Contracts

The Hidden Costs in Contract Boilerplate Every Event Planner Must Know

This is a guest post by Barbara Dunn, Attorney & Meeting Industry Expert. This article shall not be considered legal advice. Readers are advised to consult their legal counsel.

With much focus on provisions such as services, fees, cancellation, and force majeure, many event professionals may be bleary-eyed by the time they reach the end of the contract. Yet often at the end of the contract are the “boilerplate” provisions which could be very costly to the group. As such, it is critical for event professionals to watch out for these clauses and know which issues to flag and to address in contract negotiations.

Prevailing Party Attorney’s Fees

The general rule in the United States is that each party pays for its attorney’s fees unless they agree otherwise in a contract. In contracts, the other party will often include language addressing the payment of attorney’s fees, such as the following:

“In the event of any dispute involving this Agreement, the prevailing party is entitled to recover its attorney’s fees and costs from the non-prevailing party.”

While this language may seem innocuous, its effect is anything but innocuous. Though softly worded, the provision has a significant impact: the losing party pays the winning party’s attorney’s fees and costs in addition to its own attorney’s fees and costs. This provision often rears its head in settlement negotiations, with the other side saying that they will be the winner, and therefore, if a settlement is not reached, the other side will be paying double the amount of attorneys.

Documents Incorporated by Reference

So the contract is the contract, and the group can be bound by nothing else—correct?

That statement may, in fact, be false if there are provisions in a contract that incorporate other documents merely by referring to such documents by reference. Often, the language will be included as follows:

“The terms of this Contract, together with the policies and procedures of the Facility, shall constitute the parties’ entire agreement.”

Again, while this provision may appear innocuous on the surface, its impact can be costly for the group.

When I see this type of provision, I will frequently ask my clients whether they have received a copy of the Facility’s policies and procedures. If they have not, I recommend they do so and ensure that they agree with all terms included in the document because the group will be bound to its terms by referring to the policies and procedures as indicated above. If the group agrees with the terms, then the language can remain in the contract; however, the group will want to modify the provision to state “the policies and procedures of the Facility as attached” so as to ensure the group will not be bound to modifications to the provision.

One follow-up point on this issue is that when I ask whether the event professional has received a copy of the policies and procedures, many event professionals will tell me that they asked the Facility for a copy. The salesperson told them that the policies and procedures are not written but instead determined by the Facility on a case-by-case basis. If that is the case, the provision should be removed as the group cannot be bound to terms of which it has not been notified.

Controlling Documents

While the parties work hard to ensure that the contract fully addresses all issues that could arise, it is often necessary for the parties to later sign an addendum to the contract that modifies the contract provisions. These modifications often relate to key items such as the room block, rates, or function space.

It is anticipated that when these additional documents are signed, their terms will supersede and replace the terms of the contract, yet that may not, in fact, be the case if the contract includes the following provision:

“If there is any inconsistency between the terms of this Agreement and the terms of any addenda, the terms of this Agreement shall control.”

As such, this provision will often set up a battle of the documents. This is especially true if the addenda later states that if there is any inconsistency between the terms of this addendum and the terms of the Agreement, the terms of this addendum shall control. In order to avoid this battle, groups should work to remove the provision noted above and include the language noted in this paragraph in any addendum, which provides that the terms of the addendum will be controlled.

Dispute Resolution

Just as with any happy beginning, organizations and their customers do not often anticipate anything other than a happy ending. Yet, if disputes arise after the contract is signed, any dispute resolution provisions that may be hiding out in the contract’s fine print may prove costly for the group.

While there are many ways to resolve a dispute, many event professionals may not know which method is the best for their organization.

Is litigation, mediation, or arbitration best for the group?

While opinions on which method differ, one thing is certain: each method has its own advantages, disadvantages, and costs. It is important that the group review dispute resolution options with its legal counsel before it agrees to them in the contract. Often, the language in the contract makes the chosen dispute resolution provision the only way of resolving the dispute, such as the following:

“Any disputes arising out of the terms of this Agreement shall be resolved by arbitration according to the Commercial Rules of Arbitration of the American Arbitration Association. The determination of such arbitration shall be final and may be enforced by courts.”

The above provision makes arbitration the only option for resolving disputes, so the group cannot pursue a claim in its local courts or submit it to mediation unless the other party agrees otherwise.

The best way to manage these provisions is to seek direction from the organization’s legal counsel before the contract is signed regarding which dispute resolution method is best for the group.

So the next time your eyes get bleary, and you are eager to gloss over the contract’s fine print, stop and focus on these important provisions. What may be included in them may be costly for the group and waive any savings the group is experiencing in the contract.

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