Hospitality attorney Jonathan T. Howe, Meetings & Conventions' longtime legal columnist, answered questions from participants during a spirited Q&A at Northstar Meetings Group's 2018 Destination Texas hosted-buyer event, which concluded today at the Renaissance Dallas Hotel. Following are insights delivered by the founding partner and president of Chicago's Howe & Hutton law firm.
What are good arguments for removing arbitration clauses in contracts?
With these clauses, you are agreeing that one person or a panel of people will decide how the contract issue should be solved. But litigators like myself love to go to court. We get three bites of the apple -- once in court, once on appeal and once in state supreme court -- sometimes four times if the case gets to the U.S. Supreme Court. With arbitration, it is just as expensive as going to trial — a good arbitrator can cost as much as $5,000 a day — and the decision is final, there's no appeals process. I actually like going to mediation first, which works very well if both parties are of a mind to settle realistically. And there doesn't have to be a clause in the contract requiring mediation; you can choose that route at any time. Sometimes the court will order the parties to go to mediation. Not being able to strike an arbitration clause for most groups is not a deal-breaker, unless it's a been so directed by the higher-ups.
An association-management company gets a new client who has two contracts in place, both with food-and-beverage minimums that are higher than the organization's registration revenue for the event. Is there any recourse?
About all you can do is ask for mercy, but be up front. The hotel -- both parties, actually -- will benefit from coming to a compromise. So see if you can renegotiate. It might be that walking away from the contract -- no liability to either party -- is the right move. You probably won't be able to do that if you're two weeks out, but it doesn't hurt to try, and it's definitely worth considering if there's plenty of time before the event.
How is the force majeure clause being misinterpreted?
In a situation like a hurricane, an earthquake and the like, an act of god has made it impossible for either party to perform — it was beyond their control. A lot of lawyers don't know the true definition of this clause, and too many people confuse it with other reasons why parts of the contract could be renegotiated. Clean up this clause, and cover the other issues with their own paragraphs. For instance, if you contract with a five-star hotel two years out and, as the time of the event approaches, the hotel has dropped to a two-star level, you should have reserved the right to cancel or renegotiate without liability. If you're event is taking place in the Caribbean in January and you have people coming in from Fargo, N.D., who might be stranded by a snowstorm, specify that you have the right to renegotiate your room block without liability in such an instance. Make sure all the contingencies are covered in the agreement from the start, and that these clauses appear in all contracts with all suppliers for that event.
One planner had contracted with sister hotels (same ownership) that supported a conference center between them. When one of the hotels sold out, its sales department started referring attendees to a third hotel that was not part of the block. What is the planner's recourse?
As soon as you notice, call them on it. Don't ask for redress after the fact or expect attrition help after the fact. Better yet, put it in the contract that if one of the hotels sells out, that hotel is required to refer attendees to the other hotel in the block.
An independent planner works for a client for two years, and along the way negotiates a five-year contract for the client, but they have since parted ways. A big commission check comes to the planner, and three more will come in the next couple of years, but the former client doesn't think the planner should get the money. What's the rule here?
The question at the crux of this issue is: When is the commission earned? I think the independent planner has earned the money when the contract is signed. Hotels will pay the commission once, cutting the check when the involved parties make up their minds who gets the money. If you are named in the contract to receive the commission, you have earned it. But look out for what we call "weasel-wording," contract language saying things like the planner will get the commission unless otherwise directed, or the planner receives the commission as long as the planner is still retained by the client. Without that direction, the client has no claim to the money, and the planner continues to receive the commission even though the business relationship has ended.
Where can planners find sample contract clauses?
We are loath to say that one clause fits all. The problem I have with hotel contracts these days is when you ask a salesperson what each part means, and they say, "I don't know." The contract is an agreement, and if you and the salesperson don't understand parts of it, don't sign. If you don't understand on your own, don't sign until you do. Get down to specifics.
How do we get participants to buy in to room blocks?
There are many ways to get attendees to buy into the block, using incentives, raising registration fees for those who don't book into it, denying exhibit space to suppliers who don't use the block. But people are still going to book outside the block, and your contract needs to specify that all people who book into the hotel for your event are counted toward your numbers. Some groups, however, are minimizing the room block, not guaranteeing rooms overall, just booking VIPs into the property and paying for the meeting space instead. This works for groups of 50-60 people who might not be worth the aggravation of creating a block, but not for larger groups where you need to be sure you have the rooms guaranteed.
How do you feel about contract riders?
These extra instructions have ripple effects, so when you decide to tweak the contract this way, make sure you think about how it will affect the rest of the agreement. For instance, maybe you put in a rider to adjust the room block, and tie it back to the attrition clause. You need to make sure the same terms then apply to the cancellation clause, so you aren't surprised to find you are responsible for the original numbers if you need to pull out of the agreement. And make sure you use an addendum only for items that are material to the event, such as adjusting the room block or the F&B minimum. And only use it if there's no other path, so you keep the agreement as clean as possible.
A group had contracted space in a hotel that required its members to go through another event space to get to the loading dock. The hotel then sold the other event space, essentially blocking the first group's access to the loading dock. How to rectify this stalemate?
Accommodation from the hotel is needed here. The hotel has made it impossible for the first group to perform according to the contract. So sit down and talk, asking the hotel, "How are you going to make this happen?" Put the burden on the hotel to fix the problem.