It's that time again. The school year is ending. But before the fun, here's a quiz to see if you know your legal stuff, or if it's off to summer school for you:

1. The hotel I booked several years ago is in financial trouble and is contemplating bankruptcy. A clause in my contract says that either party can cancel in the event of the other's bankruptcy. So, if they file, should I:

   (a) Immediately send them notice of cancellation and re-book at another hotel.

   (b) Don't wait for them to file bankruptcy and give my notice now.

   (c) Learn to live with doing business with a hotel that's in bankruptcy.

2. Under the new fax rules, I can't legally fax anyone unless:

   (a) I have written authorization.

   (b) I have an existing business relationship.

   (c) My message is unsolicited advertising.

   (d) The recipient is given the option to opt out of receiving form faxes.

3. Each year my annual meeting gets expensive. Can I charge “special needs” attendees for the extra costs we incur to accommodate them?

   (a) Sure, pass on all your costs.

   (b) Pass on only your direct costs (e.g., Braille transcripts, ramps) to the affected attendees.

   (c) You can't charge individual attendees, but you can charge the hotel.

   (d) Sorry, the group has to bear those costs itself.

4. I signed a contract with an attrition penalty and I wasn't able to fill the block. The hotel says that I owe for the room revenue multiplied by the 75 rooms that I did not fill plus 6 percent in room tax. Is that the correct calculation?

   (a) Yes

   (b) No

Answers

1. The one clearly wrong answer is (a). Regardless of the standard contract language relating to parties' rights in the event of bankruptcy, the basic rule is that once the hotel files for bankruptcy, an “automatic stay” is triggered under the Bankruptcy Code. This “stay” essentially prohibits any action against the hotel's property interests, including its interest in contracts into which it was previously entered. The appropriate options are: (i) give notice of cancellation before the bankruptcy filing if your contract provides grounds to do so (e.g., a financial insecurity clause); (ii) continue to do business with the hotel as you normally would if the hotel is pursuing a reorganization as opposed to a liquidation; and (iii) seek to compel the debtor to assume or reject your contract as soon as possible after the bankruptcy.

2. This is a trick question. Assuming the fax in question is an “unsolicited advertisement,” the correct answer, as of today, is (b). However, the new fax regulations issued last August by the FCC will change the answer to (a) as of January 1, 2005.

3. The correct answer is (d). Persons with special needs cannot be charged for the costs incurred to accommodate those needs. Under the Americans with Disabilities Act, a meeting facility and a meeting sponsor may (and often does) allocate the responsibility for compliance by means of a contract. Otherwise, each is 100 percent liable for ADA compliance. Typically, responsibility is allocated according to the lines of control, with the facility assuming responsibility for providing access to the permanent facilities and the meeting sponsor assuming responsibility for sign-language interpreters, Braille copies of handouts, etc.

4. The answer is (a) “Yes,” if that is what you agreed to in the contract, but it is not the best or fairest formula for calculating attrition penalties. It is preferable to agree on a formula that is based on the hotel's lost profits, not its room revenue. In addition, there should be an opportunity to determine if any meeting attendees were staying in the hotel but were not counted in the room block. Negotiate the right to review all room inventory/pickup information and to count all guests staying at the hotel because of your meeting toward your negotiated block. Finally, never agree automatically to pay room tax on attrition. Most states do not require it. For those that do, pay the tax to the state revenue agency directly. Do not pay it to the hotel.

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.