Several of my past columns have examined various aspects of the force majeure clause found in most hotel and convention center contracts.
The term force majeure is French for “impossible force” or “superior force,” and the clause is intended to free either party from any liability when an extraordinary force of nature or other extreme emergency beyond the control of the parties prevents one or both from fulfilling their contractual obligations. Typical force majeure events include acts of God (such as hurricanes, tornadoes, and earthquakes), government regulations that make a meeting impossible, and pandemics and other diseases.
In hotel contracts in particular, the force majeure clause is a critical one because it can allow a group to completely cancel a meeting contract when an extraordinary event arises and rely on the clause to totally escape the typically huge contract cancellation penalties. Those damages usually are equal to a substantial portion of the total value of all sleeping rooms that were reserved and sometimes a portion or all of expected food and beverage revenues, too, resulting in total cancellation damages that can be large enough to bankrupt some smaller organizations.
Not Just for Cancellations
While force majeure clauses are probably raised most often when a meeting has to be entirely canceled, meeting planners should not assume that cancellation of a meeting is the only time the clause can come into play. Instead, given the right circumstances, it is possible for a properly drafted force majeure clause to also save an organization from having to pay attrition and other types of contract damages.
The concept is sometimes referred to as “partial force majeure,” and the idea is that a party should be excused from paying damages not only when there is the complete cancellation of the event, but also if any portion of a contract cannot be complied with due to circumstances beyond that party’s control.
For example, assume that a meeting is scheduled in sunny California in January, but that 35 percent of the registered attendees must fly out of the northeastern part of the United States. As it happens, a severe winter blizzard hits that part of the county on the day before the meeting, which makes air travel impossible. In such a case, it may not make sense to cancel the meeting entirely because a substantial majority of those who are registered will still be able to attend. But the 35 percent who will no longer be able to will dramatically decrease the number of rooms filled by the group.
If the hotel were to charge attrition damages because the contract requires 80 percent of the room block to be filled and the group can only fill 65 percent of the block, the group could rely on the force majeure clause to completely excuse its 15 percent shortfall that would otherwise be owed under the attrition clause. Clearly, conditions beyond the group’s control made it impossible to fulfill that portion of the contract, even though it did not need to cancel the entire contract.
In this scenario, the same partial force majeure argument could be made if the food and beverage minimum in the hotel contract was not achieved. For example, if the food and beverage minimum is $50,000, but 35 percent of the registrants were unable to attend due to extreme weather, then the force majeure clause should excuse the group from 35 percent of the F&B minimum, which means that the group needs to purchase only $32,500 in food and beverages.
Drafting Is the Key
It is important for meeting planners to ensure that the force majeure clause is not drafted by the hotel so narrowly that it only applies when there is the complete cancellation of the meeting or the complete inability of a party to perform the entire contract due to an extraordinary event beyond anyone’s control.
Instead, the force majeure clause should cover both complete cancellation of the meeting and also any portion of the contract that cannot be complied with due to extraordinary forces beyond the parties’ control.
One way to achieve this result is with a clause that excuses either party’s performance “in whole or in part” if there is a force majeure event. For example, a clause could read as follows (with the final five words in the clause being the key language that will help reduce room attrition and F&B damages if a force majeure event partially interferes with the success of a meeting): “Either party’s performance under this agreement is subject to acts of God, war, epidemics, government regulation, strikes, or any other occurrence or emergency beyond the party’s control, making it impossible, illegal, or commercially impracticable for either party to perform its obligations under this agreement, in whole or in part.”
Ben Tesdahl, Esq. is an attorney concentrating in nonprofit, corporate, tax, and contract law, including meetings and convention law. He is with the law firm of Powers, Pyles, Sutter & Verville, P.C. in Washington, DC. He can be reached at (202) 466-6550 or at [email protected] The author wishes to thank Tony Cummins from The Meeting Department, LLC, for suggesting the topic in this column.