Amidst the frenzy of calls and e-mails from concerned clients, ever-changing media updates on the status of coronavirus, and newly imposed government orders becoming more restrictive by the day, it’s only natural that a DMC professional is feeling overwhelmed.
As a hospitality attorney, active contributor and speaker at ADMEI, and general counsel/general manager of a national DMC, I wanted to offer these top five considerations when your client cancels their meeting or event due to COVID-19.
Executed Event Service Agreement & Vendor Agreements
Now is the time to read the fine print in your executed event service agreement and vendor agreements that were signed in much breezier times. The two areas in both agreements that you should zero in on are the cancellation terms and the force majeure provision.
“Hindsight is 20/20, but it is important to know that a force majeure provision is a necessary piece of any agreement to protect both parties.”
Within your force majeure provision, you will need to assess if it addresses costs you’ve incurred or costs that you anticipate incurring. This may include vendor costs and even your own labor costs. During this time, it is important to document your already incurred and projected costs for labor, site inspections, vendors, etc.
Cancellation or Postponement
Next, you’ll need to decipher whether your client is seeking a cancellation or a postponement. If your client is adamant about canceling, refer to your event service agreement and its respective terms. If your client is willing to postpone, you may be able to negotiate retaining any monies on hand in order to maintain capital and credit all or some of those monies toward the future event. If postponement is an option, make sure you memorialize the newly agreed upon terms properly in either a new event service agreement or an amendment to the original event service agreement.
Timing of Cancellation & Timing of Event
A heavily overlooked consideration that many DMCs fail to assess is the timing of when your client cancelled the event and when the event was scheduled to occur. A cancellation prior to COVID-19 becoming a force majeure event may disqualify it under contract as being treated as such. Additionally, a cancellation for an event scheduled to occur later this year may also not qualify as a force majeure event.
Deposit Monies On-Hand
Over the course of countless negotiations, primarily from a legal standpoint, the dynamics of a negotiation are always slightly altered when a party maintains possession of certain monies that the other party believes they are owed. Consider what monies you’ve collected in deposits, etc. and how that may achieve a more successful outcome. Always keep in mind what alternative dispute resolution (ADR) terms apply, as well as applying attorneys’ fees to a prevailing party following a formal resolution of the dispute.
Effective Decision Making & Maintaining Client Relations
Remember, the decisions made today about how to handle any particular program or client are larger than just that one program or client. It will have a ripple effect on your current and future dealings with your clients, employees, vendors, hoteliers, and fellow DMCs. For these reasons, it is imperative to involve management and/or counsel in the decision making process, as well as all internal and external communications. If your client has involved their attorney, it is highly recommended that you also retain experienced counsel.
Be sure to respond to your clients’ requests in a timely fashion, but always review these five considerations before crafting your response. And don’t forget, during these times what is most important to remember is we are all in a difficult and tumultuous place personally and professionally, and will only endure by working together and staying safe.
*Disclaimer: Every event is unique and circumstances change every day surrounding the impact of COVID-19. The considerations discussed herein are general in nature. For advice on how to address a particular matter arising from the cancellation or postponement of a program due to COVID-19, please consult experienced counsel for a detailed analysis.