“The Future of the Force Majeure: Negotiating Contracts Amid Uncertainty” was such a popular session at Convening Leaders 2022 that the breakout room at Caesars Forum quickly filled to capacity and in-person attendees had to join the online audience to participate. Force majeure — a common clause in contracts which essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond their control prevents one or both parties from fulfilling the contract — has always been an area of contention in the events industry, but everyone can agree that the past two years have made the clause even more problematic.
Convening Leaders 2022 was held during the height of the Omicron surge, and the wave of the second COVID-19 variant added yet another layer of uncertainty to the prospect of holding in-person events in 2022. The unpredictable nature of the pandemic has forced short timeframes on planners to make decisions to hold, postpone, or cancel their in-person events and caused both organizers and their partners to work harder and more collaboratively to renegotiate existing — and negotiate future — contracts.
Convene recently spoke with Joshua L. Grimes, Esq., attorney and principal of his own Philadelphia-based firm, Grimes Law Offices, about how to approach contracts moving forward, and the force majeure clause, in particular. “I do a lot of speaking, and it remains one of the top topics anyone wants to talk about,” said Grimes, who specializes in association, meetings, and hospitality law. Going forward, he added, this will continue to be “a major factor” in event planning. He shed some light on contract considerations when we spoke in late February.
What aspects of the pandemic could still be covered under the force majeure clause at this stage?
Force majeure clauses, as we use them in meeting contracts, are tailored to the needs of the particular meetings and the parties that are in the contract. I say that to mean that you can write a force majeure clause however you would like. However, it’s subject to agreement. You could write a clause that specifically includes COVID-19. You should have language to the effect of, “amongst the force majeure occurrences are disease, epidemic, and pandemic.” And then I suggest you specifically reference “including COVID-19 or a variant thereof.” … If there’s a company travel restriction, that’s typically not force majeure. If a group wants that to be a reason to cancel a meeting, you need to put that in your contract.
Is it more difficult to invoke force majeure now since the world is remaining open throughout new surges and variants?
Well, if your language in your contract is limited to force majeure factors that make it illegal or impossible to have your event, then arguably, yes. However, if your force majeure clause uses words like “commercially impracticable or inadvisable,” or “occurrence that frustrates the purpose of the event,” arguably, you could say that COVID-19 still may be a force majeure occurrence.
If an event particularly has an international attendance component, COVID still could be a larger impact because there are some countries that still have travel restrictions or mandatory testing. And there are people who might come to your meeting from another country where it’s still difficult to get vaccinated.
How do CDC or state and local health guidelines impact the interpretation of the force majeure clause?
The CDC and various governmental levels do impact [the interpretation]. In fact, some contracts say “only if the World Health Organization [WHO] says that you shouldn’t travel [can we cancel or postpone the meeting].” Well, I don’t think that’s a very good standard, because the WHO declares a pandemic, but they don’t generally issue guidelines for the United States, for instance. And if your force majeure clause talks about government regulations — the CDC doesn’t issue regulations, the CDC issues advisories.
I’ve seen this word game used as a reason to declare force majeure or not declare it. Similarly, sometimes local governments have rules different from state government. I think it’s incumbent upon parties or contracts to be specific about which laws. You could say “federal, state, and local laws, and CDC guidelines.” But you need to be specific.
Are there other ways planners can protect themselves if attendance is less than anticipated, but they still want to move forward with the event?
Yes. Sometimes, the force majeure clause deals with not just canceling, but reducing the meeting. … But the other thing I would suggest is if a group wants to move forward but doesn’t think they can meet the room block or doesn’t need all of the meeting space, as a first instance, don’t call the lawyer. Call the hotel and talk to the meeting coordinator or director of sales. Explain the situation and try to work it out. Most hotels would prefer for a meeting to go forward, even at a reduced rate, than to cancel it entirely.
Now admittedly, it is getting tougher these days to reduce your meeting with no damages, but it’s possible. And maybe you work something out — like, the hotel will agree to a reduced meeting this year and defer attrition damages you might otherwise owe if you book another meeting within a year or two.
Do you find it advisable to put go/no-go decision timelines in contracts as a way to give event organizers a buffer to make the choice on whether to hold a meeting?
Yes, because most suppliers — meaning hotels, venues, transportation companies, and decorators — they’re not the ones traveling, so they could wait until even a week or two before the event to declare force majeure. However, for a meeting planner, their attendees typically make a decision about attending months in advance. Most groups can make a determination about whether their meeting is going to be successful maybe 90 days in advance.
I believe there should be a clause in the force majeure provision that says that the group can declare cancellation or postponement, whatever is appropriate, when it becomes reasonably apparent that the meeting cannot go forward. So if the planner knows that typically 90 days out, based on meeting history, they’ve already got the room block filled at that point, but now only 20 percent have signed up this year because of COVID or another reason, there’s no reason to require the group to wait [to cancel], because they know it’s not going to happen. Waiting longer just causes the group to spend more money and have uncertainty. And for the hotel, if there’s a chance they could use that 90 days to rebook a different meeting, they should have the opportunity to do that.
At this stage in the pandemic, are you still seeing a lot of new negotiations about how to handle COVID-19?
Hotels have gotten much more restrictive on what would allow a force majeure cancellation for COVID. For many hotels, their formed contracts would essentially not allow it. Even during the worst of COVID, they would no longer allow cancellation. If that doesn’t work for planners, then that’s something that needs to be negotiated before you sign the contract.
Similarly, there have been a lot more meetings that have been postponed either because of COVID originally or because of the Omicron variant, and the postponement terms have been very difficult. For instance, the hotels are attempting to characterize it not as a force majeure cancellation, but as a cancellation by the group, and that the group ought to be paying cancellation damages. Or, waiving damages as long as the group has another meeting that makes the same or more money. But there’s a refusal to acknowledge that meetings might not be able to happen in the last few months because of COVID — I don’t mean a meeting today, but in the middle of omicron.
Are there other pandemic-related clauses or phrasing event organizers should consider adding or adjusting within their contracts?
I’m still coming across clauses about health and safety measures, because COVID is reduced, but we don’t know that we’re finished with it. There should be an agreement, or at least an acknowledgement, that the parties — the hotel and the planner — need to agree on what safety measures will be implemented. If there’s mandatory masking, for instance, who is going to enforce that? If somebody develops COVID-like symptoms at the meeting, who is going to be responsible for [arranging] their quarantining? Usually, it’s the hotel. If they get meals from the meeting delivered, who is going to pay for the meals? What if the person has to stay in the room for several days past the end of the meeting? Maybe the guest can be responsible, but I don’t think the planner should just assume the hotel will pay for it.
In addition, if the group would like the hotel personnel to do something that they’re not required by law or the hotel’s policy to do, [that should be in the contract]. For instance, some groups want everybody at the hotel and other contractors to wear masks. If the law doesn’t require masking, you can’t just assume that they will. Or, some groups want to say that everybody needs to be vaccinated — you cannot require that unless it’s in the contract. I’ve had to deal with that situation, because some groups don’t really think about that in advance, [and] if your contract is from pre-COVID, it wouldn’t be [included].
Just today, I’m dealing with a meeting that’s happening later this month where the group has a mandatory vaccination requirement. But the entertainers signed their contract to do this meeting months ago, and there’s no requirement in their contract that they need to be vaccinated. So either the group needs to not expect that the entertainers will be vaccinated, or if the group doesn’t want them to perform if they’re not vaccinated, the group will likely have to pay them anyway.
Casey Gale is managing editor of Convene.
More About Force Majeure
Read “Pandemic Complicates Contract Talks With Meetings Venues,” published by Tenenbaum Law Group, which further explores contract considerations during COVID-19 times.