Document With Care: Contracting for Services with Independent Meeting Planners
Like any business activity involving two or more parties, it is imperative that the legal relationship between the association and the independent planner be contractually supported
With pressure to expand services, increase both efficiency and speed of delivery - and save money on top of it all - many associations are outsourcing some or all of their meeting planning functions to independent, third-party planners or companies.
While certainly not new, outsourcing (previously known as subcontracting) has become a more viable option for many associations - especially those producing only one or two meetings a year, who find it more cost effective than carrying a specialized meeting staff on a year-round basis. In fact, many organizations have outsourced their entire meeting planning activities to independent meeting planners or show management companies. On the other hand, some organizations only outsource portions of their meeting planning activity such as site selection, registration, floor management, attendance promotion, exhibitor promotion, spouse tours, entertainment, special events, or show directories and dailies, to name a few.
Like any business activity involving two or more parties, it is imperative that the legal relationship between the association and the third-party, independent planner be documented with care. The obligations of the parties to each other, to attendees and exhibitors, and to additional third parties should be solidified in a well-written contract.
Contract Terms
Following is a list of issues that should be covered in contracts between associations and third-party, independent planners:
1. PARTIES TO THE CONTRACT: Specify names, addresses, and legal parties to the contract as well as the people authorized to make revisions and receive notices under the agreement.
2. SCOPE OF AGREEMENT: Give a general description of the meeting or event that will be covered by the agreement (e.g., name of meeting, dates, location, estimated attendance).
3. RESPONSIBILITIES OF THE INDEPENDENT PLANNER: This section should contain a broad statement as to the services the independent planner will provide (e.g., site selection and contracting with vendors, hiring of speakers, monitoring of budget, post-meeting review, etc.). A more detailed outline and description of services should be referenced and provided in a Services Attachment.
4. RESPONSIBILITIES OF THE ASSOCIATION: The association should be careful about exercising too much control over the independent planner. This could raise a legal question as to whether or not the planner is really an employee or an independent contractor. (See 6, below.)
If the association is responsible for handling some specific activities pertaining to the event, these responsibilities should be spelled out here. For example, the association might be responsible for providing copies of budgets from previous years, credit references, etc. The association might also be required to provide an official agency letter on the association's letterhead designating the independent planner as its official agent for limited purposes specified in the agreement (e.g., if the independent planner will be contracting with other vendors on the association's behalf). Also, the association might be responsible for forwarding to the independent planner guidelines relative to its payment policies and/or invoice processing procedures for service contract fees and expenses relative to the event. This section should also specify which party is responsible for obtaining licenses or permissions to use the intellectual property of others (e.g., music licenses and patent licenses, if applicable).
This section should also clearly specify:
a) What happens if the association cancels the meeting?
b) Who is responsible for attrition payments?
c) If the client has not seen the contract, who is liable if all other contract conditions are not met?
5. AUTHORITY AND DISCRETION OF THE INDEPENDENT PLANNER: This section is critical. In the meetings industry, associations hire independent planners in one of three legal relationships. This section should specify which legal relationship exists between the parties as well as what decisions the association will make vs. the discretion and decision-making authority of the independent planner. The three different legal relationships to be considered and specified are as follows:
The independent planner contracts to:
a) Act as an authorized agent (independent planner signs vendor contracts in agency capacity on behalf of the association).
b) Act as an intermediary (independent planner locates vendors and negotiates terms but gets the two other parties to sign the contract). This relationship is the most common. It makes it clear that the association is the principal in the contract.
c) Act as a reseller (independent planner contracts with hotel and other suppliers and resells to association).
6. INDEPENDENT CONTRACTOR STATUS: If the independent planner is being hired in any capacity other than an employee, the contract should stipulate that the independent planner is an independent contractor. There are many legal distinctions between an employee and an independent contractor. For example, employers (known as a "principal" in legal terms) are always legally responsible for the negligent acts of their employees while they are acting within the scope of their employment. On the other hand, employers are not responsible for the negligent acts of an independent contractor. The relationship also has tax implications.
In defining the difference between an employee and an independent contractor, the most important factor is whether the principal has the right to control the manner and method in which the work is done or the service is provided. The more control the principal has over the independent planner, the more likely the relationship will be deemed to be that of an employer-employee. This becomes significant if a third party (i.e., attendee or facility) files a negligence claim based on the acts of the independent planner or if the Internal Revenue Service (IRS) decides to perform an audit. Employers are required to withhold certain taxes from employee paychecks and remit the revenue to the IRS. The same withholding requirement does not extend to independent contractors. Also, employees are entitled to receive company benefits whereas independent contractors must provide their own benefits.
7. COMMUNICATION CHANNELS, METHODS, AND SCHEDULES: Specify what reporting procedures the independent planner is required to follow and whether the reporting is to be verbal, written, or both. Also specify to whom in the association organization the independent planner reports, specify deadlines, and what reports and files the independent planner is required to turn over when the contract is terminated.
8. COMPENSATION: All compensation the independent planner will receive should be disclosed and stated here. The contract should state that there are no hidden fees between the independent planner and other suppliers to the meeting. There are four basic methods of compensation in the industry:
a) Fixed Fee method: Independent planner will perform all services for a fixed fee. Additional items are negotiated separately.
b) Time and Materials: Independent planner will perform all services in the Services Attachment plus any other services required and will invoice the association for the time spent and the cost of materials and/or out- of-pocket expenses.
c) Commission: Independent planner performs all services listed in the Services Attachment and receives commissions from suppliers such as hotels, airlines, etc. The percent of the commission should be clearly specified.
d) Hybrid method: Independent planner will perform all services listed in the Services Attachment and will be compensated in a combination of the above methods. If this method is used, it should be clearly specified in writing who is paying the independent planner and how much that party will be paid.
9. STAFFING GUIDELINES: This section should specify how many people will be used by the independent planner to provide the contracted services. For instance, the independent planner may have budgeted the on-site meeting management portion of the services job for five people, but the association was expecting at least 10.
10. PROHIBITION AGAINST HIRING INDEPENDENT PLANNER?S EMPLOYEES AND AGENTS: Independent planners are understandably concerned about the possibility of having their key employees and/or suppliers hired away by their association clients if an association decides to bring the service in-house. Many independent planners will insist that this section be included with a detailed explanation of the damages that the association will pay to the independent planner if the terms in this section are breached.
11. BUDGET: This section should specify how the budget will be prepared and what discretion the independent planner has in modifying it. It should also specify the budget for out- of-pocket expenses if it is anticipated that the independent planner will incur them in providing services to the association. At the very least, this section should stipulate that total purchase orders will not exceed a certain dollar amount without additional approval from the association.
12. ERRORS AND OMISSIONS: The independent planner is likely to insist that this provision ? stating that the independent planner is not responsible for the errors and omissions of other suppliers as long as the association has the final say-so on which vendors are selected ? be included. This provision would not apply if the independent planner is making the final decision on vendors. Independent planners are always responsible for the acts or omissions of their staff members.
13. INDEMNIFICATION AND INSURANCE: All service contracts should require the independent planner to indemnify, hold harmless, and defend the association from the negligent acts or willful misconduct of the independent planner and its employees and agents. This is usually reciprocal: The association agrees to hold harmless, indemnify, and defend the independent planner for any asserted claims or losses due to the acts or omissions of the association. The contract should also require the independent planner to carry liability and workers? compensation insurance.
14. CHANGES: This section should specify that the original contract plus attachments represents the entire agreement between the parties and that material changes must be made in writing and signed by both parties. Depending on the compensation method specified elsewhere, this section should also explain the method and procedures to be used for pricing additional services and/or materials.
15. TERMINATION/EXCUSE OF PERFORMANCE/ CANCELATION: There is a legal distinction in "terminating" a contract versus "canceling" a contract. If a contract is terminated, performance is excused on both sides and neither party has any further obligation to the other. This may occur as a matter of law if the performance of one or both parties is made impossible due to acts or occurrences outside the control of the parties. Parties can also provide in the contract for other situations (e.g., threats of terrorism, outbreak of disease, etc.) that may make performance commercially impracticable but not impossible. This clause is sometimes referred to as an "Act of God" or "Force Majeure" clause.
When a contract is "canceled" by a party, it means that the party has chosen not to perform its obligations for reasons other than an act of God or force majeure. In this instance, the canceling party owes the other party damages to make it whole. The contract should specify how damages will be calculated if either the association cancels the meeting or just the services of the independent planner. It should also specify what damages are due the association if the independent planner breaches its agreement to perform services.
16. ETHICAL CONSIDERATIONS AND CONFIDENTIALITY: Independent planners have duties of faithfulness, honesty, and loyalty to their clients. The contract should require them to report any conflicts of interests they may have that could affect their provision of service or choice of other suppliers. For example, if an independent planning firm is hired on a fee basis to do site selection, the firm should disclose if it is getting paid a commission from a particular hotel chain to refer business. Also, both the association and the independent planner should warrant that they will not relay any trade secrets or confidential information they obtain about the other during the course of their business relationship to another party.
17. DISPUTE RESOLUTION/CHOICE OF LAW: Every contract should specify the issues of arbitration, mediation, or litigation. A "choice of law" provision should also be included specifying the locale and which state?s law will govern the contract. The purpose of this provision is to avoid later disputes. The choice of law can be the city and state where either party is headquartered or has a satellite office.
18. OWNERSHIP OF WORK PRODUCT: If the independent planner will be providing original creative work to the association, the contract should specify which party owns the creative work. The law specifies that title to all creative work stays with the creator unless title is transferred to another person or entity in writing.
Preparing a well-written contract for outsourcing services can be daunting: It is difficult to anticipate, spell out, and settle all of the issues in advance. But its importance cannot be over-emphasized. Taking the time to negotiate and prepare a well-written service contract, with the assistance of a competent attorney, will save organizations time, money, and heartache in the future.
Additional Clauses to Consider
The following miscellaneous clauses should also be included in your contract:
a) Restrictions on Assignment by Either Side: Contracts are usually assignable unless the terms of the contract specify otherwise. Stipulate that neither party may assign this contract to a third party without written permission from the other party.
b) Waiver Clause: This clause states that no failure or delay of either party to exercise any right in the contract shall constitute a waiver of either party to demand strict compliance of all other terms by the other party.
c) Merger Clause: This clause states that the written contract contains all terms agreed on by the parties and can?t be changed except in writing.
d) Costs Incurred to Enforce Rights Under this Agreement: The contract should provide that if either party has to bring an action to enforce its rights under this agreement, the prevailing party shall be entitled to recover its reasonable attorney?s fees and all costs of suit as fixed by the court.
e) Notices: Specify procedure for sending any notices that are required in the agreement or if suit is filed. This provision should specify that the addresses set out in paragraph one, above will remain in effect unless changed in writing.
f) Counterparts: Provide that if a facsimile (fax) transmittal is used by either party, then a fax copy shall be treated as an original.
g) Authorized Signatures: Make sure titles are used and that the individuals signing the contract warrant and represent that they are signing individually or have the authority to sign on behalf of their organizations.
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