How To Negotiate Events Contracts

Meeting planners are generally experts at picking a great site, making travel arrangements and tending to participants’ needs. But many do not know enough about contracts and business law to protect themselves and their nonprofit organizations when negotiating meeting contracts.

What Constitutes a Contract?
Many steps are involved between gathering information about potential meeting sites and actually signing a contract with the hotel or convention center you decide to use. Along the way, many written documents pass between the parties, but not all are binding contracts. A valid, enforceable contract must have five critical elements:

1. An offer with definite terms. An offer is a proposal by one party to provide goods or services to another party. The offer must be definite as to time and price. Hotels and facilities will not quote rates in proposals for future years, but a formula or method of setting rates in the future must be included.

2. Acceptance of the terms . Both parties must sign the contract to show agreement with the terms. The parties must agree to all of the terms in the contract, and both parties must initial all change.

3. Consideration. The contract must include mutual promises that each party makes as inducement for the other party to contract.

4. Statute of frauds . If performance is beyond one year from the contract date or the agreement is for the sale of goods greater than $500, the contract must be in writing to be enforceable.

5. Competent parties. Both parties must be legally capable of contracting.

You Can Negotiate Everything
Many hotels and other service providers have standard documents that will satisfy the requirements of a contract. But keep in mind that a contract’s terms are negotiable — even terms that are standard and preprinted in the document. Request provisions you want to add or omit from the contract.

If the other party agrees to a change in the contract, it can be included in three ways. One is to make minor changes in the margins and have both parties initial and date them. For more extensive changes, retype the contract. Or attach an addendum containing the changes, striking out the original terms and initialing them, and crossreferencing the addendum in the original document. But everything must be in writing and be clear.

Address These Specific Clauses
After you are comfortable that a valid contract exists, pay particular attention to key terms and clauses, such as those discussed here. Some relate more specifically to hotel contracts and others relate to convention center contracts.

Cancellation and termination. Clauses should spell out what will happen if either party cancels or terminates the contract. Carefully review dates by which notice must be given, reasons for which the contract can be canceled without penalty and what recourse each party has.

Deposits. Hotels may require group deposits if your organization is new, hasn’t done business with the hotel before, or has a history of shortterm cancellation or bad credit. Negotiate the deposits so the amount is minimized and can be paid in installments or as close to the event as possible.

Attrition. Meeting planners and hotels have opposite views on reserving rooms for attendees. You want to have plenty of rooms so no one will be inconvenienced, but hotels don’t want to be stuck with vacant rooms if fewer attendees show up than expected.

To address this, include an attrition clause. A good attrition clause includes the following:

• The last date that you can adjust the block of rooms without liability,

• The percentage of block reduction allowed on the final adjustment date,

• The formula for determining any damages your organization will owe the hotel,

• A requirement that the hotel reduce damages by any rooms resold, and

• The date your organization will pay the hotel.

Handling possible financial problems. In negotiating contracts, be aware of the hotel’s financial situation and decide how you will handle any financial problems it encounters.

Include specific terms depending on the situation, but at minimum reserve the right to terminate the contract if the hotel changes ownership or management, is forced into foreclosure, files for bankruptcy or schedules renovations during your meeting. Indemnification clauses. In a typical convention center lease, your organization is responsible for any damages or injury occurring at the center during the event, regardless of who causes the damage or injury. Amend the agreement to provide that each party will be responsible for its own negligence and the negligence of its employees and agents, and that indemnification will be reciprocal. Most convention center leases also require you to buy a liability and property insurance policy and provide proof of the insurance by a certain date. These policies contain various coverages and exclusions. Carefully review your coverage to understand what is and is not included. Amend the lease to cover any situations that may not be covered or limit your liability to the amount of coverage.

Exclusive service contracts. Many convention centers and hotels will require your organization to use certain service providers (security, booth cleaning, etc.) or pay a surcharge for the right to use different vendors.

Remember one of the fundamental rules of contracts — terms are negotiable — and negotiate for your right to use your choice of vendors.

Avoiding tax on gratuities. Service charges are mandatory and gratuities are voluntary. In most states, voluntary gratuities distributed to employees are not taxable, but service charges are. You may not owe sales tax on gratuities for food and beverages by structuring the catering portion of the contract to comply with the law. We can research the sales tax law in the state where you hold the function and determine if you can use this method to lower your sales tax.

Consult an Expert
Contracting with hotels and convention centers calls for expert advice. Our professionals will be happy to help you avoid legal liability and obtain the best possible contract.