It is one of the worst nightmares a meeting planner can have: A contract has been signed for a large event, the meeting is just a few months away, and someone discovers that, despite the parties' best efforts, the contract for the meeting contains an error. The blunder may be as simple and innocent as a typographical error, but the change in a single word or digit could subject a group to hundreds of thousands of dollars in unintended costs, or deprive a hotel of hundreds of thousands of dollars of expected revenue. After discovering a mistake in the contract, what can a planner do to ward off a potential financial disaster?
Not Everything is Necessarily Carved in Stone
Traditionally, courts have been reluctant to relieve a party of a slipup in a written contract. In the bluntest terms, the sentiment was, "If you signed it, you're stuck with it." However, the modern trend is to allow, under certain circumstances, a party to: a) "reform," or rewrite, a contract to reflect the true agreement of the parties; or b) "rescind" the contract, and treat the agreement as if it had never been made. Whether this can be done depends in large part on what kind of mistake actually occurred.
Perhaps the most common kind of contract mistake experienced by hotels and meeting planners is when the parties have orally agreed on a point, but an error was made when the contract was typed up. This is called a "mutual" mistake. For example, the parties may have verbally agreed on a meeting with 250 room-nights, but the contract calls for 2,500 room-nights. In such a case, where there is a prior agreement on a point incorrectly stated in the written contract, a court will allow a reformation, or rewriting of the contract to accurately reflect the parties' understanding.
Some Mistakes are Harder to Fix than Others
The problem becomes much more complicated if the error is made by only one party. This is a "unilateral" mistake. For example, a hotel's contract may contain a formula that was not specifically discussed during negotiations, and this formula contains an error that drastically alters the intended attrition amount. Generally, a court will not reform or rescind a contract unless the non-mistaken party (in this case, the planner) had reason to know about the mistake, somehow caused the mistake, or acted inequitably to take advantage of the mistake. For this reason, it is important that the party that made the mistake clarify as soon as possible what that party intended when it signed the contract.
Courts in different states treat contractual mistakes differently, so it is wise to consult an attorney about the state law governing the specific contract in question.
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Act Fast
If a mistake in a contract is discovered, the parties involved should act immediately to rectify the situation. "A party should immediately contact the other side and obtain confirmation in writing that both sides understand that a mistake has been made in the contract," says Steve Rudner of Rudner Law Offices, a Dallas-based firm that represents hotels and resorts in regard to meeting and convention issues. "The more extensive the written record, the better off a mistaken party will be should a dispute later arise."