Contracts are important to meetings and events in that they ensure both parties understand the terms of an agreement and have apportioned risk in an acceptable way between them.
Following are my “top 10” essential contract tips you can implement into contract negotiations and execution.
For All Contracts:
1. Cancellation. Starting with the end in mind, every contract should have a cancellation clause that spells out the terms that apply if either party opts to cancel the contract before its intended termination. A cancellation clause may include acceptable reasons for cancellation and how cancellation damages are to be calculated.
2. Force Majeure. When a contract cannot be fully performed due to a factor beyond the control of a party, a force majeure causes the contract to, in effect, self-destruct.
While “acts of God” are narrowly defined under most state laws, the force majeure clause explains what the parties will allow as a reason to terminate the contract without liability, as well as notice requirements.
3. Indemnification. Each party should protect itself from harm from a third-party claim beyond its control. Sometimes called a “hold harmless” clause, this clause spells out the responsibility of one party (Party A) to protect the other party (Party B) from liability from a third-party (Party C) claim for which Party A is responsible.
For example, if a conference speaker uses copyrighted material in his presentation and the true owner of the copyrighted work sues the conference organizer, an indemnification clause in the contract between the speaker and the conference organizer would require the speaker to indemnify the conference organizer.
4. Assignment. Know whether the contract you signed can be assigned to someone else.
The assignment clause is an important one to look for in a contract, because it specifies whether the party that signed the contract can transfer their interest in the contract to another party. So, can the event planner who signed the contract sub the job out to another event planner? Can the hotel that signed it assign the contract to a new owner?
In some cases, the other party may want it assigned, in others, not.
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Regardless, you want to be aware if there is going to be a potential change in the party you are doing business with before the change is made.
5. Waiver and Severability. Sometimes mistakes are made in the execution of contracts. The waiver and severability clause is often overlooked with glazed eyes as “standard legalese.”
The importance of this contract language is that it specifies that if one part of the contract is missing, defective or unenforceable, it does not render the rest of the contract null and void.
This can be quite a relief when you find (or have made) an error in a contract.
6. Choice of Law and Venue. In the unlikely event that a contract dispute goes to court, lawyers can spend a long time arguing about jurisdiction—which court the lawsuit should be heard in and which state’s (or country’s) law should apply.
Having a clause that specifies this can save a lot of time … and money. As a rule of thumb, the law and venue are often agreed to be where the contract was to be performed.
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For meetings, this is where the meeting was going to be held. In international situations, this can create an inconvenience and a neutral third country may be chosen.
This is also a good time to consider whether your organization wants to have a policy on alternative dispute resolution (arbitration) or not.
For Vendor/Third-Party Contracts:
7. Scope of Work. For consultant or third-party contracts, a clear scope of work is an essential part of the contract. This part of the contract should specify what is expected to be done, for how much, and key deliverable dates.
Also essential to this part of the contract is what happens if the scope of work expands or contracts; how compensation is adjusted, for example.
8. Work Made for Hire. If a consultant or third-party is hired to create a copyrightable work (graphic design, written work, etc.), the copyright for that work remains with the consultant or third-party unless the contract contains language to the contrary.
This is most often accomplished with “work made for hire” language which specifies that the consultant is being hired to create a “work made for hire,” meaning the copyright for the final product remains with the hiring entity.
There are few magic words in the law, but these are some.
For Hotel/Facility Contracts:
9. Attrition. In hotel contracts, the attrition clause is perhaps the most contentious clause, and with good reason. Take the time to carefully read and negotiate this clause.
Ensure that you understand the commitment that you’ve made and that you understand what all is tied to rooms or food and beverage performance—meeting room rental, concessions, etc.
10. Damages. Be sure that you understand how damages are calculated for both parties—hotel and group—for attrition and cancellation.
They will likely be calculated differently because the two parties would not experience the same losses if the other party underperformed or failed to perform.
It is not uncommon for the group to pay liquidated damages for cancellation, for example, and for the hotel to pay actual damages.
Tyra Hilliard, Ph.D., Esq., CMP, is an attorney and professor whose expertise is in legal and crisis preparedness issues for the meetings, events and hospitality industries.
Her 25-year meetings industry career has included management roles in hotels, travel, destination marketing, associations, catering, law and academia.
The information above is for educational purposes only and is not legal advice.
DON’T MISS THIS UPCOMING WEBINAR:
Don’t Get Skinned: Critical Clauses
and Other Meetings Contracts Tips
Wednesday, August 28, 2019,
1:00 p.m. Eastern Time
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