The aftermath of recent large-scale disasters like the terrorist
attacks of September 11, 2001 and the storm and flood damage caused
by Hurricane Katrina in 2005 have reinforced the importance of
carefully planning for the unexpected when negotiating meeting
contracts. If disaster strikes, will you be able to cancel your
meeting without liability for cancellation fees? Will you be able
to go ahead with the meeting, despite reduced attendance, without
liability for attrition damages? A key tool in managing the risk of
such challenging circumstances is the force majeure clause.
A "force majeure" clause (French for "superior
force") is a contract provision that relieves the parties from
performing their contractual obligations when certain circumstances
beyond their control arise, making performance inadvisable,
commercially impracticable, illegal, or impossible. In the absence
of a force majeure clause, parties to a contract are left to the
mercy of the narrow common law contract doctrines of
"impracticability" and "frustration of
purpose," which rarely result in excuse of performance.
Instead of relying on the common law, meeting planners can better
achieve flexibility during times of crisis through a carefully
negotiated force majeure clause. Whether negotiating with or
without the assistance of legal counsel, the following key elements
of a force majeure clause should be addressed:
Anticipate and Specify Force Majeure Events.
Determining which types of circumstances will be covered by the
force majeure clause is essential. Provisions often cover natural
disasters like hurricanes, floods, earthquakes, and weather
disturbances sometimes referred to as "acts of God."
Other covered events may include war, terrorism or threats of
terrorism, civil disorder, labor strikes or disruptions, fire,
disease or medical epidemics or outbreaks, and curtailment of
transportation facilities preventing or delaying attendance by at
least twenty-five percent of meeting participants.
Courts tend to interpret force majeure clauses narrowly; that is,
only the events listed and events similar to those listed will be
covered. For example, while acts of terrorism might be a specified
force majeure event, it does not necessarily follow that a court
would also excuse a party's performance based on
"threats" of terrorism. Thus, it is especially important
to specify any types of circumstances that you anticipate could
prevent or impede your meeting from being held.
To the extent possible, take into consideration the location of the
meeting and any special needs or responsibilities of your
organization and the meeting participants. What types of
weather-related incidents are common for the meeting location? If
there are major disruptions to transportation systems, will your
participants be prevented from attending? What percentage of
reduced attendance would make continuing with the meeting
inadvisable? Asking and answering these types of questions will
help you anticipate and specify the most critical force majeure
events for your meeting. Even so, not all potential events can be
specified or anticipated in the contract. A concluding catch-all
phrase should be appended to the list, such as "and any other
events, including emergencies or non emergencies," to cover
other unforeseeable events.
Beware of Restrictive Language.
It is common to find boilerplate force majeure language in
meeting contracts limiting excuse of the parties' performance
obligations only when it would be "impossible" to perform
due to the unexpected circumstances. Impossibility is a high
threshold; many circumstances will make holding a meeting
inadvisable, even though it would still be possible to do so. For
greater flexibility, consider instead excusing performance when it
would be "inadvisable, commercially impracticable, illegal, or
impossible" to perform.
Additionally, even if you have negotiated a specified list of force
majeure events, be sure to carefully read the language that comes
before and after the list. Language appended after a comma can
significantly alter the scope of the force majeure clause. For
example, adding the words "or any other emergency beyond the
parties' control" to the end of a list of specified force
majeure events serves to narrow the scope of triggering events only
to "emergencies." With such language, non-emergency
circumstances making it inadvisable to hold a meeting would not be
covered.
Consider Excusing Underperformance Due to Force Majeure.
Although a force majeure clause should always allow for complete
cancellation of a meeting without penalty, cancellation will not
always be the meeting planner's preferred course of action.
There may be circumstances in which going ahead with the meeting is
preferred, despite the fact that the force majeure event will
likely result in lower-than-expected attendance. However, groups
that fail to meet minimum room or food and beverage commitments
will often risk incurring significant attrition fees. To help make
going-forward a viable option in such circumstances, the force
majeure clause should be drafted to excuse liability associated not
just with nonperformance (i.e. cancellation) but also with
underperformance (i.e. failure to meet minimum guarantees).
A carefully negotiated force majeure clause is an important tool
for reducing the risk of liability associated with cancelling or
scaling back a planned meeting in response to a disaster. When
significant resources are on the line, meeting planners should
consider seeking advice of legal counsel prior to signing
contracts, and should also consider obtaining meeting insurance.
Taking appropriate precautions at the outset can provide
reassurance that, even in the worst of circumstances, you will have
the flexibility to make the best decision for your meeting.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.