Staying Fair in Trying Times: Tips for Canceling a Hotel Meeting Contract

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When a planner and a hotel sign a contract for a future meeting, neither party is contemplating canceling the agreement—although both know it may happen. The impact of cancellation can be hurt feelings and lighter wallets, but this session explores ways to draft cancellation provisions so that neither party is unfairly disadvantaged.

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Staying Fair in Trying Times: Tips for Canceling a Hotel Meeting Contract

  1. 1. 2012 Destinations Showcase James M. Goldberg
  2. 2.  Termination ◦ Outside forces, events cause contract to end  Force majeure (e.g., snow storm)  Change of brand  Construction/renovation  Unavailability of convention center Cancellation ◦ One of the parties decides to back out
  3. 3.  By the group ◦ Planned attendance doesn’t materialize ◦ Bad prior experience at hotel or city ◦ Plans change By the hotel ◦ Honest mistake  “Double booking” ◦ Get better piece of business
  4. 4.  “There shall be no right of cancellation by Group to book the meeting in another city or another hotel in the same city, or by the Hotel to book another Group” Meaningless! ◦ There’s always a right to cancel ◦ The question is how much does it cost?  “Specific performance” never ordered
  5. 5.  Liquidated damages ◦ Predetermined in contract ◦ Agreed to in advance by the parties Actual damages ◦ Determined after the cancellation ◦ Subject to negotiation or judicial ruling
  6. 6.  Will not be enforced if the purpose is to punish the wrongdoer rather than compensate the injured party Must meet two conditions to be enforced: ◦ Amount must roughly approximate the damages likely to be incurred by the “victim” ◦ Damages must be sufficiently uncertain at time of contract that clause will likely save both parties future difficulty of estimating damages
  7. 7.  Lost revenue v. lost profit ◦ Sleeping room profit margin = 75% ◦ Food and beverage profit margin = 40% Ability to resell rooms, f&b ◦ Affected by timing of cancellation by Group  Generally speaking, the closer to the meeting, the higher the damages
  8. 8.  Liquidated damages concept does not require mitigation, i.e., reselling rooms Legally speaking, adding a resell provision is like trying to mix oil and water Nevertheless, it’s common in hotel contracts
  9. 9.  Sounds reasonable, but runs afoul of rule requiring rough approximation of actual loss Group’s loss is almost never the same as the hotel’s loss
  10. 10.  Actual (or direct) damages ◦ Higher sleeping room cost ◦ Higher f&b cost ◦ Higher cost (or lack of) concessions Consequential (or special) damages ◦ Lost profit of meeting  Must have reasonable expectation of these damages
  11. 11.  Staff time involved in researching, negotiating other venues ◦ Rule against having “victim” put in a better position than “victim” would have been in the event that contract performed Attorney’s fees
  12. 12.  Be clear and complete in the contract Understand that “stuff” happens Be ready to negotiate hard
  13. 13. James M. GoldbergGoldberg & Associates, PLLC 1776 K Street, N.W. Suite 800 Washington, DC 20006 202-628-2929 jimcounsel@aol.com

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