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Members of PCMA’s Catalyst community discuss when they might be able to invoke the force majeure clause in contracts for 2021 meetings.
PCMA’s Catalyst community offers members a platform to ask each other questions, share ideas, or, as the website says, “communicate and collaborate.” Here’s a sampling from a recent Catalyst discussion.
“I’m looking for some advice on how people are handling 2021 contracts and force majeure clauses,” Richard Munisteri, director of meetings, National Art Materials Trade Association, wrote on the PCMA Catalyst forum. “We have a 2021 contract in late April in Chicago for which we updated the force majeure clause to include COVID-19 as a specific situation that would allow us to cancel. We are starting to face the reality that we very well may not be able to hold this live event and contacted the hotel today to inquire about using the force majeure in the next few months to pull out. We are being told it would not apply this early and would need to be closer to the event dates. Has anyone successfully used the clause to pull out of an event without penalty months in advance? Does anyone know what the law states on this? Thanks so much!”
This is a great question. Depending on the verbiage in your actual force majeure clause, typically the hotel agreement will only allow either party to execute their right under the force majeure clause if the reason to cancel, in your case COVID-19, makes it illegal or commercially impossible to hold this event. If there are no government gathering restrictions in the county where your event will be held, it is not illegal or commercially impossible, therefore this would not be a valid reason to cancel under force majeure. This scenario would fall under the standard cancellation clause where the full cancellation fee would be due unless otherwise stated by the venue.
As an example, I represent Las Vegas and our governor recently loosened our gathering restrictions from 50 to 1,000 this month. Prior to October, and after the government mandate was put in place, any groups over 50 attendees would have fallen under the force majeure clause due to it being illegal and commercially impossible to move forward with their event. I hope this helps!
— Kimberly Amonett, National Sales Manager, Caesar’s Entertainment Corp
We’ve been told that it’s not a force majeure event until the meeting starts. Our annual conference is in April, in Washington, D.C., and the hotel still hasn’t reopened. I know things were different in the first few months, but our sales person from a Chicago hotel contacted me in mid-May for a mid-July meeting and said we could invoke force majeure. There’s no consistency.
— Beth Martino, Senior Manager of Meetings and Events, American Association of Colleges of Osteopathic Medicine
Something we also prepared for when moving our event to 2021 [was for] most hotels not to be able to change or adapt to any changes within existing contracts (unless it fell in the year 2020 to be canceled in full). Anything into the future, hotels were already partnering up with their legal teams to protect themselves from all of the cancellations they’d experienced in 2020. You may also be dealing with a skeleton staff that are constantly changing hands since so many hotels were hit hard from the pandemic (and still are). That’s regular across the board for all regions and countries.
One suggestion is to keep a record of news headlines and articles related to the hosting city you’re contracted with to watch the phases of opening or closures they’re experiencing, since it’s a state-by-state, city-by-city tier system overall. That’s been the only helpful tool in building a potential case to try to check for any impossibility clauses that may also be within the contract. We recommend having a deep dive into your contract and then having a call with your legal team to help review and draft anything that may be missing or needed to negotiate with the hotel. Most hotels at this stage — unless you’re two months out from your actual in-person conference contracted date — will not let you pull the force majeure card on them since everyone everywhere is trying to do that with all hotel brands. I recommend other solutions unless you have the money to pay for the full cancellation in the contract, or going to court against the hotel you’re contracted with — which can be messy and should be the very last solution. Good luck! We’re all dealing with it.
— Semra Ergun, Programming and Logistics Coordinator, SMPS
It depends upon how your force majeure clause is written. Have you done a survey of your membership to see who plans to attend and who cannot attend due to travel restrictions, budgets, etc.? Also, do you have international attendees who could not attend due to closed borders? You may have the option of using force majeure depending on your language and if a certain percentage cannot attend. Also, have you asked the hotel if they can accommodate your meeting with social-distance guidelines? I would request diagrams based on your contracted numbers. Information on each state’s openings can be found on the Meetings Means Business website. There is a max number of 50 occupants right now and Chicago has travel restrictions from certain states.
— Geralyn Krist, Global Account Executive, ConferenceDirect
First, I want you to know that what you are being told is not unusual at the moment, but also know that ultimately the applicability of force majeure, impossibility, or frustration of purpose legal doctrines will be guided by your specific contract language and the law under which the contract was executed — but I am not a lawyer, cannot offer you legal advice, and believe that you ought to consult legal counsel for guidance on your organization’s rights. And it is not necessarily a productive pursuit to compare your situation with others’, at least without first confirming the commonality of your contracts, the law, and the government regulations in effect at the time. Consulting legal counsel is your best course of action.
All that said, most principles of force majeure or impossibility are guided by the validity of the qualifying “occurrence” beyond your control which renders your ability to perform “impossible.” Impossibility is generally very narrowly and literally interpreted under most states’ statute and case law precedent. Commercial impracticability and frustration of purpose may more likely be a qualifying doctrine under which your organization could defend itself against a claim of breach of contract or damages for its failure to perform. However, your organization will need to demonstrate the causality between the occurrence and your inability to perform, so short of the other party(ies) to your contract(s) agreeing with you now, you may very well need to wait until such a time as some specific obligation of yours under the contract cannot be met. Most contracts with hotels have lots of obligations, but you generally can’t simply “predict” that you won’t be able to meet them. You generally are required to exhaust all good faith efforts to meet your obligations, which in your case may mean that you have to endure at least a few more months during which the law demands that you continue to try, while your organization would be well-served to document contemporaneously the relevant obstacles preventing your performance.
There isn’t really any significant case law (that I know of — again, not a lawyer) which applies to the kind of ubiquitous, long-term business interruption we are currently experiencing globally and here in the U.S. There are new legal actions being filed regularly in commercial real estate that may become relevant to force majeure precedent during the pandemic, and undoubtedly there will be litigation between parties in our industry that result from these kinds of disagreements. However, I personally remain hopeful that most of these matters will be resolved amicably between parties who value the mutual benefits of long-term relationships over the limited value of monetary damages in the short term. It’s just miserable for everyone involved in the interim.
As with any other emergency, disaster, or crisis, you are always best served to be preparing alternatives to your primary plan for your event, should you not be able to execute your program as designed. It’s a massive headache, and likely not very budget-friendly, but without your hotel partner(s)’ tacit agreement, you may need to weight the cost and challenge associated with designing both an in-person event plan and a “contingency” plan for an alternative means of delivery against whatever the costs of terminating your agreements without cause would be, at least until such a time as your legal counsel believes that your organization would be within its rights to terminate its agreement(s) for cause and without liability.
I wish you all the best, hope that you do manage to find a viable solution with your hotel partner(s), and that you are successful in meeting the needs and expectations of your participant stakeholders.
— Sam Bhandarkar, CMP, CASE, Ambassador, Meetings Mean Business Coalition