Editor’s note: The lawyer quoted in this article is not providing legal advice. If you are seeking legal advice, consult with a professional.
Now two years out from where we were at the pandemic’s genesis, one question continues to peck at the minds of meeting planners: “Can the fear of Covid be sufficient enough to trigger force majeure?”
Ty Sheaks, attorney at Texas law firm McCathern PLLC, author and faculty advisor for International Association of Venue Managers (IAVM), joined this week’s Smart Chat Live!, “Post-Covid Contract Solutions.”
Sheaks, who deals with law in the restaurant and hospitality division, breaks down the force majeure process and points out the risks and legalities event planners and producers should be aware of when booking an event in a world recovering from Covid—where last-minute changes have become a regular, anticipated occurrence.
Listen on demand for the full discussion on force majeure clauses.
We’ll delve into a condensed review to address what and what not to include in your venue contract, as well as negotiation tactics and what can potentially trigger a force majeure.
Who’s Got Jurisdiction?
If your meeting or event is with a client in another jurisdiction, where state or local laws differ from where you typically do business, determining whose laws are followed is one of the first steps in negotiating contracts. Local laws can impact your contract and your options for termination, recovery and liability, Sheaks explained.
Deciding the “choice of law provision,” or what state and who gets legal jurisdiction, may come down to common law negotiations, Sheaks said. This means you’ll probably want to enlist the support of a lawyer who can help you interpret precedent and determine which laws will come into play.
The Act of God: What To Include in Your Force Majeure Contract
Pre-Covid, most people had some form of force majeure contract. It was either a short form or a long form. Sheaks defines the short form as, effectively, vague; the language in those contracts is typically along the lines of, ‘If the world ends, you are OK to cancel your event.’ These were, in practice, never invoked, Sheaks said. And these short-form clauses are certainly not going to protect against fear majeure. The pre-Covid long form, on the other hand, was reserved for terrorist actions and natural disasters.
But by now, everyone’s had to go back and revise their contracts, or include a force majeure clause if they didn’t already have one, claimed Sheaks. What is by-and-large agreed upon is force majeures are based on the occurrence of an impossibility or impracticability. The key to clarifying the types of force majeure provisions you and your event need is in the language.
Read more contract tips from Ty Sheaks.
Foreseeability and Fear Majeure
It doesn’t stop at jurisdiction; laws that define what counts as force majeure and what can trigger it differs from state to state. Whether Covid-related emergencies are considered “beyond control” and truly unforeseeable really “depends on how [the language] is written,” Sheaks explained.
From concerts to business events, planners have had to cancel events booked during the pandemic at the last minute because someone on the production team caught and spread Covid or there’s been a variant surge in the venue area. So, protecting your event by defining your rights to terminate or suspend the event comes down to the words you choose.
It is crucial to establish what the impossibilities are, “Like, ‘the government is telling me I cannot open my doors, or ‘I cannot have people indoors.’ Because of code, [having that meeting] is impossible, or impracticable enough to trigger force majeure,” Sheaks said, drawing an example.
Tailoring the Termination Clause
A recommended way to “get around the foreseeability issue” is to draft a separate termination clause, or to “beef up” the one that’s already in the contract, according to Sheaks. “You can build that into your contract now and say, ‘hey, we can terminate this. You can set a date out…If the local jurisdiction says that it’s a code red 30 days before our event, then automatic termination, no penalties, no fees.”
With a termination clause, you’ll need termination provisions, or a notice of breach and potential cure provisional clause. You have to give them a notice that says you’re not going to be able to do it, then you try to work it out. “If [you] fix it within 30 days, you’re back on, or whatever the date may be,” Sheaks elaborated.
To cover for the nitty-gritty, write in the option to terminate or suspend any obligations for an event prevented, impeded or postponed by a compromising event. Avoid the use of the word “all” in place of “any” when referring to obligations or commitments you made with the venue. “If you say ‘all,’ then all of them have to be prevented or impracticable or impossible before you can terminate,” explained Sheaks.
Take the space to reference the virus strains and differentiate epidemic-related termination versus pandemic-related, as well as corresponding government regulations. Federal, state and local laws, as well as CDC recommendations, are the heavy hitters when it comes to preventing gatherings, Sheaks reminded the audience.
Read more about 7 critical tips about clauses you need to know.
Limitation of Liability Clauses and Covering Your (Ass)ets
When plans go awry, you want to have control over what’s going to come down on you and your business.
One way to do this is through an indemnification clause, which determines who’s liable for monetary damages if Covid affects your event. This especially applies to contracts with food and beverage vendors, security and third-party testing companies. But remember, your indemnification rights vary from state to state.
Another way is through a liquidated damages clause. These are the “caps on future damages and categories of damages,” said Sheaks. With the right respective language, this clause communicates what’s going to happen if you terminate or postpone and the specific categories of damages and how much you can recover.
Additionally, dispute resolution clauses help avoid later liability issues. Dispute resolution clauses specify how you‘re going to handle disagreements between parties when and if they arise.
Sheaks suggested including a mediation requirement in your contracts that determines whether the next step is a lawsuit in court or a trip to arbitration, where any parties involved in the disagreement are heard by a legal authority who reviews the case and determines the verdict. Sheaks also said it’s wise to include a line about how both parties will first attempt direct negotiation before any legal action takes place.
Lastly, you may want to include additional insurance protections in the baseline insurance requirements detailed in the contract. Consider the event size and expected income of your event, and look into cancellation and business interruption policies to help recover funds and protect your own interests in the face of big hotels. “All of your major insurers are going to have some type of business interruption [protection],” Sheaks asserted.
Final Tips and Tricks To Look Out For
Speaking of big hotels, “use the language the big boys come up with,” said Sheaks. In addendums—also known as contractual riders—one- to two-page independent additions to the contract, you can note the details those hotels believe is pertinent to mention and incorporate them into your own addendum, rather than fighting to amend a major hotel’s contract. It is, however, important to write the language in your own voice, so as not to meddle in copyright law.
A few final notes Sheaks gave us: Keep all the evidence to support your efforts in trying to ensure your event runs as planned; be prepared and adaptable; and have those open lines of communication.
“People are more willing than ever to try to work with folks,” he added, encouragingly.
