Association Meetings asked John S. Foster, CHME, Esq., Foster, Jensen & Gulley, LLC, Atlanta, for legal advice in handling attrition and cancellation issues in today's tumultuous economy.

  • AM: Does a hotel legally have to show that it tried to resell guest rooms if a cancellation goes into litigation? Does publishing hot dates/hot rates on one of the many Web sites constitute proof that the hotel did try to resell the cancelled rooms?

  • JF: The injured party in a contract dispute must show that it took affirmative steps to mitigate its damages when a suit is filed. The other party is entitled to make them substantiate their efforts. Publishing open dates on a hot dates/hot rates Web site certainly would qualify as mitigation, but it may not be all that's required.

    Timing is a factor too. Canceling a year out would require a different level of mitigation than canceling a day in advance. But even if the meeting is cancelled on arrival day, the hotel still should notify its 800 number that the dates are now available for special rates.

  • AM: How does the inclusion of a liquidated damages clause impact mitigation efforts?

  • JF: Liquidated damages can be stated as a flat fee, a sliding scale, or a formula. To be “reasonable,” the provision must be a close approximation of actual damages, and it can't be a penalty. If a liquidated damage provision is held by the court to be “reasonable,” it is presumed that the parties already factored in mitigation when they negotiated the terms of the clause. I don't make the decision for my clients as to whether they should use a sliding scale, a formula, or a flat fee. I explain the options and it's their choice.

  • AM: Does a meeting sponsor have the right to look at the hotel's records?

  • JF: Yes, meeting sponsors have a right to independently ascertain the accuracy of the hotel's numbers regarding out-of-order rooms; rooms sold to in-house guests; and rooms billed to other groups and individuals for no-shows, attrition, and cancellation. If the parties go to court, the hotel's records are open to “discovery” by meeting sponsors. The hotel can require the meeting sponsor to sign a confidentiality agreement. This is routine. Because of the large amounts of money at risk with attrition and cancellation damages, planners should insist on including an audit provision so that the meeting sponsor's right to see the records is clear.

  • AM: Will hotels ease up on attrition and cancellation clauses due to today's unsettled economy?

  • JF: Attrition clauses will not go away in first-tier cities. But they may well go away in second-tier cities. Hotel owners made so much money in the past few years through these clauses that they're willing to put up with hassles to get their money. Having said that, even in first-tier cities, smart hoteliers will consider and accept contract terms proposed by meeting sponsors as long as they are fair and written to compensate the hotel if damages occur.






For additional information, contact Foster at jsfoster@mindspring.com, or call him at (404) 873-5200.