The event goes off without a hitch, and you’ve already paid out thousands of dollars to caterers and other suppliers. But that final installment payment never comes. It happens, and that’s when you need a solid contract.
“We always talk about the event industry being a relationship industry, but you also have to protect yourself and you do that with a contract,” said Jill Blood, VP, deputy general counsel and privacy officer at Maritz. “We write contracts for worst-case scenarios.”
According to Blood, 80% of contract details can be the same for every event. But, there needs to be specific details about deposit and payment terms and the deliverables. “Really describe the work you’re going to do and have it in place before you start doing the work. I know that’s easier said than done because a lot of meetings are being planned on tight schedules. But I always say you don’t have contracts for when everything goes perfectly. You have contracts for when things don’t go exactly according to plan,” said Blood. “If you’re in a dispute over whether or not you performed and performed well, the details in the contract are going to serve both parties,” she added.
Bringing Contracts up to Date
Contracts must evolve according to the current environment. For instance, staffing continues to be an issue. Therefore, contracts should address staffing if it aligns with the event’s success and execution. The contract can also include specific services or service-level expectations. A commitment to minimum staffing levels can be in a contract, particularly if it is a high-profile event requiring check-in. Some contracts even include specific housekeeping service standards.
For several years, force majeure and Covid-related clauses were among the most important and most heavily negotiated provisions in event contracts. “More recently, we’ve seen increased focus on provisions addressing things like DE&I, sustainability, and AI,” said Blood. “That continuous evolution can be a challenge with events that are planned well into the future so it can be helpful to build some flexibility into long-term contracts.”
The United States Court of Appeals recently ruled on force-majeure contract clauses to allow a contract to be terminated based on the prospective impossibility of performance. The clause now applies at the time of the contract termination, not when the event would have operated.
This can have significant implications for events. For example, if a meeting is scheduled in a tropical location and the weather forecasts a week out say that a hurricane will hit over the event dates, a group may be able to claim a force majeure cancellation even if the hurricane changes course and there are blue skies on the day the event was intended to operate.
Negotiating for a Win-Win
Gary Murakami, vice president of global sales and industry relations at Teneo Hospitality Group, has negotiated thousands of contracts in his career. “It’s all in how you start the conversation; you need to understand the business and customer needs to negotiate effectively to help mitigate risk, avoid pitfalls and deliver the best outcomes for both parties,” he said.
He shared his three things to keep in mind when negotiating a contract.
- Relationship – “This is our business, and we are not adversaries. We want to create and execute a memorable program to your specs so you return,” said Murakami.
- Facts – Understanding what is most important, what is flexible, and is non-negotiable is key.
- Flexibility – Murakami stresses the importance of good communication from both sides, enabling a flexible approach.