February 12, 2016

Top "Must Have" Provisions for Nonprofit Meeting Contracts

3 min

For most nonprofits, meetings are the central function of the organization. What nonprofits often don't recognize, however, is that meetings are also a source of significant potential liability in the form of contract penalties, legal claims, and commitments that may go unfulfilled due to causes beyond the organization's control.

Below, we highlight several "must have" provisions for nonprofit meeting contracts; note that this list is partial and not comprehensive. We also stress the importance of leading any contract negotiations with your organization's own set of "model" provisions. Developing your own set of model provisions will provide a ready-made alternative to standard meeting contract forms, which never protect a nonprofit's interests fully.

  1. Indemnification. Indemnification provisions determine your organization's liability in the event that something goes wrong, such a trip-and-fall at the meeting site, a case of food poisoning, or other injury occurring at or in connection with your event. We strongly recommend that all organizations push back on any indemnification provision which is one-sided (in which your organization is not indemnified), or which requires the organization to cover "losses" resulting for third-party actions beyond your control. For example, provisions requiring your organization to assume liability for the acts of your meeting attendees and/or vendors should be revised.
  2. Duty to Mitigate (the Resell Clause). Attrition and cancellation penalties apply when your organization is either unable to fully utilize a room block (or food and beverage commitment), or otherwise needs to cancel a contract entirely. Typically, meeting contracts will provide a scale of damages which apply irrespective of whether the hotel or meeting space is able to recoup their losses by reselling the applicable rooms/space. Inserting a "duty to mitigate" provision, under which your organization receives credit for resold rooms/space, offsetting any penalties owed, is one of the most important steps you can take to limit potential financial liability under meeting contracts. Mitigation clauses also should contain a provision stating that any penalties, if due, will be reduced by an agreed-upon rate, such as 30% of hotel room rates, to reflect costs the hotel did not have to expend in cleaning and maintaining an empty room.
  3. Force Majeure. Force majeure provisions outline the circumstances when a party may terminate the agreement, due to reasons set forth in the force majeure clause, without penalty. Although force majeure provisions vary, certain overarching themes apply. First, review the scope of enumerated "force majeure" examples and make sure the listed examples are directly applicable to your event. For example, if you are going to a location known for volatile weather, inserting "inclement weather preventing or delaying at least 25% of the meeting attendees from attending the event" as an excusable force majeure event could save your organization from significant penalties. Likewise, we recommend broadening the standard language beyond the narrow "illegal or impossible" standard with a more flexible standard, such as "any cause beyond the control of the parties making it illegal, impossible, or commercially impractical" to perform under the contract. Finally, force majeure clauses should both excuse cancellation of a contract and underperformance, such that attrition penalties would be waived in the event your organization is not able to fully meet its contract obligations.
  4. Warranty of Condition. Finally, a broad "warranty of condition" provision can greatly expand your nonprofit's ability to terminate a contract, without penalty, where the hotel, or its quality or services, significantly deteriorate between contract signing and the date of the event.