How to Handle Event Contract Cancellations

Hospitality attorney Jonathan Howe addresses how meeting planners can get out of hotel contracts as meetings continue to be affected by the pandemic.


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Listen to Jonathan Howe take planners' questions about COVID-19 and contracts on Northstar Meetings Group's recent webcast Ask the Attorney: New Contract Considerations for Live and Hybrid Events, available on-demand here.

As the months roll on and large events 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 cancelling events. (Find his advice on force majeure and other clauses here.) 

Jonathan T. Howe Esq.

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’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.

As Covid cases continue to surge, planners whose meetings count medical personnel or people who are susceptible to the coronavirus obviously need to cancel. What kind of recourse does the planner have?
Basically the response is obvious. The deal for the hotel or venue is, with a medical group whose attendees cannot get there or won’t go because they’re meeting their professional obligations as health-care providers, do you really want to go to court or arbitration and say, well, we’re not going to let them off the hook? I think the case is going to weigh a little bit more toward the medical community. If you have a group of seniors or people who have survived cancer, they’re very susceptible. Come on, let’s get real.

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.

If a group cancelled and paid the cancellation fee, and then found out that the hotel was closed over their meeting dates, is there any recourse?
It depends on when you cancel. If you cancelled the program in January of this year, lots of luck. If you cancelled the program in March, you might have a little bit better chance of going back and seeing what you can do. 

You made your decision based upon what you knew at the time. So what were all the factors that came into you making that decision? If it was, Oh, woe is me, nobody’s going to come -- without doing any research or without any backup -- I’d have a hard time giving you back your fee. But if you have solid backup as to why that decision was made, the process you went through in making that decision and why you made that decision at that time, all will help.

That’s why I call this brinksmanship. The hotel or the venue might be saying, well, we’re not going to let you off the hook now for force majeure. It might be a force majeure today, but it’s not necessarily a force majeure tomorrow. I’ll go back to what I said a moment ago: You guarantee to me that you’re going to be able to provide all of the things that you have been contracted to provide for me, or we’ve got to look at this realistically on both sides. You’re just waiting for me to cancel before you have to cancel. I think that’s an unfair game, but it’s the game that’s being played. 

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.