Event Venue Contracts: What is at Risk

 

by Heather Reid

In almost every component of the event planning journey we encounter elements that speak to “risk” – the acknowledgement of risk possibilities, the assessment of potential damages, the anticipation of known risks, the planning for mitigation, the back-up plans A, B and C…and on and on.

Risks associated with events are wide-ranging: natural disasters, emerging risks, terrorism, collateral damage, health and safety concerns, crime and fraud, reputation and public image damage. One of the most often over-looked elements of risk management is the contract signed for the venue hosting the live event.

Venues’ rental contracts are carefully crafted by the venue’s legal counsel to shift the burden of financial and logistical risks to the event host.  Venues have rental contracts that address risks and risk management as they pertain to the venue.  Venues have rental contracts that protect their own financial and logistical interests to the maximum extent.

So, what about the event host’s best interests and risks?  Who is protecting event hosts?

Regrettably, it is rare that event hosts engage with legal counsel to negotiate venue contracts in order to protect their best interests and manage risks.  In fact, many event hosts take a “DIY” approach – which sadly leaves them unnecessarily exposed to reputation, financial and logistical risks.  For those event hosts that invest in having event professionals plan and execute their events – either as staff or as sub-contractors – there is an implied expectation that the event planners will protect their best interests and manage risk.  After all, planners are hired to be the event’s advocate, planners are hired to be savvy and articulate negotiators, and planners are hired to be masterful at contracting.  And yet…..in my experience the expertise that event professionals have specific to event contracts varies widely.

So, what do you need to know?

It is imperative that one recognizes what risks are addressed in a venue contract, what risks are not addressed, what the terminology and legal language in the contract means, the implications of the language, and how to negotiate the clauses to achieve a balanced contract.

What is a balanced venue contract?  Balance, by definition, means fair and in good proportion.  A balanced venue contract is one that addresses and protects the needs of both parties – the venue AND the event host.

There are a multitude of considerations that need to be explored to deconstruct the draft contract presented by the venue.  This article presents three key considerations for three of the common major clauses involving risks.

INDEMNIFICATION

The indemnification clause in a venue contract requires the indemnifying party (the party that has caused harm) to protect the indemnified party (the party that has had harm done to it) and pay for loss and damage incurred by the indemnified party.  It’s a promise to pay and means there is an assignment of blame or fault.

Consideration 1: consulting with your event insurer is paramount before the contract is signed. Do you know for certain that your event insurance covers each of the “audiences” (ie., employees, attendees, agents, subagents etc) identified in the venue contract?  Can your insurance cover all of the terms and expectations in the contract?  Not knowing these answers before signing is risky and leaves your event unduly exposed.

Consideration 2: is there language that identifies when indemnification can be invoked?  Have you established a schedule of events in your contract that clearly identifies the event functions?  An Event Host should only be indemnifying for guests while they are participating in group-sanctioned functions.

Consideration 3: terms such as “sole” and “gross” have specific legal meaning.  Watching for and negotiating to remove these terms will broaden the opportunities to invoke indemnification and thus seek damages.

TERMINATION

In a venue contract, “termination” means either the venue or the Event Host can end the contract for reasons/events happening beyond their control and without liability (ie., absence of monetary damages) to the other party.

Consideration 1: whether Termination is worded in broad terms or a laundry list of specific scenarios – Event Hosts need to ensure that the risks that are specific to the event location, the scope of event logistics and the audience demographics are itemized.  It is the Event Host’s responsibility to identify these risks and protect their event with appropriate language.  One should not settle for the default clause – as it rarely protects the interests of both the venue and the Event Host.

Consideration 2: seemingly simple words can actually be powerful legal terms and the term “impossible” in the Termination clause is one of those.  The term “impossible” refers to incidents that clearly and undeniably impact the ability of either the venue or the Event Host to move forward with the hosting of the event.  “Impossible”, therefore, indicates an objective decision.  For Event Hosts, however, it is not sufficient to only address scenarios of “impossibility”. Event Hosts require a balanced clause that addresses all levels of possibility: impossibility, impracticability and frustration of purpose.

Consideration 3: a balanced termination clause needs to allow an Event Host to claim termination in advance of the actual event dates.  To this end, the clause should identify a window of time that Termination can be invoked.

CANCELLATION

The cancellation clause in a venue contract is included to permit either party to withdraw from the contract – for reasons of their own or for reasons of breach of contract – all with the understanding that damages (typically monetary) are owed to the other party.

Consideration 1: typical venue contracts protect the venue’s interests “to the maximum” should the Event Host wish to cancel the contract for their own reasons.  Are you sure that your venue contract addresses and adequately mitigates the risks and damages for the following contexts for cancellation: cancellation by the Event Host due to the breach of contract by the Venue; cancellation by the Venue due to the breach of contract by the Event Host; cancellation by the Venue for their own non-contractual reasons.

Consideration 2: is the cancellation clause calculated from a position of profit replacement or from a position of anticipated revenue?  Do you know the difference?  Negotiating the costs of cancellation from a position of profit replacement minimizes unnecessary financial payouts by Event Hosts.  Financial risks are of the highest importance to every business.

Consideration 3: it is important to understand that one of the premises of law requires the party that has been harmed by the other party cancelling the contract, has a responsibility to assist in minimizing the damages owed by the party that has cancelled the contract.  For an Event Host who needs to cancel the contract then, a balanced contract contains provisions for the venue to assist the Event Host in minimizing the damages owed (ie., reselling meeting space, reselling guestrooms).

 

Heather Reid, ARCT MSc DES, is founder and CEO of Planner Protect Inc. She consults with event hosts and industry professionals to negotiate balanced event contracts. CEOs, professional planners, and venue representatives alike, all recognize Heather as a trusted and knowledgeable expert in her field.

 

 

 

DISCLAIMER: this article does not constitute legal advice, but rather is business advice provided from the perspective of a professional meeting planner.  Legal advice can only be rendered after a discussion of your particular circumstance with an attorney competent in meetings law.   

 

 

 

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