How Impossibility Clause Can Save Your Budget and Reputation
/With each passing month, more and more events are being pushed into 2021, or canceled altogether. Smart planners should be prepared with how to use the Impossibility Clause to get out of financial obligations should the COVID-19 pandemic make it impossible to host their event and also how to negotiate a bullet-proof contract for future events. Many of you commented that you found my last blog on contract negotiation tips helpful. As a continuation, this blog will cover additional legal considerations to keep in mind as we move into the next phase of the pandemic. I’ll outlined a key strategies and clauses to help you navigate how to get the Force Majeure Clause to work in your favor using the “Impossibility clause” so you can minimize the impact a pivot in your event strategy has on your company’s bottom line and reschedule your event with the right protection in place. Please note that these recommendations are based on my own personal experience and do not reflect the recommendations of any legal counsel.
What is the Impossibility Clause? The impossibility clause can help you if you’re in a situation whereby an “Act of God” such as a pandemic or natural disaster, makes it “impossible” for a vendor or venue to provide services as you intended them at the time both parties signed the contract.
What does it mean if you can prove “impossibility”? Having the right foundation and legalese in place to prove impossibility means that if you have to cancel your event because it’s impossible to host it in the current environment, you’re released from any financial obligation, pay no penalty, and might even qualify for a refund for any previous deposits.
Now, the KEY to being able to tap into impossibility clause, is by setting up your contract or communication with the other party with the proper language to begin with. By adding the right language, it’s a lot easier to prove that the venue or vendor is not able to deliver services as planned and saves you a costly litigation process. Below are my tips for what to add when you’re contracting to make sure you’re covered:
Consider adding language such as: “Any emergency that prevents at least 25% of the group’s attendees from attending the meeting.” This clause is particularly relevant during this COVID situation if you have international attendees that might not legally be able to travel to your event, or that have to quarantine for 14 days once crossing into your country’s border.
Clearly spell out in your contract the details of your event and get as specific as possible when it comes to numbers of guests and details that the venue or vendor must be able to fulfill. For example, list out how many attendees you will need to seat in a keynote session, at meals, evening events, whether attendees are international, etc. That way, even if a venue (for example) could technically host 50 guests spaced 6 feet apart in a keynote session, but you need to be able to seat 150 attendees in the keynote, you could argue impossibility.
Add in language that also includes impossibility kicking in if attendees are not able to safely arrive at your venue via available method of transportation. This would take into account safety of airplanes during a pandemic, quarantine holds for crossing borders, or high risk groups that are advised against taking public transit to get to your event and have no other way to get there.
Make sure that you add in specified timing in your force majeure clause that allows for cancellation without penalty. For example, if you add into your contract: “up to 90 days”, it would cover the group at any point in that timeframe. So if, for example, at 90 days out from a meeting, the local government was not allowing meetings at hotels, and the group wanted to terminate under force majeure in order to move the meeting, but the hotel says “Don’t worry, our hotel will be open when your meeting starts.” The group can reply that by then it will be too late to move their meeting should they need to. This supports you being able to proactively move or cancel your meeting without penalty.
Here is a sample legal clause you can add to your contracts to protect you:
“The parties’ performance under this agreement is subject to acts of God, war, terrorism, disaster, strikes, civil disorder, curtailment of transportation facilities, any situation beyond the parties’ control that prevents or similar emergency beyond the parties’ control which makes it impossible, illegal, or impracticable to hold or host the meeting, prevents 25 percent of attendees from being able to attend the meeting, or which otherwise materially affects a party’s ability to perform its obligations under this Agreement. In the event of a force majeure incident, the group may invoke the force majeure clause and terminate the contract without liability up to ninety (90) days prior to the meeting dates in order to have adequate time to relocate the meeting, if necessary.”
What to do if you didn’t get the right language in your contract? First of all, it happens. Virtually nobody predicted this pandemic coming, and we’re all learning as we go. The best thing you can do when you realize you may need to tap into an impossibility clause is get in writing (email works fine) all the details of your event that are needed in order for the venue or vendor to provide services. If you can get them to agree to that in writing, even if it isn’t in the contract, it will be much easier to prove impossibility if you have to involve a legal team. I also recommend researching local news and ordinances to get an idea of reopening trends in and whether it’s highly likely that it could be impossible for your event to take place. It’s also worth it to get an outside counsel’s advice. A couple thousand dollars spent on professional help can save you hundreds of thousands when navigated properly.
