The Strauss Blog

Understanding Your Contracts and Memorandums of Understanding During COVID-19

The world has been turned on its ear over the last several weeks. COVID-19 pandemic has changed the world on so many fronts and it is hard to comprehend or understand how it will affect your association, your workplace and your interactions with members.

As an association management company (AMC), we represent many different types of associations; each association has been affected differently depending on the industry or sector.

Our association clients that host conferences and in-person events for members have been hit very hard by the social distancing measures in effect to attempt to flatten the curve of this pandemic. Federal and provincial governments are setting guidelines for society to stay home, making the meeting industry that relies on face to face contact unable to conduct business as planned.

What is your association’s financial exposure if you need to cancel your event? Lots of conversations are taking place trying to understand what force majeure means and when does it apply to your event? We are in uncharted territory in both the hotel/convention industry and in the association industry hosting events. Both industries lose big when meetings don’t proceed. We must all keep asking questions, but also must realize that answers aren’t always available yet. Cool heads will prevail, and we all need to take a deep breath and work through the possible solutions.

As of now, each side is posturing as to how to proceed and, with the landscape and the rules changing each day, when the federal and provincial government come out with updated news and rules, it is very hard to know how to have the tough conversations with venues.

A couple of things to consider when looking at the hotel contract and what your associations responsibilities are to the hotel/convention centre in the time of pandemic:

  • Can your meeting proceed based on government mandates related to meeting sizes? The province of Manitoba, for instance, had a rule that prohibited more than 50 people from gathering and this was reduced to no more than 10 in the past 24 hours. With these rules, could your venue even fulfil their contract? (Look for legal opinions)
  • Is it socially responsible to proceed with the event? If the answer is no, then how does contract cancellation clause apply?

I am not going to add too many scenarios, since depending on the part of the world you are in and what the governments are dictating in their regions, the answers are different and are constantly evolving. One thing is for certain, association boards need to consult their legal counsel if there are any disputes between your organization and a venue.

Many hotels have been proactive with our clients by looking for dates that might work later in 2020 with no penalties to us. This is a good approach that salvages the business for the hotel and also might allow your association to fit the event in within the 2020 year to recoup the interaction with members and possibly recoup the earning for the association, and keep relationship with sponsors etc.

The postponing of the event might not work for all associations, as some associations schedule their event to have their annual general meeting of members. You can read the following article on how to handle your AGM if your event doesn’t take place. If rescheduling doesn’t work and cancellation is your only option, start the conversation now with the venue as soon as possible. You both have something to lose and each side might not have the answers yet, but it’s crucial to  keep an open line of communication in these trying times. Look at the situation as an opportunity to limit the negative impact on your association while being fair with the hotel.

The one thing we all have to remember is that the hotel industry and the associations hosting events are not winning with the COVID-19 pandemic. Watching this video was incredibly impactful for me in summing up how the hotel industry is going to hurt. Based on this message, I think the more we look upon the hospitality industry as a partner in this, the less likely we will come out of this pandemic without losing everything.

Memorandum of Understanding

Another thing to consider as board members/association executives is the agreements you have with partners for hosting joint events. Memorandums of Understanding are typical between organizations hosting events. These agreements will explain how profits and losses are handled when events take place. Associations are optimistic when entering into agreements and talk a lot about how surpluses will be divided and pay less attention to how deficits will be handled. Look at your MOU’s and make sure it is clear where the exposure is for your association.

If you are hosting jointly, both organizations should be signing the contract with the facility to share in the liability if the event needs to be cancelled. No one could have foreseen this pandemic and it has exposed some of the deficiencies in agreements to protect associations. Look at your contracts and make sure you understand your liabilities.

As I write this, the line in the sand has likely already moved from where it was. That is our new reality. The best advice I can offer at this time of uncertainty is to keep communicating with the hotels/convention centres where you were supposed to host your event. Keep your options open and be flexible where you can be. It is super important that we remember that no one is winning in this scenario and what we need to focus on is how do we limit the losses for all.