Contracts don’t have to be intimidating
- 1 Contracts don’t have to be intimidating
- 2 Signing the Contract –
The responsibility of negotiating and approving or recommending approval of contracts is usually one of the most intimidating for many event planners and coordinators to approach!
But, similar to budgeting, once you get over the hurdle of the unknown and become comfortable with the process and the terms used in contracts for the hospitality industry, you will find them to be valuable and even comforting tools.
Yes, contracts set boundaries that you must stay within, but they also protect you –
Contracts should never be one-sided, so the goal throughout the negotiating process is to make sure both parties are satisfied that the final agreement is fair and mutually beneficial.
Mutual benefit needs to be carefully considered inasmuch as your group may experience a greater financial loss if a facility cancels your booking than the facility would experience if you were to cancel.
Only the written word will prevail if there is a dispute about terms in a contract. The person you negotiate with may have a very different recollection than yours of a verbal agreement or may no longer be available to verify verbal clarifications or changes when questions arise.
Get verbal quotes, agreements or changes of any significance confirmed in writing. It’s just good business sense.
The process may be complex, but it does not have to be difficult –
It will be easier if you have been methodical and thorough in your research and have acquired an outline of booking policies from the various properties and service providers you are considering. Equally as important is being well informed about what your group brings to the negotiating table and where you have flexibility.
Once the contract is finalized, refer to it often as you move through the event planning process to keep agreements fresh in your mind. This will be especially important if a significant change to your program is being considered.
Contractual negotiations are evolving with the speed of light –
Due to the unknowns, we are experiencing in the current economy, contractual negotiations and obligations are in a state of turmoil.
New contracts include new clauses and greater accountability. It will take a trained eye to spot subtle changes or unexpected terms, so contractual reviews should include a team member or senior officer who has significant experience. The terms of contracts already finalized for future events remain binding but may need to be reviewed again if there has been a change of ownership or bankruptcy, etc. Contracts can be renegotiated, but it is critical that renegotiations be handled with utmost care beyond the customary levels of the past.
Now more than ever it is important to work diligently toward building and strengthening respectful and trusting relationships with venues, vendors and service providers through reasonable, fair and ethical business practices and conduct.
You will encounter an “attrition” policy in contracts for sleeping rooms, golf tournaments, group bookings for airline seats, exhibit space, and more. It may not be identified as attrition.
It may be called a “minimum” indicating the amount of revenue that must be generated by a group without penalty.
Using food and beverage as an example, you will be held responsible for paying a certain amount of the food and beverage you “guarantee” for a planned meal function regardless of how many guests are actually served. If the revenue your guarantee represents is less than the minimum stated in your F&B contract, your group will have to pay the difference. If more people are served than you guarantee, you will be charged for the total number served.
There will usually be a sliding scale included in the contract which allows you to reduce your risk of attrition penalty based on how soon you notify the venue or vendor that your numbers will be less than expected, but that can require giving notice months in advance of your event date. Flag those deadline dates and don’t forget them! Monitor your registration for any type of function very closely. Add a contingency line item to your budget to cover penalties in case your event does not materialize in number as you hoped. It is better to be extremely conservative in your numbers when booking unless you have solid history from earlier events that document your group’s actual attendance at functions booked. If attendance is mandatory rather than voluntary, this will not be such a sticky issue.
Attrition penalties are not going to go away, so you need to understand them and know how to monitor them successfully.
Planning Helper does not provide legal services of any kind.
Consult your own legal advisors before entering into any contractual agreement.
Signing the Contract –
- Do proofread, proofread, proofread, then proofread the proposed contract again.
- Do verify that all negotiated items are spelled out in the contract.
- Don’t make any assumptions about contract terms.
- Do question any terms you don’t understand.
- Do understand attrition penalties (they can be deadly)
- Do insist that ambiguous language is re-written so it can be easily interpreted by any party.
- Do name within the contract any attachments that are to be considered part of the contract.
- Don’t expect the other party who initiated or signed the contract to be available to clarify terms after it is signed.
- Don’t expect the contract to be presented to you with the other party’s signature already affixed. It would be a risk to them if you were to add changes that they might not want to approve.
- Don’t accept hand-written notations as revisions to the contract; request that the contract is re-written to incorporate revised terminology or clauses.
- Do remember that once you have signed the contract, it is still not binding on the other party until it is counter-signed and returned to you.
- Don’t assume that a faxed or emailed copy will be legally binding. Verify it.
- Don’t accept a signed contract unless you have verified the signing party is authorized to do so.
- Don’t sign a contract unless you have the legal authority to do so.
- Do gain approval before signing, even if you have authority to sign, from the party in your group who will be ultimately responsible if any liabilities occur.
- Do document in writing any changes to the contract after signing and have it initialed by both parties as an addendum.
Contract Tools – Samples and Tips
Pay close attention to the formulas in spreadsheets
Take painstaking care to check all formulas when making entries and changes to spreadsheets to ensure that calculations remain accurate.
If you are not experienced with Excel formulas, have your work checked by someone who has expertise working with spreadsheets and can verify that the information is presented properly and that formulas are set up to calculate accurately.