Don't Get Burned by Contract Boilerplate
ASSOCIATIONS NOW, August 2012 Intelligence
By: Jonathan T. Howe
|Summary: Six trouble spots to watch for in meeting contracts.||
Association meeting professionals are accustomed to dealing with contracts. But with their attention focused on venue facilities, dates, room rates, and other important matters, planners often overlook the "boilerplate," the legalese at the end of almost every contract that makes most people's eyes glaze over. Whether you're contracting with a hotel, convention center, or other meeting location, if you ignore the boilerplate, you're making a big mistake that can land your organization in hot water.
Here are six contract trouble spots to watch for:
Dispute resolution. Many association executives sign contracts providing that any dispute arising out of the contract will be settled in accordance with the Commercial Rules of Arbitration of the American Arbitration Association. What many do not realize is that the clause does not require that AAA handle the arbitration, only that its rules apply. That may be fine if it's what you intended, but it's not fine if you want to ensure that AAA will be the arbitrating agency. Also, by "incorporating by reference" the AAA Commercial Rules, the clause makes them just as much a part of the contract as if they were set out in full in the document. "Incorporation by reference" is a red flag; when you see it, ask, what are we really agreeing to?
Choice of law and venue. These clauses dictate which state's or country's law will apply to the contract. Often it will be the jurisdiction where the proposer of the contract is located. Does that work for you? If not, you should consider what law you want to apply.
Similarly, choice-of-law clauses will often dictate where any litigation or legal proceedings must be heard. If you are located in Oklahoma City, you may wish to have disputes heard in Oklahoma City, but the other party may not agree. You don't want to find that out after a problem arises and you have already signed a contract requiring that disputes be handled in the other party's hometown. This point is negotiable, so pay attention before signing.
Prevailing party. Many contracts state that whoever loses in arbitration or litigation must pay the legal fees and expenses of the prevailing party. Sometimes this language encourages aggrieved parties to pursue small claims that they otherwise would not pursue if they feel confident they will win, because they know they will eventually recover their fees. Generally, you should try to have this language removed from the contract.
Notice. Contracts typically state that one party must give notice to the other in certain circumstances or when certain events take place, but the language is silent about where or to whom notice must be given. I encourage clients to include the name and address of their attorney for purposes of receiving notice.
"Wrap-up" clause. This clause provides that the proposed agreement replaces any other agreements, discussions, and oral understandings between the parties. This means that the signed, written agreement binds the parties, and even if you believe that something has been agreed to outside the contract, that outside agreement is not binding.
Identification of parties. Knowing with whom you are dealing sounds easy, but it's not always obvious. You may think the other party to the agreement is a brand-name hotel, but the brand may not be the owner. You need to know who will ultimately have legal responsibility for fulfilling the contract, and so proper identification of the parties who are to be bound is imperative.
A related question is who has the authority to sign and bind the other party. When signing the contract, it is generally advisable to go as far up the chain of command as possible. If you can get the general manager of the hotel to sign, you may have better access to the general manager if issues arise later.
Meeting-related contracts are full of hot spots where unexpected legal issues can bubble up. With help from counsel, you can ensure that these issues don't boil over after the agreement is signed.
Jonathan T. Howe is senior and founding partner with Howe & Hutton, Ltd., in Washington, DC. Email: firstname.lastname@example.org
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