CLAUSE: All room revenue is commissionable at 10 percent to Smith Meeting Services. Hotel agrees commission will be paid to Smith Meeting Services within 30 days of settlement of the Group master bill.

EFFECT: A simple clause like this can (and has) put a hotel in a very awkward position. For example, this standard contract clause can get complicated if the group discontinues its relationship with the independent/third-party meeting planner, Smith Meeting Services, prior to the meeting dates.

Groups and independent planners both need to clearly understand at what point the independent planner's commission is earned — is the 10 percent earned at the time the hotel contract is signed? Or is it earned only after the meeting dates have come and gone? The commission is payable to independent planners for specific services — what those services are should be clearly spelled out in the contract between the group and the independent planner.

The hotel is contractually bound to the party with whom it executed the contract, so most hotels will honor a request by that signing party to change who gets the 10 percent commission. If the group representative signed the contract, the group may request that it or a different independent planner get the commission. If the contract is signed by the independent planner, the hotel is most likely to pay the commission to the independent planner, regardless of changes in the relationship between the independent planner and the group.

If the group intends to retain the right to be able to unilaterally change the party to which the commission is to be paid, the group should discuss this with the independent planner and add language to this effect to the contract.

CLARIFICATION:

The above information is not intended to suggest that the independent planner in the scenario presented would not be able to recover commissions due. If the independent planner is found to be an intended third party beneficiary, the independent planner may still be able to recover commissions from the Hotel or the Client.

For further reading, visit Checklists/How To's: Law and Contracts


Tyra W. Hilliard, Esq., CMP, is an educator, consultant, and attorney on legal, risk management, and ethical issues. Her consulting and law practice focuses on representing associations, nonprofits, and independent meeting and event professionals. Her Web site is www.tyrahilliard.com and she can be reached by e-mail at tyra.hilliard@gmail.com.

More Clause and Effect Columns:
Clause and Effect: Attrition

Clause and Effect: Cancellation Policy

Clause and Effect: War and Force Majeure

Clause and Effect: Indemnification and Hold Harmless

Clause and Effect: Construction, Remodeling, and Renovation

Clause and Effect: Dispute Resolution

Clause and Effect: Insurance

Clause and Effect: Function Room Assignments

The Five Toughest Meeting Clauses

Destinations and Legal Jurisdications

Clause and Effect: Disclosing Taxes, Fees, and Surcharges

Clause and Effect: Overbooking and Guest “Walking”

Clause and Effect: Use of Outside Contractors

Green Practices Clause

Clause and Effect: Conflicting Groups

Clause and Effect: Lowest Rate Clauses

Audit to Avoid Attrition

Clause and Effect: Food Donations

Americans with Disabilities Act

Clause and Effect: Early Departure Fees

Clause and Effect: Complimentary Room Nights

Clause and Effect: Hotel’s Right to Eject Troublemakers

Clause and Effect: Hotel’s Right to Modify Meeting Space

Data Security Controls

Clause and Effect: Marriott and the IATA Requirement

Clause and Effect: Establishing Credit

Clause and Effect: Putting Group Charges on the Master Bill

Clause and Effect: Third-Party Commission Clauses

Clause and Effect: Disputing Charges