Force Majeure Clause:
Force Majeure Clauses have continued to evolve over the past decade and is currently one of the most negotiated clauses in hotel contracts. The reason for this is the recent surge in natural disasters such as floods and hurricanes, along with an increased amount of terrorist attacks. Also there has been a recent surge in travel warnings for risks such as Zika Virus and civil unrest in the past 18 months.
Let’s start with a definition of Force Majeure before we jump into further detail.
Jonathan T. Howe, Esq is an expert on this subject and has published a great industry resource on the Meetings & Conventions site:
In this piece he defines Force Majeure as:
“The legal concept of force majeure (French for “greater force”) means impossible to perform. Thus, if a force majeure circumstance makes it impossible for the parties to fulfill their contracted duties, they are relieved of any liability for failing to perform because of the intervention of the superior force. But the inability to fulfill contract terms is excused only for the duration of the force majeure circumstance.”
When looking at a force majeure class there are four elements that should be presented:
First, what events fall under force majeure, and how are they defined?
Second, when one of these events occur, what happens, what is the communication?
Third, what happens if the force majeure event continues for longer than a predefined period of time?
Fourth, if an event that falls under force majeure happens, who can suspend performance?
**One thing to keep in mind, third parties can keep any deposits already spent even if the party claims force majeure.
Have you looked at adding in State of Emergency (not national) into that contract to provide your company more protection? Have you ensured that a time-frame is included in the force majeure clause? If a hurricane is expected to hit does the clause include up to 7 days out? They are so many different clauses so it’s important not to just continue to use template clauses. An event in Chicago might not need a hurricane included under force majeure but if the attendees are coming from Florida in September this might be a top priority. It’s important to remember both sides of the equation, the actual meeting place and also the departure location for your attending guests. The force of God happening in Florida might not be implied to an event in Chicago unless its specifically written out in your contract. This is where partial force majeure becomes so important.
In addition to the templated force majeure in most hotel contracts we also recommend negotiating in Partial Force Majeure to every hotel contract. Partial force majeure could also include a travel warning clause or this could be a separate paragraph/section within a contract.
- Examples of what to include in partial force majeure clauses:
- (On top of terrorism, acts of god, etc) Anything that reasonably prevents 50% or more attendees to attend the meeting - Interruption of Transportation for 50% or more of attendees.
- International - Tie Force Majeure to something specific, if US state department or CDC or World Health Organization issues a travel warning, then if the client still agrees not to cancel the meeting and the meeting is held, all performance and attrition provisions included in this Contract will be waived.
Here is an additional article by Ben Tesdahl, Esq on partial force majeure:
Along with partial force majeure we also recommend adding in a Termination and Excuse of Performance Clause which can state, “Should a force majeure or similar event occur, and both parties agree not to cancel the meeting and the meeting is held, all performance and attrition clauses in this contract will be waived.”
In the last 3+ years, the travel industry and hotel market has been hit by major hurricanes in Houston, Florida, and the Caribbean. Along with these devastating hurricanes, the CDC and US Department of State have been active issuing travel warnings. In 2016 in response to outbreaks of Zika, the CDC elevated its EOC activation and Level 2 travel warning for traveling to specific regions both outside the US and within the US. Just recently the US Department of State issued a travel warning due to crime and civil unrest discouraging U.S. citizens from traveling to Haiti. The final example being the US Department of State issuing many travel warnings against U.S. Citizens traveling to different regions in Mexico. Some of the more touristy regions are currently only a level 2 (exercise increase cautions) but for a short period those warnings escalated to a level 3 (reconsider travel). Some regions in Mexico are currently a level 4 travel warning which is a warning for U.S. not to travel to that region and all U.S. government employees are prohibited from the region.
So the big question remains which of the above travel disruptions would be covered under Force Majeure and which would not. Unfortunately this is a clause that is understood many different ways. To ensure the highest level of protection against uncertainty in this contract clause we recommend adding in specific contractual provisions to cover the risks of the location where you will be hosting the event. Example, if the U.S. Department of State issues a travel warning above level 2 to where the event is taking place then you would have the ability to temporarily suspend or terminate the contract if it continues for a prescribed period of time.
Guarding against these events are a difficult task so we recommend consulting the right experts and understand what each clause means to your specific upcoming event.
At the end of the day most meeting planners are not lawyers so it's essential to have a lawyer review any large contracts before signing. Yes meeting planners can provide recommendation of what has worked in the past and industry standards but lawyers (especially internal corporate lawyers) will provide insight to what is important to your client.
We recommend meeting planners research further into force majeure to understand what falls under impossibility/impracticability and also the frustration of purpose doctrine. These two doctrines are key in understanding the legal details behind force majeure.
Jonathan Howe is a great resource to help educate yourself on contracts in the travel/hotel industry. You can find further articles at the Meetings & Conventions website;