A basic principle of negotiation is that it takes a meeting of the minds to have a legally binding and enforceable contract. Most of the time, meeting executives keep that principle firmly in mind when drafting their agreements. Yet every so often, people get lazy. Rather than take the time to work through a difficult issue, they put it off to the future or, worse, provide one side with unilateral decision-making authority. Either contract approach can be very dangerous and should be avoided.
"To Be Determined" Key contract provisions should be resolved before signing. Yet it's not unusual to see a contract state something like: "The parties agree to meet no less than six months before the convention to decide the schedule for food and beverage and other hospitality events." Or, "The parties shall review the group's meeting history and shall meet periodically to establish the appropriate number of rooms to include in the final room block." Sounds innocent enough--unless an agreement can't be reached. Then what happens?
If a "to be determined" provision is a critical term, the contract may not be legally enforceable since there is no meeting of the minds. For example, it would be difficult to claim one had a binding hotel contract if the signed "agreement" merely said that the parties intend to agree in the future on the room rate, the number of rooms, or the date of the meeting.
Where a "to be determined" provision is not a key term, it won't affect the legality of the agreement, but it is more than likely to lead to bad feelings and disputes. Where fixed terms cannot substitute, the contract should at least establish the criteria for the "to be determined" term. Instead of saying "we will agree on the future room rates," the contract could state, for example, that the group's future room rates are unknown, but will be no more than 20 percent off the rack rates for the year in question. While the future rack rates are also "to be determined," they are determined by the marketplace, not by unilateral decision-making or the need to come to agreement.
Making It Mutual Failure to agree on contract provisions before signing can also lead to another problem: delegating to only one party the right to resolve an issue. It is not unusual to see contracts with provisions allowing the hotel to make unilateral decisions, such as:
* "The hotel shall review the group's room pick-up history and reserves the right to adjust the room block accordingly." Here, the meeting planner has signed over to the hotel the unilateral right to adjust the number of rooms available to the group.
* "Attached as Exhibit A is the group's proposed meeting room schedule. The hotel shall determine the actual meeting rooms to be assigned for the group's use." In this example, the hotel has the unilateral right to put the group in any meeting room it chooses. I'm aware of one situation where a hotel used similar language to justify putting a group's meeting in a tent in its parking lot!
* "Group shall provide security guards for the exhibit hall as hotel shall determine." Here, the hotel gets to decide how many guards with what qualifications are needed for which days and hours--at the group's expense.
While contract terms like those above don't always result in horror stories, don't risk it. No meeting executive worth his or her salt should allow the hotel alone to make critical decisions that can affect both meeting quality and costs.
In almost all instances, the fix is simple. Rather than delegate decision-making to one side, just make it mutual. For example, if the contract says that the hotel reserves the right to adjust the room block, add "subject to the group's consent." And, to avoid confusion, the language always should require written consent.
Unilateral decision-making is appropriate in a hotel contract only when there is a mutually-agreed-upon result of such decision-making. For example, it is typical to allow a party to an agreement to have the unilateral right to cancel that agreement. But such a right almost always comes with a consequence: some sort of liquidated (agreed to) damages.
It's important to remember that the liquidated damages provision itself should not allow unilateral decision-making. Thus, provisions requiring groups to pay for a hotel's "lost revenue" can be problematic. It is unclear what is meant by lost revenue and how it will be determined. In at least one case, a hotel included in its lost revenue calculation not only lost revenues from the canceled sleeping rooms, but also from canceled meeting rooms, coffee breaks, lunches, dinners, and receptions, as well as lost revenue from the public restaurant, the bar, room service, and the lobby gift shop.
With all of the effort that goes into negotiating the critical details of a hotel contract, it makes no sense to delegate to one side the unilateral right to modify those agreements, nor should issues be deferred to a later time. While contracts should be flexible enough to accommodate changes that may be necessary, the contract must ultimately require the mutual agreement of both the hotel and its meeting client before any changes are made.