In times like these, with Coronavirus dominating the news and last week’s deadly tornadoes in Nashville [America’s sixth-largest meetings market, according to a recent American Express Global Travel Survey], the spotlight shines on an often lightly regarded but critically important clause in corporate meetings and events contracts — force majeure.
To begin with, force majeure means “superior force” and the generally accepted definition is: “A provision in a contract that excuses a party from not performing its contractual obligations that becomes impossible or impracticable, due to an event or effect that the parties could not have anticipated or controlled.”
National Law Review, a respected aggregator of legal news and analysis, concurs. A force majeure clause “usually operates to relieve one or both parties of some or all of their contractual obligations if an unforeseeable event beyond either party’s control prevents or delays full or partial performance of obligations under the contract”.
And here’s where the ambiguity begins.
Generally speaking, legal beagles say any ambiguity can be traced directly to the level of due diligence done during contract negotiations …or lack thereof. Take the clause lightly and you’ve exposed yourself. Treat it as seriously as you do room rates and attrition and you’ve wisely gained [essentially] insurance protection that doesn’t cost anything but a little extra time.
So Broadly Speaking, What Is a Force Majeure Event … and What Isn’t?
Hurricanes, tornadoes, floods, earthquakes, lightning strikes and other acts of God are obviously force majeure events, as are government-declared times of war and many other things. But what about the current situation with COVID-19?
As NLR says, it all comes down to the individual wording in a particular contract so there’s no simple, blanket answer for this situation or any other threat, real or perceived. But there are things you should be doing right now when it comes to in-place contracts, as well as contracts currently being negotiated. [Julie’s BLOG 52: 10 Hotel Contract Gotchas! to Watch Out For”]
Let’s Start with Existing Contracts …
Review your force majeure clause. – In the often tedious, back-and-forth negotiations for favorable attrition terms, comped suites, in-kind services, group rates and other hotel concessions, it’s tempting to blow by a force majeure clause, consider it standard boilerplate language, and simply rubber-stamp it. Did you? Go back and become intimately familiar with the wording in place and look for subtleties and/or nuances they could either sink you or save you in a force majeure situation.
Lean on industry peers. – Chances are, if you have concerns, others do, too. You’re not alone. Talk to other industry professionals – planners, vendors, hotel-savvy folks, etc. Gather knowledge and share information. Find out where they stand, what they’re doing, and where they’ve had success negotiating force majeure situations. Adopt similar negotiating strategies.
Do some research. – Contact city, county and state officials where your event is scheduled to be held and find out if there are new health regulations that have recently been put in place, and that may provide you some leverage.
Some success is better than no success at all. – Force majeure isn’t necessarily an all-or-nothing situation, it can also be applied in a scaled manner similar to hotel attrition clauses. If you’re planning a conference or convention and your attendee numbers are lagging due to a force majeure condition, find out if some portion of the obligation can be forgiven since the conference will be occurring albeit with fewer people attending.
Now, Let’s Look at Contracts Currently Being Negotiated …
Learn, learn and learn some more. – Just as many of us did after 9-11, leverage knowledge gained from the experience – painful and otherwise – and use it as a guidepost moving forward. If you haven’t already written force majeure language that you prefer to use in your contract negotiations, it’s time to do so. If you do already have it, it may be time to revisit it and make adjustments, based on what you’ve learned most recently.
Build-in scalability. – Make sure the door is open to partial relief from obligations if your conference does occur, though with lower attendance or shortened duration.
Use words that clarify, not cloud, a force majeure situation. – Eliminate broad ranges of interpretation that can bite you in the backside. In the case of Coronavirus or the “next big thing” avoid general words like “outbreak” or “sickness” or “unfortunate occurrence” in favor of words that are more precise – such as disease, epidemic, pandemic, quarantine, official acts or declarations of government, etc. The less wiggle room you allow, the greater your chances of successfully negotiating force majeure relief from contract obligations.
Postponement versus Cancellation. – If indeed a catastrophic situation occurs and you have to call off your event, be sure you’ve negotiated – in advance — a reasonable Plan B with the other party. Maybe you can’t hold the event on the original dates but once the “all clear” has been signaled, you can rebook with the property without being dinged financially. Obviously, there would have to be time windows and deadlines negotiated for an equitable Plan B.
Two Points to Keep in Mind …
First … don’t lose your mind, unnecessarily.
We’ve been through our share of terror attacks, diseases, disasters and every other form of mayhem. Yet, we’re still standing. Same will be true when the next piece of ugliness rears its head.
Educate yourself but don’t drive yourself crazy. Awareness of current or potential threats is a wise way to conduct business. But keep things in perspective and don’t succumb to hysteria [something that serves well as click bait and as a means of garnering viewers but creates unnecessary angst]. Somewhere in the middle of what you’re seeing and hearing in the media lies the truth. Focus on that and don’t be drawn to extreme opinions, one way or the other.
Secondly … and this is extremely important, understand the spirit of a force majeure agreement is fairness to all parties. Folks need to be paid and the pain of a force majeure situation should be fair and equitable to all involved. Remember, no one is to blame. Something bad happened beyond everyone’s control.
When you ink your signature to a contract – whether it’s for a car loan, a mortgage, a hotel booking, etc. – you’re laying your personal integrity and reputation on the line. Don’t seek to leverage a tough situation and take advantage of another. Be the type of human being others trust and enjoy doing business with, always.
Stay informed. Be smart. Negotiate well. And get crackin’ on that preferred force majeure language you said you were going to do so many months ago!
CALL-TO-ACTION / TAKEAWAY MESSAGE / CONCLUSION
A force majeure clause in your contracts is critically important. Take the time to write it right! And if the worst occurs, be fair and kind to all involved.