The heinous events of September 11 have dramatically affected the peace and tranquility of our society, and will forever change us in ways great and small. Our nation is joined in a common expression of shock, grief, and renewed patriotism.
Our day-to-day activities seem quite small in comparison, but it is those everyday activities that must go on. And so, in the spirit of moving on and learning from this tragedy, there is a renewed appreciation of the importance ofprovisions in hotel and convention center .
Essentially, a force majeure or termination provision addresses the conditions under which a party may terminate an agreement without liability. In the wake of the terrorist attacks, it has become obvious that some of these provisions are better than others. Many are written in a way that mainly protects the hotel or convention center. The language focuses on events that make it “illegal or impossible” for the hotel or facility to “provide facilities or services.”
Such provisions are unlikely to allow a group to cancel its meeting and terminate its agreement without penalty because, for example, attendees are unwilling or unable to travel. A better force majeure provision would state:
The performance of the agreement by either party is subject to acts of God, war, terrorism, government regulations, disaster, fire, strikes, civil disorder, curtailment of transportation facilities, or other similar cause beyond the control of the parties making it inadvisable, illegal, or impossible to hold the meeting or provide the facility. This Agreement may be terminated without penalty for any one or more of such reasons by written notice from one party to the other. [emphasis added]
Even with strong contracts that make it possible to cancel without penalty, many groups have gone ahead with their meetings planned for the weeks and months after September 11.
Deciding to press on, however, does not necessarily mean that attendees will fill the room block. Most hotel contracts contain attrition clauses that impose fees on groups that fail to fill all or a set percentage of their sleeping rooms and food and beverage commitments. Thus, groups deciding not to cancel are faced with a substantial likelihood of attrition penalties. Many hotel chains have liberally relaxed or waived cancellation and attrition provisions. However, not all have, and some grace periods are longer than others.
Meeting planners face a Catch-22: Terminate a meeting on the basis of a force majeure provision and leave the hotel empty and without recompense; or, go ahead with the meeting, do the best to fill the rooms, and run the risk of having to pay attrition fees.
Faced with this dilemma, many groups are working with hotels to proceed with meetings but with a written agreement to waive attrition fees. But not all hotels have been willing to revise theafter the fact.
With that in mind, contracts should be written with language linking attrition and force majeure events, and automatically voiding (or substantially modifying) the attrition provision if such an event occurs. With such language, a group could make a business decision to proceed with a meeting with the clear understanding that there would not be an attrition charge, or that such charges would be calculated on a substantially modified basis. Such an approach seems reasonably fair.
The terrorist attacks have caused us to look at important, but also mundane, contract and insurance issues. In doing so, let's not forget those lives forever affected by these tragic events: the victims, their families, friends, and the thousands who toil selflessly to help heal our wounds. Our thoughts and prayers are with them.
Jed R. Mandel is a partner with the Chicago-based law firm of Neal, Gerber & Eisenberg, where he heads the trade and professional association practice.