Articles Posted in Coronavirus

Coronavirus alerts for hoteliers

Published on:

3 March 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on the coronavirus and here for the latest on force majeure.

Note: If you are an individual consumer with coronavirus-related travel issues, please do NOT contact us! We do not represent individual consumers. We advise businesses on major contracts, investments and financing. 

In the article below, JMBM partner Mark Adams discusses the coronavirus in relation to force majeure provisions in contracts. This legal concept goes back centuries, but has become increasingly relevant as COVID-19 may be advanced by many in the coming days as a defense to breach of contract. This article is one of a series which will discuss the principles of force majeure and the commercial implications of the coronavirus.

We start with a brief explanation of the concept and trace its roots.
COVID-19 coronavirus as a force majeure defense to contractual non-performance
by
Mark Adams

One often doesn’t know the extent of one’s insurance coverage until a calamity occurs. So it is with force majeure provisions in contracts.

Typically, force majeure provisions are included in contracts to excuse a party from contractual obligations if some unforeseen event beyond its control prevents performance of its contractual obligations.

As of March 2, 2020, there have been 88,948 confirmed cases of this strain of the coronavirus (COVID-19) in 64 countries with 3,043 confirmed deaths. The first reported case of COVID-19 was just over two months ago on December 31, 2019 from Wuhan, China. The effects of this coronavirus have already prevented or delayed performance in countless agreements in numerous industries causing widespread commercial loss and business interruption. It is likely that travel restrictions, worker shortages, immigration quarantines, supply-chain disruptions, and event cancellations will worsen before they begin to recover. And now, those affected are dusting off their agreements to examine their force majeure provisions and determine whether they might cover a coronavirus event.

The concept of force majeure (meaning superior force) originated in the Napoleonic Code of 1804. The breaching party to an agreement was condemned unless their non-performance or delay in performance resulted from a cause that could not be imputed to them, and by a cause of a superior force or of a fortuitous occurrence. Today, most tribunals, both in common law and civil law systems, recognize that contractual performance that becomes impossible or commercially impracticable under certain contexts may be excused. That said, the words in the parties’ force majeure provision controls, and that provision is deemed to be the parties’ negotiated allocation of who bears the risks of particular catastrophic events as between them. CONTINUE READING →

Published on:

20 February 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on the impact of the coronavirus.

Coronavirus continues to be of global concern, and remains an issue the hospitality industry should be tracking, both for economic and legal reasons. Bob Braun discusses whether the virus may trigger a force majeure event for hotel operators and owners, and what that might mean for a property’s performance obligations and other operations.

— Jim
Coronavirus as Force Majeure Event:
What Hotel Owners and Operators Should Consider
by
Robert Braun

Coronavirus (COVID 19) has been a leading news item for more than a month now, competing and often pre-empting other national and international news items. For the hospitality industry, the virus has created severe disruptions in the largest single source of tourists. Hotel companies, both inside and outside of China, have warned of reductions in revenues, and as the virus continues to spread, the trend does not bode well. Like the SARS virus of 2002-2003, coronavirus has the potential to disrupt travel for months, and the travel industry will take time to recover.

Performance Tests and More
The most immediate effect will be seen by hotel companies when they review upcoming financial statements and see shortfalls. This could, among other things, cause some hotels to fail their performance obligations, giving owners the right to terminate a management agreement (unless the hotel operator exercised a right to cure the shortfall). At that point, hotel operators are likely to claim that the impact of the virus constitutes a force majeure event, which would require performance tests to change the performance obligations. For more details on performance tests, see our article on Hotel Management Agreement Performance Standards.

CONTINUE READING →

Published on:

31 January 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on the coronavirus and here for the latest on force majeure.

Note: If you are an individual consumer with coronavirus-related travel issues, please do NOT contact us! We do not represent individual consumers. We advise businesses on major contracts, investments and financing. 

On January 31, 2020, the Center for Disease Control (CDC) declared the Wuhan coronavirus a public health emergency of international concern. The numbers of confirmed cases, as well as the death toll continues to climb. (For current statistics, see the Center for Systems Science and Engineering’s online dashboard that pulls data from the World Health Organization.)

Containing the spread of the disease is of global concern. Beyond the serious human health impacts, businesses worldwide expect disruptions in supply chains for manufactured goods, evidenced by the S&P’s sharp decline on January 31st. The U.S. has issued a “Do not travel to China” advisory, major U.S. airlines announced cancellations of flights to China, and President Trump announced a travel ban on foreign nationals who have traveled to China.

Hoteliers have their own causes of concern.

Chinese nationals comprise the largest tourist market in the world with 159 million outbound tourists in 2019, accounting for 12.2% of all outbound travelers globally and US $275 billion spent. If you cater to even a small percentage of these tourists, their absence will affect your bottom line.

  • Do group travel organizers have contractual obligations to your hotel if they cancel trips due to the coronavirus?
  • If travelers in your hotel infect other guests or your workforce, what is your liability?
  • If you have hotels in China, what responsibilities do you have toward foreign guests who cannot easily return to their home countries?
  • What do you do if your employees refuse to come to work for fear of becoming infected?
  • What policies and procedures should you put in place for managing these kinds of crises?
  • What exactly does your insurance cover?
  • How can you find experts who can help?

CONTINUE READING →

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