- Hospitality -- Force Majeure: How Large a Threat?
- March 6, 2006 | Author: Lawrence H. Iron
- Law Firm: Miller Thomson LLP - Toronto Office
Sudden threats of terrorist attacks, contagious disease outbreaks and destructive weather increasingly jeopardize conferences, conventions and trade shows planned years in advance. This makes the concept of force majeure vitally important for meeting planners and hospitality facilities.
Force majeure absolves organizations from honoring event contract cancellation clauses, which typically call for 50 percent payment on cancellations made more than a year in advance and 100 percent payment within a year. Although contract language defining force majeure situations has long been standard, there is increasing disagreement over what constitutes a triggering event. Many sponsors now seek to define force majeure as a situation making it "inadvisable" to attend an event.
A good example is the 2003 concern over SARS in Toronto. Although the outbreak was limited and no travel ban was issued, many Toronto events were canceled during and after the SARS scare when individuals refused to attend. Hotels sued event sponsors for compensation, sometimes settling when a sponsor agreed to hold a future event at the facility.
Hospitality companies should not make contractual force majeure definitions too restrictive: 99-plus percent of all events occur without problems, and unduly restrictive terms can scare away business. However, clearly spelling out force majeure and cancellation terms in a contract is a prudent step for both sides, given the problems that the 1 percent eventuality can cause.