Digging deeper into venue contracts

I recently attended a great workshop, Venue contracts: Digging Deep and Wide, which looked at contracts from an event planner’s perspective.

Venue contracts can be complex. In most cases, the venue prepares the contract and tailors it to protect their interests. As a planner, you want to ensure that the contract will also protect you and your client.

You should review each contract carefully and don’t hesitate to ask questions if something isn’t clear.

This blog post isn’t legal advice; it is drawn from my workshop notes and is meant to share industry best practices with the meeting industry. You should always consult a lawyer specialized in hospitality for legal advice.

Clause #1 – Indemnification

There are three key clauses that should be included in every venue contract that are sometimes overlooked or one-sided. If they aren’t, you can simply ask the venue to include them. We’ll look at what they mean, what’s the event planner’s role and what to look for when reviewing those clauses.

The indemnification clause ensures that you and/or the venue will get compensated in the event of a loss or damages.

As an event planner, your role is to:

  • make sure both parties are covered
  • evaluate potential risks
  • ensure adequate protection for your client and the venue

There needs to be reciprocity to protect you and your client’s interests. It doesn’t necessarily mean that the clause needs to be neutral or equal. For example, if one of the risks is that sensitive information gets leaked to a competitor, you can ask that the venue includes a requirement to notify you of events being held at the same venue around your event.

You should discuss with your event insurance provider (always get insurance, even if the venue doesn’t require it) that your policy covers all the necessary parties (ex. You, AV, suppliers, etc.). Ask them to review the indemnification clause before you sign a contract.

If your event has a tradeshow component, ask your exhibitors for proof of insurance.
Ensure that the clause specifies that it only applies to the scheduled functions. You don’t want to be liable for an attendee’s bad behavior after hours.
Get rid of “sole” and/or “gross” negligence as it implies that only one party is at fault and can limit what you can claim as indemnification. It is recommended to use “negligent”.

Request a proof of insurance for the venue and avoid doing business with a venue that isn’t insured.

Clause #2 – Force majeure

The goal of this clause is to allow either party to end the contract without damages if it can’t meet their obligations due to occurrences outside of their control.

There are three types of force majeure, and they should all be included in your contract:

  • impossibility of performance – for example, when the ballroom that you booked becomes unavailable
  • impracticability of performance – not impossible to hold your event, but it would be substantially more burdensome or unsafe; the event would be held under lesser conditions
  • frustration of purpose – for example, if it was a meeting to discuss proprietary, confidential information but your biggest competitor was hosting a meeting in the same building

Other examples of force majeure include terrorism, war, natural disasters, blackouts, epidemics, labour disruptions, civil disorder, etc.

As an event planner, your role is to:

  • ensure it is equitable to both parties
  • be aware of potential calamities specific to your event
  • ensure the clause isn’t limited to impossibility and also addresses impracticability and frustration of purpose
  • state how and when notification needs to happen (note: in most cases, 30 days before the event is the standard notice period)
  • include a wide range of possible occurrences are listed (that’s when your laundry list of what could go wrong comes in handy).
  • address the possibility of hosting the event, despite conditions for force majeure (for example, if the meeting size is reduced, so should the food and beverages orders, attrition should be revised, etc.)

The contract needs to specify what happens to paid fees and deposits. Ideally, anything paid in advance should be returned. The contract should also specify when and how you and/or the venue need to be notified of a force majeure.

It is highly recommended that you clearly outline the purpose of the event in a separate clause.

Clause #3 – Cancellation

Cancellation is the act of cancelling or rendering void. It applies when a party wishes to cancel the contract for reasons other than those specified in the contract (ex. Cancellation without liability, termination, as permitted by law).

As an event planner, your role is to:

  • ensure the contract speaks to the venue cancelling the contract (as opposed to only the client cancelling the contract)
  • outline liabilities for both parties
  • replace profit, not revenue by acknowledging industry profit standards
  • ensure compensation is equal
  • protect your client for other circumstances (like renovations, construction, etc.)
  • establish specific formulas to calculate damages
  • agree to payment terms

It’s important to note that the damages should never add up to 100% of revenue as no services were exchanged if the contract is cancelled. Cancellation should be a stand-alone clause; it should be defined separately from attrition and termination.

If your event is held at two or more venues, it’s crucial that the contract includes a co-dependency clause with other facilities so that you can cancel your contract if the other venue is unable to fulfill its contract.

Of course, there are many other key clauses and provisions that should be in an event contract. Always review your contracts carefully and reach out to your legal counsel for advice.

If you’d like to learn more, sign up for a webinar version of the workshop on Heather Reid’s website.