Legal matters: vital to know when the force majeure clause applies in contracts.
Jonathan T. Howe is founder and senior partner of the Chicago and Washington, DC, law firm Howe & Hutton Ltd, specialising in meetings and hospitality law. He recently contributed an article to Northstar Meetings Group for US meeting planners. We feature a condensed version here.
Worldwide awareness of the new coronavirus that originated in Wuhan, China, has exploded along with the number of cases being confirmed. When the Zika virus was rampant in 2016, or during the SARS epidemic in 2003, the US government did not ban travel to affected areas, and therefore your contract's force majeure clause did not come into play.
This time it's very different, as the major U.S. airlines have stopped flying to China and the Centers for Disease Control and Prevention, a US public-health agency, has advised against non-essential travel to China. The U.S. State Department advises against traveling to China at all. This makes it virtually impossible for meetings contracts for events in China to be fulfilled by either the planners who would fly in or the hotels expecting your guests. Your force majeure clause, therefore, is automatically invoked, and neither party can be held liable for non-performance.
How Far Out Can You Cancel?
This is a bit of an open-ended question, but you should definitely be able to cancel a program in China for up to a couple of months. But I think this is going to be going on for a while.
However, if you are holding a meeting anywhere else in the world where you expect your numbers to drop because of the coronavirus, you will not be able to cancel without penalty. As there is nothing keeping you from traveling to other countries, the force majeure clause would not apply and you would have to rely on the cancellation and number-reduction wording that is already in your contract. You can try to work with your property to adjust your numbers, but that is a renegotiation of the contract that is already in place. You might get some relief this way, but then again, you might not.
In evaluating any instance where a health problem might cause meeting hosts to withdraw from a destination, several factors must be taken into consideration. For example, what are the World Health Organization and the CDC saying about the destination? Unfortunately, these bodies can have differences of opinion. For several weeks when the SARS epidemic was in full swing, the WHO and the CDC disagreed on how dangerous it was to travel to Toronto. So, you need to spell out in your contract which organisation (or both) is governing your cancellation clause.
When cancellation clauses are not worded well, hosts are liable for the revenue promises they made to hotels, and will face charges outlined in their contracts.
For Your Future Contracts
To protect your event against any concerns that might make attendees reluctant to travel, planners must include in contracts the ability to reduce numbers if attendees stay home due to a perceived threat. For example (and be sure to vet this with your own legal counsel): "Should the organisation wish to continue with the event, but because of travel advisories as to health, security and/or terrorism, which might cause a reduction in attendance, upon notice, the organisation shall be able to reduce its room block accordingly, without liability and without a reduction in amenities, etc that are contingent on room block and pickup."
The wording must also define what constitutes the need to cancel the programme outright. This way, planners and suppliers will be prepared to work consistently in tandem.
All contracts related to the event should include a uniform cancellation/modification proposal. The number-reduction and cancellation clauses in the hotel agreement should be the same in contracts for all third-party vendors.
This is an abridged version of an article that first appeared in Northstar Meetings Group.