Convention Contracts: Protecting Against Cancellation and Slippage

Less than 15 years ago, hotels never considered suing a national organization

(or other customer) for canceling a meeting contract or showing up in

insufficient number.

All that has changed. Because of the economics of the hotel business and the

impact of a handful of decided cases, hotels increasingly write into their

contracts with meeting planners specific provisions that state specific

penalties for cancelled meetings or when there is substantial attrition from the

number of rooms reserved for attendance.

CANCELLATION

Liquidated-damage clauses are increasingly becoming the industry standard

when it comes to meetings that outright cancel. Such clauses minimize the

necessity of litigation should there be a cancellation. An ideal cancellation

clause will attempt to protect a substantial portion of the hotel's anticipated

profit in the event of cancellation.

Here is an example of a liquidated damages/cancellation clause that attempts

to protect against lost hotel profits:

Under the terms of this Agreement, the Hotel is reserving the room block

and public space requirements described herein for your use. In the event

these reserved facilities and related services are not used, the Hotel will

experience significant monetary losses.

You shall have the right to cancel this Agreement without cause upon written

notice to the Hotel at any time prior to the event, and upon payment of an

amount based on the following scale:

Notice of Cancellation Received

Cancellation Fee

Signing of the Agreement

During 1st year after signing Agreement

During 2d year after signing Agreement

After 2d Anniversary of signing Agreement

The existence of cancellation clauses with liquidated-damages provisions

provides a strong deterrent against meeting planners moving a convention or

meeting to a different city or a different facility in the same city.

Nevertheless, there are still occasions when meeting planners will attempt to

avoid obligations to hotels upon cancellation. They will attempt to argue that

force majeure conditions - e.g., usually political conditions of some kind -

made it impossible for them to hold the meeting in a particular locale. If the

meeting planner prevails in the argument, the meeting will be excused from

liability to the hotel.

An example of a case where the force majeure argument failed, and the hotel

prevailed in obtaining a judgment requiring the meeting sponsor to pay lost

profits for an unexcused cancellation, is found in 1200...