So we all have them – “pet peeves” – that is. They are the things that drive us crazy though we often don’t want to admit them to others. Well when it comes to hotel contracts, I have developed a certain set of pet peeves which, over the years, has grown not only in length but in importance. Following is a sampling of those pet peeves, what they are, why they are important, and how to avoid them.
Failure to Use Consistent Terms in Contracts
Is it a “contract” or an “agreement” or a “letter” – at the end of the day, it does not matter what you call the document – what matters is what the document says. Does the document include the key terms (“material”) terms – dates, room block, rates, etc. – and did the parties mutually agree on those terms. Assuming those elements (along with some other legal requirements — capacity to contract, consideration, etc.) are met, you have a legally binding document regardless of what it is called. However, when the document is “named” (typically in the introduction paragraph), that name should be used throughout the document. So once a “contract”, always a “contract”, once an “agreement”, always an “agreement”, etc. I also recommend that once a term is defined, it should be used with a capital letter, e.g., “this Group Sales Agreement (“Agreement”) is dated….” Then, thereafter in the document, it should be referred to as “Agreement” vs. “agreement”. Similarly, references to the “group” and to the “hotel” should also be used consistently and once defined, used with a capital letter as well such as “XYZ Company (“Group”)” and “the Palm Tree Hotel (“Hotel”).”
While this pet peeve may seem “trivial”, there certainly is the possibility that failing to use terms consistently can expose the parties to interpretations which were not intended. This is particularly troublesome when it is likely that the people who negotiate the hotel contract may not be the same people when it’s time to perform the contract. If a term such as “group” is used inconsistently, for example, it opens up the possibility of the contracting group arguing that the “group” is really not the “contracting group” and therefore whatever obligation in the contract is not their responsibility.
Fortunately, this pet peeve is easily avoided with a global search and replace feature when preparing the document. But nothing substitutes for careful proofreading before the contract is signed!
Sloppy Drafting
Wrong terms, wrong names, wrong dates – all of which I see too often in contracts. For example, if the hotel is issuing a new contract for a group and is basing it on another group’s contract, all references to the other group’s name should be updated to the new group. While some might say that we all meant that it was “this group” and not the “other group”, when push comes to shove, the parties who negotiated the contract have moved on to diƯerent jobs long ago and now what was understood as what the parties meant, they are arguing about it before a judge or an arbitrator.
Also, dates are often listed incorrectly – sometimes they are missing a month, day or year, list a date from a previous contract or include a date which has already expired. Again, careful proofreading is critical to ensuring that the parties understand the key dates under the contract such as the cut-oƯ date. Also, it is all too common to see gaps in dates in cancellation fee schedules. So for example, if the cancellation fee schedule provided that the cancellation fee between the date of signing and July 31, 2020 was 25% of total room revenue and then the cancellation fee between December 31, 2020 and June 30, 2021 was 50% of total room revenue, what is the cancellation fee for the “gap period”, i.e., August 1, 2020 – December 30, 2020? I doubt the parties intended that there would be no cancellation fee during that time period but this type of sloppy drafting exposes the hotel to the group making that very argument.
Not Synching the Amendments with the Agreement
A term often used incorrectly in the contracting process is “addendum”. An addendum is a document which is attached to a contract (at the time the contract is signed) which provides further detail as to an item referenced in the contract. For example, under “Function Space”, the contract may state that the hotel is obligated to provide the group with such function space as outlined in Addendum A to this contract. Then Addendum A details the dates, times, room names, room sets, function type, and any fees. If, after the parties sign the contract, they want to make a change to the contract, the proper term for the “change document” is an “amendment” – not an “addendum.”
Setting aside my pet peeve on the terminology, the real issue is that when a contract is amended, the parties often do not properly amend all applicable provisions in the contract. For example, if the group reduces its room block, the amendment likely needs to include more than just the new room block. It will need to include references to all other provisions in the contract which were tied to the original room block, e.g., room block attrition, total room revenue. So if the minimum room block was listed as an exact number (let’s say 780 – the hotel is giving the group a 20% cushion for slippage) and the room block is reduced, the new minimum room block should be listed instead of 700 (the new minimum based on the 20% slippage. Otherwise, the group is bound to 780 as its minimum room block for purposes of attrition.
I had a client change the dates of its meeting – pushing the meeting three months ahead of the original meeting dates. The parties signed an amendment to the contract as to the new dates and room block, but they failed to amend the cancellation fee schedule which included dates based on the original meeting dates. As fate would have it, the group then cancelled their meeting and a dispute arose over whether the cancellation fee was truly based on the original meeting dates (which would mean the group would pay a larger cancellation fee) or whether it was understood that those dates should have been adjusted as well with the date change. This dispute could have been avoided altogether with proper review of the contract.
Bottom line, when amending a contract, look closely at each provision in the contract and ask yourself whether the change(s) being made will impact that particular provision. If so, that provision should be updated and included in the amendment.
Dangling CounteroƯers
Many of you probably remember grade school grammar class and the dreaded “dangling participle”. Well I now often refer to what appears to be a contract but is really as counteroƯer as a “dangling counteroƯer”. So how does this happen? It happens when the parties are busy negotiating the contract and fail to recognize that the document oƯered by the hotel and the document signed by the group are not a “mirror image” (identical) to one another. Remember Contracts 101, an oƯer has to be accepted on the exact terms it was made – otherwise it is a counteroƯer which then needs to be accepted on the exact terms on which it was made. For example, the hotel sends the group a signed contract, the group makes handwritten changes to the contract, initials and dates each change, and signs the contract. The hotel receives the document back but never countersigns it — so essentially it has not accepted the group’s counteroƯer. Silence is not acceptance. What likely occurs is that the hotel sees the group’s changes and determines that they are acceptable to the hotel without communicating that to the group.
Many years ago, I had a client who had the exact same thing happen to it. Signed contract from a hotel. Group changed room block, rates and other provisions. Signed it and sent it back to the hotel. Then never heard back from the hotel. Years went by and the parties saw one another at various conferences – all the while stating that they were looking forward to having the meeting at the hotel. Then one year out, a new board of directors comes on for the group and they determine that they don’t want to have their meeting at the hotel and instead want to move their meeting to
another hotel – thereby raising the question, “How much is the cancellation fee?.” When I received the “contract” in order to answer this question, I noted right away that the parties did not have a contract: they had a dangling counteroƯer. The hotel never countersigned the contract. So we took the position that the group was “withdrawing its counteroƯer” and gave notice to the hotel. The hotel challenged the group and sought cancellation fees it claimed were due under the contract. But because there was not a contract, the hotel could not enforce those damages. The parties resolved the dispute but ultimately if challenged, a judge or arbitrator would likely review the facts and take the position that the parties “believed” they had a contract and that “belief” was enough to entitle the hotel to monetary damages for the group’s cancellation but those damages would likely be much less than the cancellation fees listed in the hotel contract if it had been a true contract.
Allowing a One Way Street
Hotel contracts are often fraught with provisions such as “hotel reserves the right to…..reassign function space, raise prices, reduce the room block, etc.” Essentially it’s a one way street – the hotel has the unilateral right to do something to the group without the group’s permission. So the goal is to revise all “one way street” provisions to “two way street” provisions by changing provisions such as “reserves the right to reassign group’s function space” to “the hotel may reassign group’s function space if group gives the hotel consent to do so”. The key with any change is to have the mutual agreement of the parties but if the contract allows for a one way street, that one way street is enforceable.
Handwritten Changes on Contract
Last, it should go without saying that my top pet peeve is handwritten changes on a contract. While handwritten changes if done properly may be enforceable, the likelihood is that they are not enforceable. Why? Because often the handwritten changes are not countersigned by the hotel (thereby becoming a dangling counteroƯer as noted above) or the changes are illegible (and the person who made the changes no longer works for the group). Bottom line, if you have handwritten changes, ask that the contract be updated to reflect the changes. The goal is to have one, clean contract that both parties can follow and enforce.
So the next time you are reviewing a hotel contract, put your organization in a good position by avoiding these pet peeves.