John S. Foster, Esq., CHME, and his firm, Foster, Jensen & Gulley, LLC, Atlanta, Ga., represent several hundred meeting and convention professionals nationwide. Foster, a frequent speaker on legal topics at industry meetings, spoke with us on September 19, three weeks after Hurricane Katrina had hit the Gulf Coast, about possible implications for meetings and events scheduled for New Orleans (and other Gulf Coast locations) in Katrina's aftermath. At that point, all citywide conventions (using the New Orleans Ernest N. Morial Convention Center and at least three hotels) had been canceled by the city through March 31, 2006. Single hotel meetings were canceled only through December 31, 2005.
Q. What if one of the hotels contracted by a group using the convention center after March 31, 2006, is not open at that date? Could the group cancel the meeting without penalty?
A. All of myfor citywide events have a “cross-contingency” clause. This states that the group is not obligated under the hotel if the convention center, and other hotels in the housing block, are unwilling or unable to perform their obligations on the contracted dates. My convention center licenses state that the group's obligation to use the convention center is contingent on each of the hotels being willing and able to provide housing on the contracted dates.
Without these cross-contingency clauses in the contract, there is a big question mark. I think a group has a good legal argument to avoid liability by saying it shouldn't be required to use convention center if enough hotel rooms are not available, and vice versa.
Q. What if the contracted hotel or hotels and the convention center are open, but serious questions remain about the ability of the destination or the facility to handle groups — with regard to services, safety, and infrastructure?
A. Unless the intended consequences of such occurrences are provided for in the contract, the common law doctrines of impossibility, impracticability, and frustration of purpose [see sidebar, page 23] will be applied by the courts, depending on the facts and the jurisdiction.
Q. So impracticability and frustration of purpose might apply to some meetings canceled in New Orleans in 2006 or 2007?
A. Yes. The situation in New Orleans and elsewhere on the Gulf Coast, gives all parties — facilities, other suppliers, and meeting sponsors — the right to terminate their contracts without liability depending on various circumstances.
No one wants to appear to be making a bad situation worse for the facilities affected by Hurricane Katrina, but every organization has fiduciary duties to its owners or members to make prudent business decisions.
Q. What advice do you have for those with meetings in New Orleans, or anywhere else on the Gulf Coast, in 2006 or 2007?
A. There is a principle in contract law that states that both parties to a contract are entitled to “adequate assurances of performance” if circumstances give either party reasonable insecurity about the other party's ability to perform the terms of the agreement.
Meeting sponsors should contact each of their meeting facilities immediately for information, but should wait as long as possible before making a decision to terminate their contract(s) and move the meeting elsewhere. The timing of the decision will depend on the date of the meeting and the time needed to find alternate space and to promote the new venue. The time to react could be anywhere from 24 months to 90 days before the event, based on these criteria.
At the appropriate time, the meeting sponsor should send written correspondence to each hotel and the convention center asking them to respond on or before a specific date with either adequate assurances that they will be able to perform their obligations in full on the meeting dates as if Hurricane Katrina had not occurred, or that they are not able to give such assurances.
If the facilities are not able to give adequate assurances, or if they fail to respond by the deadline, the law considers this to be an “anticipatory repudiation or “anticipatory breach” of the contract by the facility. This would give the meeting sponsor the right to terminate its obligations under the contract and move the meeting to another location. A meeting sponsor that terminates the agreement under these circumstances must be sure to notify each facility in writing of the decision.
If the supplier responds in a timely manner with assurances that they will be able to perform in full, the meeting sponsor will then have to determine if the assurances are “adequate” under the circumstances. If the meeting sponsor determines that the assurances are not adequate, this determination will have to be defended if challenged later. If the meeting sponsor decides to keep the meeting in place, the supplier cannot later useas a defense to non-performance.
Q. So some judgment is called for?
A. There is no legal precedent to the issues currently facing meeting sponsors and suppliers in the Gulf Coast at this time. However, I believe it is valid for both sides to make decisions about future meetings based on the information that exists at the time the decision has to be made. We don't live in a perfect world where all the answers are cut-and-dried when we need them.
It is predictable at some point in the near future that the hotels and convention center will claim that they are ready for business even though the city itself has not returned to the same level [in terms of] environmental safety, personal safety, service, or entertainment offerings as before Hurricane Katrina hit.
This is a gray area and I have advised my clients to expect opposition if they make a decision to move their meeting scheduled for mid-2006 and beyond to another city.
However, I think if a meeting sponsor's due diligence shows that the city is not the same as when the meeting was booked, and will not be the same on the meeting dates, it has a valid legal argument that it can terminate its contract without liability. To keep the situation from escalating into a major legal battle, meeting sponsors should offer to rebook their meeting at the same facility in the future if that is a viable option.