Canceling an event is never pleasant. However, considering the current state of things, it’s necessary. And while a lot of planners’ attention is focused on virtual events, a part is also concerned with cancellation. So, what do you have to do? Can you simply send out a mass email? And is that even advisable? Is there any way you can repurpose the costs of your in-person event? These are only some of the questions that have been floating around in the events industry.
But we are here to help! This week’s incredible episode of #EventIcons will walk you through the ins and outs of canceling an event. And in order to do so, our amazing host Will Curran is joined by Josh Grimes. Josh is an attorney who’s specialized in the area for events. With 23 years of experience in the business behind him, there’s a lot we can learn from Josh. So press play and let’s dive right into today’s edition of our iconic show!
Canceling An Event: Force Majeure
We begin by learning about the term force majeure. “Force majeure is a legal term that’s been around for a long time and it’s in your contracts, but it’s separate from your contracts”, Josh explains. “It’s a legal principle that says, if it becomes impossible to perform, or illegal to perform, then both sides can go their separate ways and there’s no liability for either side. And almost every statute and almost every country in the world has, and every state has a force majeure or provision. Wither built into their law or in their legal tradition. And most countries have it outside of the US too. So there’s a strict force majeure principle out there”.
“Now, what we’ve done in the meetings industry is broaden that. There shouldn’t just be a cancellation if it’s impossible or illegal to have a meeting. But we’ve talked about, is it impractical to have a meeting? Is it commercially impracticable? That’s the word you use, is it inadvisable? And we’ve built in a whole number of contractual provisions that frankly are much broader than a strict force majeure clause would be. But they let planners and groups get out of meeting contracts or frankly, any kind of supplier contracts too if they meet certain criteria. And if you have a contractual provision in your meeting contract that’s broader than a force majeure law, that meeting contract provision will almost always be upheld. That’s really the difference”.
Does Force Majeure Have Priority?
“A force majeure or only applies where someone can’t perform because of a reason outside of its control. So for instance, if I say, “Well, we have a new CEO in our company and he wants to tighten the belt so we’re canceling,” that’s not a force majeure because that’s within the control of the group that’s canceling”, says Josh. “And it’s hard to have an exhaustive list because we don’t know what’s going to happen. And it’s never a bright line usually. Is it terrorism just in the city where your meeting is going to be? Or is it terrorism for some groups? If there’s terrorism in Europe, people might not want to get on an airplane and travel. So maybe that’s a force majeure for that group”.
“Bad weather might be a force majeure. But is really bad heat going to be a force majeure if your meetings in Scottsdale in July or August? Probably not. So, the key is to define things as narrowly as possible or as broadly as possible for force majeure”, he adds. “Because we don’t like things to go to court. But if it ever did, a judge is going to take a hard look at your clause and see if what’s there actually is a force majeure”.
What If There’s No Force Majeure Clause?
It might happen that you don’t have such a clause in your contract when canceling an event. What can you do in this case? “You’re not out of luck totally”, says Josh. “Again, as I said before, it depends on the law that governs your contract, which is usually where your meeting is going to be held. But, for instance, if you’re meeting in Texas, Texas has a force majeure, what we call a common-law provision I believe there”.
“California has a provision and I happen to know what’s the California Civil Code Section 1511 that has circumstances where you can cancel without liability because of unforeseen occurrences outside the control of the parties. So that gives you rights if you have absolutely no force majeure clause. I can’t tell you, it depends on the circumstances, I can’t tell you it’s a slam dunk. But it will probably be helpful for you in a dire circumstance like what we have right now”.
You’re probably wondering how far prior to an event a force majeure can be triggered. According to Josh, it depends. “Some contracts say that if you have a force majeure occurrence, you need to notify the other side that you want to cancel. Let’s also remember, force majeure can also be a postponement of a meeting, not just a cancellation. But you have to tell the other side within 10 days of when the force majeure occurrence arose. And if that’s in there, that’s what it is”.
“Otherwise, I would say as soon as you know, but let’s look at the other side. So I’m dealing today with meetings that are going to be at the end of June. And groups are asking me, can we cancel today if a meeting is at the end of June? Well, I would wait and see what happens, particularly if there’s no penalty for you to wait. Why? Because right now most of these government orders against group gatherings and travel and closing convention centers are only in effect until April. And, in fact, Las Vegas casinos are closed, but only until towards the end of April”, he adds.
“And these bans may be extended, but we don’t know right now. So can you cancel for June? We may get to June. I don’t particularly think this is going to peak that soon and be great by April. But yesterday or two days ago, the President was talking about opening things up by Easter. What if this goes away and it does open up by Easter? If you then have a meeting canceled in June, the force majeure reasons may no longer exist. So I recommend that you wait as long as possible until it’s clear. Now if you have a ban or a government order that says we are not reopening our convention center or our hotels until July, then you know now so it’s something different”.
Services Already Rendered
Many companies provide meeting plan services to clients in exchange for hotel commissions. What happens when a client cancels a meeting for force majeure? Do the meeting planners have any recourse for services already rendered for both parties? “If it’s just a commission contract, the answer would be no”, says Josh. “Because the commissions come in when the meeting happens, and in fact, most hotel contracts will say that they don’t pay commissions on cancellation damages”.
“Two ways to address that. One is to work the commissions based on revenue that the hotel gets, whether it’s cancellation damages or not. And I would argue, if there are cancellation damages at play, if the hotel is getting 100% of the room rate for each room that is canceled, then they should pay commission. Otherwise, the hotel is getting more money in their pockets than if the group had actually performed”.
“Planners ought to have an arrangement with the company that hires them. This is obviously for third party planners that recognize that you do a lot of work before the meeting. And of course, you do site visits, you do planning visits, all sorts of planning, registration, you do real work before the meeting. And you deserve to be compensated for that work whether the meeting happens or not. Many of your clients don’t really appreciate that because you might be compensated strictly by the commission. So I recommend you have a contract in place that says, if the meeting happens, we get a commission. But if it doesn’t happen, we get our costs and expenses and maybe an hourly rate for employees equal to the amount they did up until the time of cancellation”, he concludes.
Canceling An Event: Vague Language?
The possibility of canceling an event should always be on your mind when putting together a contract. “I think that planners have to sit down and think about when they’re doing their contract. Here’s my meeting, is my meeting a corporate meeting where everybody has to show up basically, or they get fired? It’s part of the job. Is it a voluntary association, where it’s optional for people to come? And then you figure out what kind of meeting you have”.
“And you decide what kind of force majeure would be relevant to your members or your prospective attendees. So if it’s senior citizens, maybe they don’t want to go out in horrible weather. You may need a broader force majeure clause. Or if it’s people who aren’t used to traveling, so they get skittish if something happens. You may need a broader force majeure clause than you do if it’s experienced travelers or people who are really extremely motivated to show up for the event”.
“The courts don’t like vague language and courts tend to construe force majeure clauses pretty narrowly if they’re able to. But I would put in exactly what you need. The challenge with force majeure is that we don’t know what the next force majeure is going to be. They are unforeseen events. So you need to define it as much as possible with examples. And then add something like any other unforeseen occurrence beyond the control of the parties that makes it illegal, impossible or commercially impracticable to move forward with the event. Something to that effect, some broad language that gives you some leeway”.
Can A Venue Force You To Rebook Versus Cancel And Receive A Refund?
“A force majeure, a pure force majeure means that both parties walk away. So they have to refund. A venue could take a position, that they don’t have to do that. And in fact, what we’re seeing right now are situations where, frankly, given the starkness of the situation in a lot of places, you are to get your money back. If you’re meeting in Las Vegas at one of the casino hotels at the beginning of April when the casino hotel is going to be closed by order the government, you ought to get your money back”.
“But why isn’t that happening so automatically? Because the hotels, the venues, they want to keep your money. They are in a desperate situation. They would rather rebook you so they can keep your money and apply it to a later meeting. The airlines, frankly, are doing the same thing they’re canceling, but they’re trying to get you to take credit rather than give you a refund, even though they’ve canceled your flight”.
“What you need to insist on if you’re a planner, insist on it. And if it’s a real force majeure event, you should get it. Don’t expect the hotel to volunteer it and in fact, some properties are taking the position even if it’s a clear force majeure in my opinion, what happens, they’re still taking the position that it’s not a forced mature. Why? Because they’re trying to negotiate a better deal that lets them keep the deposits at least for a while until your rescheduled meeting comes around. But with a true force majeure, you should always have an option to get a refund, not only for you but also for your members or attendees who may have already made a hotel reservation or paid some sort of deposit”.
General Cancelation Tips
Josh also gives us some general advice on the topic of canceling an event. “Well, the first thing that we’ve learned is to read your contracts. Know what you’re getting yourself into before you sign the contract, and think about what could happen. Think about what could happen to your meeting. Think about in your experience what’s happened in the past. Make sure your contracts address all those things. Make sure if you’re a third-party planner or a vendor, your clients have reasonable expectations about what you can deliver”.
“With your hotel contracts, if they’re way off in the future, think about unpredictability, not just a force majeure. What if we’re heading to a buyers market? So rates are going to go down. Do you have some way to protect your groups and yourself so that if rates go down in the area generally where you’re having your meeting, your rates for your meeting aren’t going to be stuck at some high rate because you signed a contract a year earlier before rates went down? And now you’re stuck”.
“I’ve always recommended there be a hotel quality clause in the contract that says, essentially, the hotel shows us a website, or we’ve gone on a site visit, we see what condition the hotel is in. And we expect the hotel to be in the same condition or better at the time of our meeting if it’s a year or two away or even a few years away”.
“Why is that important? Because right now, we’re in an uncertain period. Hotels may not have the capital that they’ve had in the past few years to renovate and do upkeep. And you want to have some remedy if the property is not where it ought to be and where your reasonable expectations are, at the time when you’re meeting rolls around. So again, a lot of proactive thinking about what could happen using your experience”.
Consider Everything That Could Go Wrong
“Make sure you understand what’s in your contracts. If you don’t understand them, if there’s a lot of legalese, a lot of references, the statutory provisions and you don’t understand them, ask the properties. Even if they’re non-hotel contracts ask your vendors”.
“Remember when we were discussing privacy GDPR California’s privacy laws. All sorts of things that were important before Coronavirus came up, they’re still going to be important. Cybersecurity, anti-hacking, the security of the internet and your networks in the property. All sorts of things to think about to make sure your contracts address them particularly if you’re paying the hotel or a third-party vendor to have secure web access during your meetings. They ought to warrant and take responsibility if things happen, so nothing to do with Coronavirus. Refreshing for a minute to talk about something else, but all sorts of things to think about putting in your contracts”.
There are a lot of vendors out there, a lot of them had people pay deposits. Now they’re having trouble collecting fees. So how would Josh suggest changing the deposit clause so they get paid? “Unfortunately, it’s a little late to think about this. I think the lesson for what’s already there for your deposits, it’s what it is. If someone owes you a deposit and they haven’t paid you, you have to think about how to cut your losses. So you say to the client, “Look, we’re going forward with the meeting. At this point, you’re late with your deposit.” And most contracts say this anyway, “If you don’t pay us within five days of when it’s due, we have the right to cancel the meeting and keep your deposits.” If you don’t have something like that in your contract you should”.
The Routes You Can Take
“But if you do have something in your contract like that, think about enforcing it more than maybe you otherwise would. Because right now things are very uncertain. Again, it’s tough to deal with this after the fact because a lot of us work on relationships, and you may extend credit to your clients or pushback deposits. Because it’s never been an issue. There’s not much you can do about that either if they don’t owe you if they don’t know you yet. Now, if they do owe you and haven’t paid besides cancellation, really the only remedy you have is to take them to court, which isn’t going to get you anywhere quickly. Number one, most courts, at least in the US aren’t operating right now except on an emergency basis. And two, it takes time. So you don’t want to go there”.
“Besides court, I would talk to them and say, “Look, maybe you want to settle it for 70 cents on the dollar,” whatever it is if you don’t think that they’re going to otherwise pay you. It’s really on a case by case basis. And learn the lesson for your future clients, insist on more payments upfront so you’re not losing out”.
“And so if you know you have expenses, in particular even including your employee expenses, or you have to pay others for equipment things that you need, if the client doesn’t make a deposit payment, you’re not losing money, you get the deposits in such a schedule. So it’s before you have to make major expenditures. Hopefully, some of that is helpful. But again, it’s a lesson learned. I hope it’s not a lesson learned for a lot of us, but I think it will be just because of this unanticipated nature of what we’re going through right now”.
And that’s a wrap on this week’s episode of #EventIcons! As you’ve learned, canceling an event isn’t easy. But there are steps you can take to make sure you come out of this without losing everything. Get educated and get in touch with the right people. And remember to tune in again next week for some iconic conversations!