Meetings industry attorney James Goldberg, principal, Goldberg and Associates, Washington, D.C., addresses key contractual questions related to risk management.
MeetingsNet: Where can I get information on event cancellation insurance?
James Goldberg: Talk to an insurance agent or broker, preferably one who can get proposals from a number of companies offering this type of coverage. Premiums can vary widely from insurer to insurer.
Keep in mind that cancellation insurance does not provide reimbursement if attendance lags as a result of a poor economy or high hotel rates. But if an unanticipated force majeure event occurs, it can provide reimbursement for lost meeting profits and/or the cost of finding a new venue.
MeetingsNet: Does force majeure cover individual cancellations when, for example, the departure airport for some members is closed for a lengthy period of time, making it impossible for them to attend the meeting?
Goldberg: Generally not. Since the party to the contract is the planner’s organization, it is the organization’s inability to perform that is generally covered by a force majeure provision. The inability of a certain percentage of attendees to easily make it to the meeting can be included in a force majeure clause, but whether a closed airport will invoke the clause depends on how it is drafted. Suggested language might be:
“The performance of this agreement in whole or in part is subject to occurrences beyond the control of the parties which renders it illegal, impossible, commercially impracticable or inadvisable for the Hotel to provide the facilities for the meeting or for the Group to hold the meeting.”
Note that many hotels will object to inclusion of the word inadvisable, which they regard as too subjective. Use of the term commercially impracticable is important because it’s a generally used legal term that has been recognized and applied in court decisions involving all types of force majeure situations.
MeetingsNet: If you get cancellations after the cutoff date that put you in an attrition situation, should the hotel allow you to buy/reserve those rooms that your attendees canceled?
Goldberg: While that would seem to make sense, it’s always best to put such an option in the contract. However, depending on how the contract is written, it may be better to pay the attrition fee (especially if it’s less than the usual room rate and the state does not impose any taxes) than to pay “full fare” for the unused room.
MeetingsNet: What are your suggestions on negotiating an addendum or changing a contract that has already been signed?
Goldberg: Make sure the addendum clearly refers to the underlying contract (including its date and parties), states specifically what provisions are being changed (including clear replacement language), and states that all other provisions of the underlying agreement remain in effect. However, a hotel is under no obligation to renegotiate an existing contract.
MeetingsNet: When booking more than five years out, is it wise to include an annual room-block review in the contract based on each year’s actual pickup?
Goldberg: An annual or periodic review can be built into a contract, but it’s beneficial to the planner only if the adjusted room block becomes the new room block for all purposes of the contract (e.g., attrition). If any adjustment requires agreement of both parties, the planner runs the risk that the hotel might not agree to a substantial, or even a second, room-block reduction.
For more on force majeure and attrition, visit our Contracts/Negotiating page.