At the 2011 Small Market Meetings Conference, attorney Kristalyn Loson gave meeting planners several tips on how to prevent contract blunders. The following is the second part of her presentation, which focuses on liability clauses to include writing new contracts with hotels
I. Hotel Liability
STEP 1: Force Majeure
• Force Majeure is a common clause in contracts that frees both parties from liability when circumstances beyond the control of the parties occur, such as a war or a flood.
Five key components of Force Majeure
1.) Emergency or nonemergency beyond the party’s control
2.) Delineated risks such as terrorism, threat of terrorism or government travel advisories
3.) Preventing or delaying of at least 25% of the attendees and guests from appearing at the event
4.) Making it illegal, impossible or commercially impractical to hold the event or perform the services
5.) Contract may be terminated or performance excused by either party without penalty for any one or more of such reasons by written notice from one party to the other
Warranty of Services: The hotel represents and warrants that the hotel and hotel’s facilities, including services to be provided by the hotel to its attendees pursuant to this agreement and the area surrounding the hotel at the dates herein set forth shall be of substantially the same condition and quality as currently exist as of this agreement.
STEP 2: Indemnification
• Indemnity is a sum paid from party A to party B to compensate for a particular loss. Party A may or may not be responsible for the loss suffered by B.
Good Indemnification Liability:
• Reciprocal – A reciprocal clause is desirable where each party indemnifies the other for (is responsible for) its own negligence (mutual indemnification).
• Limited to control – What each party is being asked to be responsible for is within its control.
• Limited scope to insurance coverage – For employees, volunteers or third parties
• Includes defense costs
Bad Indemnification Liability:
• The terms “sole,” “gross,” or “as determined by a court” – This restriction would limit liability and make it harder for indemnification to kick in. Only one party would have to be at fault, whereas removing “sole” distributes liability among the parties according to percentage of fault.
• Coverage of third-party negligence – Meeting attendees (except perhaps board members, etc.)
STEP 3: Commissions
• Consider out-year consequences
• No post-termination commissions (or reduced)
• Have ability to revise relevant agreements without agent approval
Kristalyn Loson is an associate with the Washington-based law firm Venable LLP. She is an attorney in the firm’s Regulatory Practice group, and works mainly with nonprofit organizations and associations. For the complete Power Point from Loson’s presentation, click here.