By Heather Reid
Register today for the June 5th Trillium Workshop – Managing Risk Begins With the Venue Contract, presented by Heather Reid
I am guilty of using words interchangeably without understanding the subtle differences in their meaning. Continuously….continually; Affect…..effect; Adverse…..averse. It has taken me a number of years in the meeting industry to consistently know when and how to use ‘cancellation’ and ‘termination’ properly.
Both of these terms, ‘cancellation’ and ‘termination’, have rigid legal meanings in Canadian common law:
Contract ‘CANCELLATION’ allows one of the contractual parties to end a venue contract with or without a contractual breach by either party, and such an act involves damages to the cancelled party.
Contract TERMINATION allows one of the parties to end the venue contract without a breach by either party and without liability to the other party. The concept of “termination” can also be referred to as “Acts of God”, “Excuse of Performance” or “Force Majeure”.
A balanced contract includes both Cancellation AND Termination clauses, protecting the event event host and the venue.
Quadrant 1 – Cancellation by Event Host with Contractual Reason
The event host cancels the contact due to the breach of contract by the venue. As a result of the breach, the venue would owe damages to the event host.
Examples Cancellation by Event Host with Contractual Reason include:
- Construction at the venue impedes the meeting or guest experience – when the contract includes a “No Renovation/Construction” clause.
- A change of flag or change in property management for the venue.
- Diminished performance standards at the venue (service, quality).
- A change from non-unionized to a unionized facility.
A Canadian association suddenly faced significantly higher onsite expenses and logistical issues than originally anticipated when their event venue changed from being non-unionized to unionized. As event host, the association, had little recourse, as they had neglected to negotiate the insertion of a clause and/or contractual language addressing this scenario.
Quadrant 2 – Cancellation by Event Host
The event host cancels the contact without either party having breached the contract. The event host would owe damages to the venue.
Examples of Cancellation by Event Host include:
- Internal fiscal/business decision.
- Timing for the event is wrong.
- The venue is too small to accommodate the event.
- A desire to host in another facility or destination.
- The mandate of the event has changed.
Sixteen months out from their annual conference, a Canadian association is considering cancelling the event for internal reasons. The venue initially proposed terms whereby the association would owe $180,000 for this form of cancellation. Happily, the association carefully negotiated the cancellation terms before signing the contract and will only owe $28,500 should they cancel – a fraction of the cost!
Quadrant 3 – Cancellation by Venue
The venue cancels without either party having breached the contract. The venue owes damages to the event host.
Examples of Cancellation by Venue include:
- The venue wants to take a larger piece of business.
- The venue can secure significantly higher room or rental fees from another party.
- The venue wants to undertake construction or a major renovation.
A Canadian hotel cancelled an association’s $350,000+ conference 18 months prior to the event in order to complete renovations. Unfortunately, “Cancellation by Venue” language was not included in the contract to protect the association. The hotel offered “logistical assistance” to assist the association with relocating their meeting but did not offer financial damages to offset the relocation costs.
To mitigate damages, the same group negotiated a future conference at the same hotel with clear Cancellation by Venue terms. As a result with the new Cancellation by Venue language in the contract, the hotel will owe damages to the association of $20,000 should they cancel the group’s contract 18 months prior to the event and will owe damages of $75,000 should cancellation occur three months prior to the event.
Quadrant 4 – Cancellation by Venue with Contractual Reason
The venue cancels due to a breach of contract by the event host. The event host owes damages to the venue.
Examples Cancellation by Venue with Contractual Reason include:
- Financial instability of the group.
- A default on deposits or payment schedule.
- Inappropriate or misrepresentation of the nature of the event.
In my experience, Canadian venue contracts always offer terms for Cancellation by Event Host (Quadrant 2); most venue contracts offer some terms for Cancellation by Venue with Contractual Reason (Quadrant 4); and very few venue contracts offer Cancellation by Event Host with Contractual Reason (Quadrant 1) and Cancellation by Venue (Quadrant 3).
As event planners, it is our responsibility to fully understand the subtle differences between Cancellation and Termination – and to ensure we negotiate all four of the Cancellation quadrants into our venue contracts.
Heather Reid is the Founder & CEO of Planner Protect. She is also the recipient of the 2017 Smart Women in Meetings Award, Innovator Category, and Meetings & Incentive Travel’s 2017 Canada Hall of Fame Award, Innovator Category.