The school year is ending, and summer is about to begin. But before the fun can start, it's exam time. So here is a quiz to see if you know your legal stuff.

  1. The hotel I booked several years ago is in deep financial trouble and contemplating a bankruptcy filing. I have a clause in my contract that says either party can cancel in the event of the other's bankruptcy. So, if they in fact file, I should …

    (a) immediately send them notice of cancellation and rebook another hotel.

    (b) not wait for them to file bankruptcy and give my notice now.

    (c) learn to live with doing business with a hotel that's in bankruptcy.

    (d) take two aspirin and call a lawyer in the morning.

  2. Should I charge my “special needs” attendees for the extra costs we incur to accommodate them?

    (a) Sure, pass on all your costs.

    (b) Pass on only your direct costs (e.g., Braille transcripts, ramps) to the affected attendees.

    (c) You can't charge individual attendees, but you can charge the hotel.

    (d) The group has to bear those costs.

  3. I signed a contract with an attrition penalty, and I wasn't able to fill the block. The hotel says I owe them for the room revenue multiplied by the 75 rooms I didn't fill plus 6 percent in room tax. Is that the correct calculation?

    (a) Yes (b) No

And the answers are:

  1. The one clearly wrong answer is (a). The basic rule is that once the hotel files for bankruptcy, an “automatic stay” is triggered under the Bankruptcy Code. This stay essentially prohibits any action against the hotel's property interests, including its interest in contracts into which it was previously entered. Your options are: Give notice of cancellation before the bankruptcy filing if your contract provides grounds to do so (e.g., a financial insecurity clause); continue to do business with the hotel as you normally would if the hotel is pursuing a reorganization as opposed to a liquidation; seek to compel the debtor to assume or reject your contract as soon as possible after the bankruptcy; and (always a good idea) call your lawyer.

  2. The correct answer is (d). Persons with special needs cannot be charged for the costs to accommodate those needs. Under the Americans with Disabilities Act, a facility and a meeting sponsor may allocate responsibility for compliance by means of a contract. Otherwise, each is 100 percent liable for ADA compliance. Typically, responsibility is allocated according to the lines of control, with the facility assuming responsibility for providing access to the permanent facilities and the sponsor assuming responsibility for “auxiliary aids” that may be needed, such as sign-language interpreters, Braille copies of handouts, etc. That allocation only succeeds in getting the other off the hook for 100 percent liability if each party indemnifies the other against ADA liability consistent with its responsibilities.

  3. The answer is “Yes” if that is what you agreed to in the contract, but it isn't the best formula for calculating attrition penalties. Agree on a formula based on the hotel's lost profits, not its room revenue. There should also be a means of determining if any attendees were staying in the hotel but were not counted in the room block. Negotiate the right to review all room inventory/pickup information and to count toward your block all guests staying at the hotel because of your meeting. Never agree automatically to pay room tax on attrition. Most states do not require it; for those that do, pay the tax directly to the state revenue agency, not to the hotel.

Jed R. Mandel is a partner in the Chicago-based law firm of Neal, Gerber & Eisenberg where he heads the trade and professional association practice.