Event-Contract Advice: Cancellations

Updated Jan. 14, 2021.

As the months roll on and events beyond about 50 people continue to be prohibited across the country, meeting planners still have questions concerning when and how to cancel events. Here, Jonathan T. Howe, founding partner of Chicago's Howe & Hutton law firm and Northstar Meetings Group's longtime legal expert, offers his advice on constructing clauses that will help organizations get out of hotel contracts if the need arises. (Find his advice on force majeure and other clauses here.) 

What are you hearing concerning events in 2021?
What we're looking at now is by the third quarter of 2021 there will be a sort of hesitant, resumption of business. We're still hedging our bets, as to what kind of meeting and program we're going to plan, because one of the lessons we've learned in the past year was that people enjoy the aspect of being able to go to a virtual meeting, but they didn't get quite the same impact out of it. So we're still making hard decisions: Am I going to go virtual? Am I going to go hybrid? Or am I going to make the bet and plan an in-person meeting? Everybody's got this pent-up desire to get the hell out of dodge. They want to get back and move, they want to do things. But they're still not sure they want to risk their health.

You have got to do your homework, always. But more importantly, know your group. And if you decide to do a hybrid meeting, you're planning two and a half events. You're planning the virtual meeting, you're planning the hybrid meeting, and the half meeting is coordinating the two and being able to mesh them. It's not as easy as it seems. I've seen too many situations over the last couple of months, where they thought they had it under control, and it was a disaster. The meeting planner of today is not the meeting planner of yesterday, not even the last hour and a half.

What we're going to see in contracting — I made a little list the other day — you are going to have to show that the attendee's entire travelogue, from the time they get in the car to go to the airport to the time they go back home, that the hygiene is going to be covered. Safety standards will have to be outlined, whether that will be wearing masks, social distancing, sanitation of the areas that they're going through, etc., etc.  

What's happening with cancellation clauses?
The cancellation clauses are becoming a little more flexible, reflecting a little bit more reality. But the further out you set your meeting, the tighter the cancellation clause is going to be — in other words, the more strict the clause will be. If you're talking about cancellation clauses in 2021, you get a lot more wiggle room than you will for 2023.

How should planners be approaching contracts now?
Figure out what the worst possible case is that could happen. Then, look at it from the brand standpoint. What is going to be important to maintain your brand and your credibility as you go forward? You need to determine that drop-dead date when you have to make a decision one way or the other, go or no go. And then you have to make the decision at that time as to be what’s going to be best.

Sometimes we’re just going to have to put aside what legal rights or responsibilities there might be. You’re going to make a business decision about what is going to be in the best interest of the people that work for you, who you’re expecting to come to the program, the people who are going to be supplying the program. 

You may have to bite the bullet for a cancellation fee, but how can we minimize that? If we’re not in communication now with our vendors and others as to what we can do on both sides to make this a better deal, we’re missing the boat.

We’ve had clients doing surveys of their potential attendees, asking them point blank, would you come to a meeting, say in August, and they get a response: No, I’m not coming to any meeting until I’m sure that I can travel safely or my people can be there safely. So a whole lot of things that go far beyond what the contract says come into play. It’s what your mindset says, what your brand identification is going to be and how any decision you make today is going to impact on it.

We’re seeing a lot of situations which I call brinksmanship where you go to the hotel or the venue, and they’re saying, well, we’re not going to let you off on the cancellation fee. They’re playing a little brinksmanship: Who’s going to blink first? It may well be that when it comes time for that meeting to be performed, the property will be in no position to perform. Their people will have been laid off, they’ve been furloughed, they’re not coming back. They’re concerned about their own health. And so the hotel or venue won't be in a position to service your program. When you face that dilemma with the property or the vendor, ask them, Can you guarantee and would you be willing to sign a letter or an agreement with me that you’ll be fully able and capable of performing in full everything outlined in the contract? Will the restaurants be open, the housekeepers will be there, the service setups and knockdowns all will take place? Have them sign an agreement that if they aren't able to perform, they'll pay you what they're asking you to pay for a cancellation fee. You’re going to get a little pushback, I guarantee you. But more importantly, it makes the conversation a little bit more realistic. There are obligations on both sides. That’s the sharing of the risks.

Each state is dealing with the pandemic under its own terms. What do planners need to know about this?
We have to look at what the federal guidelines are, what the state where our event will be held is doing, and what the local community is doing. My advice, before you make any decision, is to look at what the current restrictions are for the destination. But again, you have to make your decisions based upon what you know on that drop-dead date.