In the wake of September 11, there is new appreciation of the importance of force majeure provisions in hotel and convention center contracts.

A force majeure or termination provision addresses the conditions under which a party may terminate an agreement without liability. Some provisions are better than others. Many mainly protect the hotel or convention center. The language of these provisions 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 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.)

The Attrition Catch-22

Even with strong contracts that make it possible to cancel without penalty, many groups went ahead with meetings post 9/11. Deciding to press on, however, does not mean that attendees will fill the room block. Most hotel contracts' attrition clauses 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 the likelihood of attrition penalties. Many hotel chains relaxed or waived cancellation and attrition provisions; however, not all did, and some grace periods were longer than others.

Meeting planners faced 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 attrition fees.

Faced with this problem, many groups worked with hotels to proceed with meetings but with a written agreement to waive attrition fees. But not all hotels were willing to revise the contract.

Contracts should link attrition and force majeure events and automatically void (or substantially modify) the attrition provision if such an event occurs. That way, a group could proceed with the clear understanding there would not be an attrition charge, or that such charges would be calculated on a substantially modified basis.




Jed R. Mandel is a partner in the Chicago-based law firm of Neal, Gerber & Eisenberg, where he heads the trade and professional association practice.