracted.
Amending an amendment: We know that many planners have run into scenarios where their spring meeting was originally moved to fall and now needs to be moved again. So the question is - do you create a whole new contract or change the existing? The answer is it depends. Depending on the complexity of the change either strategy can make sense. If it’s a simple change, i.e. a date change, amending a contract can be appropriate and easier than creating an entirely new one. However, changing other terms; concessions, function space, etc. might make sense to create a new contract. Multiple amendments create a complexity because it’s imperative to sync up all changes made in an amendment throughout the terms in the contract.
If you are a planner and have a specific clause or term that you really need to have in included in your hotel agreement, it is imperative to communicate that up front to your hotel partner during the RFP process. Barbara mentions that the HopSkip software has the ability for a planner to include their organization’s customized contract terms in their RFP. If you have interest in checking out the contract clauses features on HopSkip, book a demo here.
That said, it is also important to note that attaching a contract clause to your RFP is not negotiating. Planners and hotels should work together to agree on one single complete contract with clauses that both parties like.
Lisa and Barbara emphasized the importance for corporate planners to be aware that their procurement/legal organizations standard contract terms for purchasing aren’t necessarily applicable for hotel event contracts. Often, typical purchasing forms for organizations do not include key clauses for hotel events but do include clauses that do not apply and can cause wasted time and/or expose you to more risk.
Corporate planners have started to take advantage of technology to help manage their event contracting efforts. Companies like HopSkip, through their contract wizard feature, provide planners the ability to include the right contract clauses specific to their organization’s meeting.
“One ounce of prevention is worth a pound of cure”- Benjamin Franklin. Do you as planner want to be responsible for $100,000 in liability? Even the word “per night” or nightly” makes a big difference contractually when it comes to the financial exposure your organization faces. It’s always recommended to include your legal eagle on any reviews or questions you might have.
Barbara and Lisa recommend working with your legal counsel to develop the master clauses your organization will need to feel protected while executing your events. Ensuring that all planners in your organization are then including those clauses up front in your RFP is critical. Why? It mitigates any uncertainty for both the planner and the hotel and demonstrates that both parties are serious about making this event a success. With HopSkip’s contract clause feature, you can save your organizations contract clauses and increase your confidence in your contracting process, feel free to schedule a demo with HopSkip here.
The damages that the customer and the hotel suffer are very different.
Trying to enforce a “no cancel” clause on your hotel is not going to help you. It’s not enforceable. Business is business. Hotels are also businesses and they have an obligation to the ownership team to try and optimize revenue. A $50k meeting vs. 1-million-dollar meeting opportunity to the hotel is a business decision most hotels will always make. If a hotel needs to cancel a group’s meeting, groups need to think about what would be considered a reasonable loss. List out the specific costs as well as a timeline of being owed those funds by the hotel. However, groups should expect to see a cap on the amount of money hotels are willing to offer for any reasonable damages. Hotels will always try and do their best to make it right with their customer and will try to come to the table with a solution and will work to make things right.
We know that in current times, many hotel chains are offering no attrition. However, removing an attrition clause is a mistake. It creates more exposure for the planner. Build an attrition clause that will never come into effect. State that “the group won’t be held responsible for damages if group fails to utilize their contracted room block”. But as a friendly reminder, often concessions are tied to your room block pick up so be aware of the trade-off’s when you are negotiating 0% attrition. Also, another recommended approach for planners and hotels is to have agreed upon review dates where you will have check-in’s to review the current pick up, agree to the right to adjust the room block accordingly, and be sure to set a date for the final “confirmed” block with your hotel partner.
While we’re all working harder than ever to ensure a safe return to live events, increased activity and decreased time for reflection can lead to costly mistakes, which could end up slowing our recovery as an industry. Take the time to look for and correct these common mistakes for the benefit of your stakeholders, your hotel partners, and most of all your attendees. Understand what might have worked in the past might not be the best solution moving forward. Because, as mentioned, the stakes have never been higher. So, please feel free to book some time for a demo to check out the HopSkip platform and learn how you can instill confidence in your RFP and contracting process.
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