Article By Barbara F. Dunn O’ Neal, Esq.
One of my strangest school memories comes from my junior high life science class. We were required to dissect a frog. My friends and I decided that the smell of the preserved frog smell was so bad, we would spray the inside of the frog with Love’s Baby Soft perfume. Needless to say, to this day, when I smell that perfume, it reminds me of our ill-fated frog.
Dissecting a force majeure provision is often not as difficult as dissecting a frog but it can be just as unpleasant. So, for those new to the meetings industry and those who have worked in this industry for far too long, let’s dissect a force majeure provision and see what is inside.
Black’s Law Dictionary defines the French term “force majeure” as “superior or irresistible force” which is commonly addressed in contracts “to protect the parties in the event that a part of the contact cannot be performed due to causes which are outside the control of the parties and could not be avoided by the exercise of due care.”
In the world of meetings contracts, the force majeure clause was catapulted into the spotlight following the tragic events of September 11, 2001. Since that time, the force majeure clause has become the topic of much debate within the industry.
When dissecting the clause, I focus on the three main components: 1) the listing of calamities which could occur, 2) the standard of impact such a calamity has to have on a party’s performance in order to excuse such party from performing the contract and 3) the net effect if such party chooses to perform the contract despite force majeure. So let’s examine each of these components without Love’s Baby Soft.
The “Grocery List”
Much focus is often on the listing of the various calamities which might occur to affect the parties’ performance. Weather, war, terrorism and the like are often included in the list. While it is important to make the listing as comprehensive and customized as possible, the fact of the matter is that it really does not matter which calamities are listed since most clauses include a “catch all” provision at the end of the list such as the following: “or any other cause beyond the parties’ control.” With that “catch all” statement on the list, as long as a party can establish that the calamity was beyond its control, the first component of the clause will be met.
The Standard of Impact
When a client asks whether the force majeure clause in their contract will apply in the event of any calamity, the key component of the clause I focus on is the standard of impact. Most clauses you see in contracts use two standards: impossible or illegal. Impossible truly means “no way, now how” – meaning that, in the case of a hotel contract, the hotel is destroyed. Anything short of that is likely not “impossible” under the letter of the law. “Illegal” would apply if a governmental entity said that performance of the contract was in violation of the law such as due to a curfew. These two standards, however, are very rare and difficult to meet. For that reason, it is critical that this component of the clause include a standard of impact which is less than impossible or illegal. Alternatives abound but two widely used terms are “commercially impracticable” or “inadvisable”. Both of these terms impart an objective, business standard. Another alternative is to include a certain percentage of attendees or exhibitors which would be “deterred” or “materially affected” from coming to the meeting. This percentage may be in the neighborhood of 30-40% and, if the group can produce data showing that this percentage requirement has been met, the group may exercise its rights under the provision.
Holding the Meeting Despite Force Majeure
Groups are now also including a third component in their force majeure provisions which states that if the group could cancel under the provision but chooses to perform the contract anyway, the hotel will waive room and food and beverage attrition fees related to a smaller meeting and honor any lower room rates. For example, if a snowstorm in the meeting city closes airports and results in lower attendance for the meeting, the group, which could have cancelled its meeting under the contract’s force majeure provision, can hold the meeting and not be subject to attrition fees for a lower utilization of its room block.
Through this dissection process, I hope you have gained a new understanding and appreciation for the force majeure clause. Meeting professionals should ensure that this clause is part of every contract relating to its meeting. No Love’s Baby Soft perfume is necessary.
Barbara Dunn is a Partner with the Associations and Foundations Practice Group at Barnes & Thornburg where she concentrates her practice in association law and meetings, travel and hospitality law. Barbara can be reached at (312) 214-4837 or email@example.com.
©Copyright 2013. Barbara F. Dunn, Esq., Partner, Barnes & Thornburg LLP, Atlanta, Chicago, Delaware, Indiana, Los Angeles, Michigan, Minneapolis, Ohio and Washington DC. All rights reserved under both Pan-American and international copyright conventions. No reproduction of any part may be made without the prior written consent of the copyright holder