Force majeure clauses just got trickier: Attorney Kimberly Pendo provided some contract tips to help meeting planners manage risk in today’s uncertain COVID-19 environment.
Contracts, including Force majeure clauses, must be top of mind, even as we begin to see some light at the end of the pandemic tunnel, at least in the U.S. Meeting professionals are still faced with negotiating termination, cancellation and rebooking for their 2001 meetings. They’re also having to deal with hotel preparedness, waivers, contact tracing and other potentially tricky issues as we work our way back to the new normal. While most planners by now have experienced all the uncertainties of COVID, from reopenings and reclosings and restarts to emerging variants and whether to require proof of vaccination or liability waivers, it’s still all a bit overwhelming.
“We don’t know exactly what lies ahead, but there are a lot of things we can do to be proactive,” said Kimberly A. Pendo, a Founding Member of Chicago Law Partners, LLC, during a recent Prevue webinar called COVID and Contracts. Pendo, who practices not-for-profit and corporate law and serves as the firm’s Chief Operating Officer, explained how force majeure works in the era of COVID-19, from the difference between cancellation and termination clauses, to what triggers a force majeure event — and she answered attendees’ burning questions about how it applies to their meetings and events.
A few contract tips and tricks she offered:
- Remember that force majeure clauses are very strictly configured by the courts, so you need to list all the things that could be considered supervening events, she said.
- Be careful about which legal standards you include when drafting a force majeure clause. “Try not to settle for ‘illegal’ or ‘impossible’ — those are very high standards,” she said. Instead, define terms that would make it “impracticable” or “commercially impracticable” to hold the meeting. If a contract says only says you can terminate your contract for illegal or impossible reasons, “the only thing that will trigger that right is if it’s literally impossible or legal — such as if the hotel burns down or there’s a very specific order, or regulation issued by the state or the city that prohibits your gathering in that specific location,” she said. Guidelines from the CDC or the White House are not sufficient because they do not make it illegal or impossible to hold the meeting.
- Include the purpose of the event in the contract. “It’s important to have the purpose of your meeting in your contract so you can point to it if you need to demonstrate frustration of purpose,” Pendo said. “If the purpose of your meeting is to have face-to-face interaction and networking, reference that in the definition of your event so you can point to it if the hotel can’t accommodate the number of people that you anticipate at your meeting.” This will bolster your argument that you can terminate the contract without liability, whether it’s COVID-19 restrictions frustrating the purpose of networking, or the death of a speaker frustrating the purpose of having attendees come specifically to learn from that speaker, she said. “The contract has to include the purpose of your meeting in order for you to take advantage of that.”
- Ask for written assurance that the venue can meet your requirements. For example, if you’re not sure if your hotel will be able to meet your purposes, contract law says that you can demand written assurances from the hotel or from the convention center that they can meet your requirements and that they provide assurance to you that they can legally host your event,” she said. “If they can’t answer in the affirmative, or they won’t confirm, then it could be considered an anticipatory breach of contract under the law.”
- Include factors outside the venue itself that could make your event impracticable. For example, everything could be fine at your host venue and destination, but say there’s a storm that prevents a significant number of attendees from traveling to the event — that’s why you want to include language saying, for example, that if 25% or more of your attendees won’t be able to make it due to some external factor, the hotel agrees to reduce attrition and food and beverage minimums by that same 25%, she suggested. There are many factors that don’t affect the host venue that could affect your event, she said. It could be a terrorist threat that affects the ability of attendees to travel to the event, hazardous weather, government regulations/advisories/restrictions on travel, attendee employer restrictions on travel, strikes and labor disputes, or a declared (or even undeclared) war. “These are all things that have to be specifically drafted into your force majeure.”
Remember that termination is a separate issue from force majeure, she added. Termination triggers could be anything from a change in hotel ownership or management, a deterioration or construction in the host facility, or even the inability of the parties to negotiate a mutually acceptable agreement on the use of the convention center.
View the full webinar — and download Pendo’s tip-packed slide deck — here.
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