Archives

Published on:

By

01 March 2024

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

Why Judicial Reference is better than Arbitration for resolving
Hotel Management Agreements & Hotel Franchise Agreements.
Advanced analysis of Judicial Reference features.

Hotel Management Agreements & Franchise Agreements

by

Mark S. Adams, Hotel Dispute Lawyer
Partner & Senior Member
JMBM’s Global Hospitality Group®

 

In prior articles, we have looked at the options available to parties in resolving hotel industry disputes. See, Critical considerations for hospitality litigation, arbitration & alternate dispute resolution clauses in hotel contracts. See also, Is Judicial Reference better than Arbitration to resolve Hotel Contract disputes? The basics of Judicial Reference. 

The authority for Judicial Reference in California comes from two sources. The first is the California Constitution which provides for appointment of temporary judges. (See Cal. Const., Art. VI, § 21). The California Code of Civil Procedure also authorizes Judicial References. Specifically, it provides for the appointment of a Referee to hear all or part of a given case. (See Cal. Code Civ. Proc. §§ 638, 639.) Under § 638, the parties may agree to the appointment of a referee to determine “any or all of the issues” in the action [§ 638(a)], or to “ascertain a fact necessary to enable the court” to decide the case [§ 638(b)].

The purpose of this article is to make a more advanced analysis of the many desirable features of Judicial Reference.

Features of Judicial Reference.

Here are some of the important features of Judicial Reference:

  • Judicial Reference permits an enforceable waiver of jury trial. In California and many other states, there is a strong public policy against waivers of the right to jury trial. Like arbitration, Judicial Reference is a well-established means to accomplish jury trial waiver in California.
  • Efficiency and Timeliness: One of the primary advantages of the Reference procedure is its potential to resolve disputes more quickly than traditional court trials. The parties have more control over the scheduling of proceedings, which can lead to a swifter resolution. Generally, there is less risk of having to prepare for trial repeatedly because of continuances as a result of congested court dockets. While not inherently cheaper than arbitration, Judicial Reference can be more cost-effective in the long run due to the reduced risk of erroneous decisions and the potential for appeal. Compared to court trials, Judicial Reference offers a more streamlined and efficient process, minimizing disruption to hotel operations.
  • Practical Expertise of the Referee: Parties have the opportunity to select a referee with expertise in the specific area relevant to their dispute. This allows for a more informed and specialized decision-maker, potentially leading to more accurate and equitable outcomes.
  • Confidentiality: Unlike court trials that are generally open to the public, Reference proceedings can be more private and confidential. This can be appealing to parties who value the protection of sensitive hotel information, such as guest data and hotel operations. And unlike confidential arbitration, Judicial Reference proceedings could be made public, deterring frivolous claims, and promoting transparency.
  • Appellate Review: Decisions made through the Reference procedure have opportunities for appellate review. This is a major advantage over arbitrations, which have very limited rights to appeal. Imagine a scenario where an arbitrator makes a decision contrary to law or evidence, potentially costing your hotel millions. In arbitration, your options are severely limited, with appeals rarely granted. Judicial Reference, however, provides a safety net of appeal rights, allowing you to challenge erroneous decisions in court and seek justice. This safeguard is invaluable for protecting your investments and ensuring a fair outcome. Unfortunately, arbitration’s “finality” often comes at the expense of justice. Consider the case of Vail Resorts Management Co. v. Rizzuto, where an arbitrator awarded a mere $150,000 in a $20 million breach of contract claim, despite overwhelming evidence in favor of the plaintiff. This decision, unappealable due to the arbitration clause, stands as a stark reminder of the risks associated with limited review.
  • Comparison with Arbitration: Both arbitration and the Judicial Reference procedure offer alternatives to traditional court trials. Arbitration is typically less formal and more flexible. Arbitrators are often chosen by the parties, similar to referees, but the process may lack the level of formality associated with Reference proceedings. Both arbitration and Judicial References offer other avenues for waiving jury trials, albeit with distinct characteristics. Compared to Judicial Reference, arbitration is binding, meaning the arbitrator’s decision is final and cannot be appealed on factual issues. While offering finality and potentially faster resolution, arbitration raises concerns about neutrality and limited Judicial review. Unlike referees, arbitrators are not bound by strict rules of evidence and procedure, potentially raising concerns about fairness and transparency. Additionally, challenging an arbitrator’s decision is significantly more difficult than appealing a court ruling. Judicial Reference provides greater procedural oversight and potential flexibility due to the non-binding nature of the referee’s decision, which will become binding following court confirmation. However, Judicial Reference lacks the finality and expediency of arbitration. Conversely, arbitration offers finality but sacrifices judicial review and raises concerns about bias.
  • Due Process and Discovery: Arbitration often restricts the ability to present crucial evidence because of limited discovery and unpredictable rules of evidence. This can leave you vulnerable to incomplete information and potentially unfair outcomes. Judicial Reference, on the other hand, adheres to established rules of evidence and discovery, ensuring a greater level of due process and a more thorough examination of the facts. This is critical when protecting your interests in high-value disputes. Extensive discovery provides deeper evidence but can be time-consuming and expensive. Limited discovery expedites the process but might restrict your ability to fully present your case. Similarly, broader appeal rights offer recourse against unfair outcomes but can lead to protracted legal battles and further costs.
  • California-Specific: Judicial Reference is only available in California unless both parties agree to its application under another state’s law, which might face enforceability challenges. In key hospitality markets, such as Texas, Florida, New Jersey, New York, and DC, none has a Judicial Reference procedure at all, let alone one like California’s procedure. The same is believed true for all of the other states in the US, as well.
  • Cost: Similar to arbitration, the costs of a Judicial Reference can be significant, especially with complex disputes and experienced referees.
  • Judicial Expertise of the Referee: Unlike arbitration, where decisions can be made by industry “mavens” but with limited legal knowledge, Judicial Reference brings in retired judges or legal experts. Their in-depth understanding of the law ensures rulings are based on evidence and precedent, not industry biases or “splitting the baby” compromises. This is crucial in complex hotel contracts, where nuanced interpretations can have profound financial and reputational consequences.
  • Reliable enforceability: California’s Judicial Reference procedure does not violate California’s constitution. Sandoval v. Salazar (1922) 57 Cal.App. 756, 759 (Code Civ. Proc., § 638,-645, relating to trials by referees, is not violative of Const., art. VI, § 14, as the referee’s report may be accepted or rejected by the trial court which renders the judgment.) Although the decision of a judicial referee is generally enforceable like a court judgment, the enforceability of such agreements relies on factors like the complexity of the issues, the qualifications of the referee, and the fairness of the proceedings. Judicial References are generally upheld, but there is no guarantee of enforcement, and parties may still challenge the referee’s recommendation before a judge during the confirmation process.

CONTINUE READING →

Published on:

By

27 February 2024

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

The better way to resolve hotel contract disputes:
Judicial Reference or Arbitration?

Hotel Management Agreements & Franchise Agreements

by

Mark S. Adams, Hotel Dispute Lawyer
Partner & Senior Member
JMBM’s Global Hospitality Group®

Judicial Reference is a procedure similar in many ways to binding arbitration. For convenience, we may sometimes use the word “Reference” interchangeably with “Judicial Reference.”

The parties may agree to use this procedure before or after a dispute arises, and may specify various elements of the procedure such as the skills of a retired judge to serve as the referee. Like arbitration, Judicial Reference is effective (even in states like California) to waive jury trial and avoid the risk of runaway jury verdicts. A Judicial Reference comes with a procedural advantage that arbitration cannot match: the right to appeal. With a Reference, the parties retain the appellate rights that they forfeit when they opt for arbitration.

The current prevailing choice is arbitration.

The hotel industry has been an innovator in the use of alternative dispute resolution to resolve disputes arising out of significant hotel contracts such as hotel management agreements, hotel franchise agreements, joint ventures, and even financing arrangements. Overwhelmingly, the industry has opted for binding arbitration. Proponents of arbitration claim that, compared to traditional court trials, arbitration can be faster, more private, impose experience or other qualifications on the arbitrator, and avoid a jury trial (with the potential for runaway verdicts). Many experts believe that the compelling “advantage” is avoiding jury trials, but there may be a better way to accomplish these objectives. See, Critical considerations for hospitality litigation, arbitration & alternate dispute resolution clauses in hotel contracts.

Using the right dispute resolution tool for each type of dispute.

Arbitration may be a quick fix for resolving questions about budget overruns or minor operational hiccups. Its efficiency shines in low-stakes situations where swift resolution is paramount. However, when it comes to major contractual breaches, misinterpretations, or significant financial losses, Judicial Reference emerges as the clear best choice. The stakes in hotel contracts often demand a more robust and transparent solution – one that Judicial Reference demonstrably delivers. So let’s take a look at the details of Judicial Reference. CONTINUE READING →

Published on:

By

17 January 2024

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

Critical considerations for hospitality litigation, arbitration &
alternate dispute resolution clauses in hotel contracts

Hotel Management Agreements & Franchise Agreements

by

Mark S. Adams, Hotel Dispute Lawyer
Partner & Senior Member
JMBM’s Global Hospitality Group®

Mark S. Adams is an experienced trial lawyer, partner, and senior member of JMBM’s Global Hospitality Group®. In his more than 14 years with the Firm, Mark has created an international reputation as a Hotel Dispute Lawyer, handling litigation, arbitration, jury trials, and alternate dispute resolution in hundreds of matters affecting hotels, resorts, restaurants, and other hospitality properties. But not every matter should, or does, end up in litigation. Mark also provides pre-litigation strategic advice to avoid litigation and optimize a client’s position for settlement where possible.

What is the difference between “Litigation” and “Dispute Resolution”?

In many circles, the term “litigation” refers to the process that starts with the filing of a lawsuit in the traditional court system and includes all that follows until a final resolution. This more restrictive definition does not include arbitration or other alternative dispute mechanisms.

In other circles, however, “litigation” has a much broader meaning which includes the first definition of court litigation. This second meaning includes all methods of dispute resolution and refers to the entire progression of a dispute from reviewing and advising on pre-contract drafting, through the first disagreement, preparing correspondence, and on to negotiations to amicably resolve issues. It also encompasses all related matters in the dispute from notice of default, strategic positioning for a lawsuit or other action, and engaging in dispute resolution by any procedure such as filing and then prosecuting or defending a lawsuit, arbitration, mediation, or judicial reference (see below).

We generally use “litigation” in the second, broadest meaning of all stages of any dispute and any type of dispute resolution process. In this article, we will specifically name a particular means of dispute resolution where it may provide greater clarity.

Dispute arbitration compared to court trials and judicial reference

Binding arbitration is the dispute resolution mechanism embodied in most hospitality contracts, particularly hotel management or operating agreements and hotel franchise agreements. The choice of binding arbitration may have profound effects on the process and outcome of the dispute. As a result, many parties opt out of arbitration, or attempt to opt out of it. The Pros and Cons of arbitration vs. court trials are summarized below:

Arbitration:

Pros:  Almost always a faster resolution, typically private and confidential proceedings, parties can choose arbitrators, avoids jury trials of complex business issues and the potential for runaway verdicts. Arbitration is favored by strong public policy behind the Federal Arbitration Act and most state arbitration statutes.

Cons:  Extremely limited appeal options, if any, less formal discovery, potential for biased arbitrators (e.g., frequent flyer customers), binding decisions, now offers little savings in cost – can be outrageously expensive. Without mutual agreement, a dispute can only be forced into arbitration when the parties have signed a binding arbitration agreement before the dispute arises, or, the parties sign such an agreement for the particular dispute after it arises.

Court Trials:

 Pros: Adherence to legal procedures, comprehensive discovery, public record, right to appeal.

 Cons: Lengthy process, high discovery costs, less control over timing, potential for complex rules and delays, jury trial waivers may not be enforceable in many jurisdictions (such as California) except when arbitration or judicial reference is provided.

Judicial Reference (or “Reference”) – A better alternative dispute resolution process with the best of both arbitration and court litigation?

Although it is less well known than arbitration or traditional court litigation, in states like California, there is another process that offers the best of both worlds. Many of our most experienced litigation attorneys believe that judicial reference deserves thoughtful consideration for hospitality contractual provisions for the dispute resolution process. CONTINUE READING →

Published on:

By

8 January 2024

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

Hotel Dispute Lawyer: Choice of law to govern hospitality contracts — New York, Florida, Texas, California and Maryland law

Hospitality Litigation, Arbitration & Dispute Resolution

by

Mark S. Adams, Hotel Dispute Lawyer
Partner & Senior Member
JMBM’s Global Hospitality Group®

Mark S. Adams is an experienced trial lawyer, partner, and senior member of JMBM’s Global Hospitality Group®. In his more than 14 years with the Firm, Mark has created an international reputation as a Hotel Dispute Lawyer, handling litigation, arbitration and alternate dispute resolution in hundreds of matters affecting hotels, resorts, restaurants and other hospitality properties.

Why New York law is the governing law in so many hospitality agreements

There are many reasons why parties select the laws of a specific state to govern the interpretation and enforcement of contracts in the hospitality industry. Often, they select the laws of the state where the relevant hospitality property is located, or the laws where one or both of the parties reside. However, irrespective of those considerations, New York law is often chosen as the governing law for significant financial transactions and arrangements.

There are a number of factors that make New York law one of the most popular choices for governing law. These include the following:

  1. New York is a global financial and commercial hub, which logistically makes it a preferred jurisdiction for resolving disputes through negotiations, arbitration or litigation.
  2. New York has a well-established, highly respected legal structure that provides a level of predictability and stability crucial for dealing with complex contractual relationships within the hospitality industry.
  3. New York courts have established a robust and sophisticated body of case law. This provides clarity for parties entering into hotel contracts, offering guidance on various issues, including contractual interpretation, performance obligations, and potential liability. This well-defined legal landscape reduces uncertainty and potential disputes, fostering a more secure environment for hotel owners, management companies, and franchisees.
  4. The prominence of New York law in hotel contracts is linked to the state’s role as a key center for international business transactions. Many hotel management and franchise agreements involve parties from different jurisdictions, and the familiarity and enforceability of New York law on a global scale make it a practical choice. This preference for New York law enhances the efficiency of negotiations and facilitates cooperation in the performance of the contractual obligations.

American and International jurisprudence is based largely on legal precedents, which are real life cases with well-reasoned opinions as to the outcomes.  In light of my observations given above, New York has had both a longer tenure to establish legal precedents, generally, and particularly a greater volume of decided hotel cases. These legal precedents provide indispensable guidance on the potential or likely outcomes in pending disputes, i.e. greater predictability and certainty of outcome. CONTINUE READING →

Published on:

By

6 January 2024

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

Meet Mark S. Adams, Hotel Dispute Lawyer –
Hospitality Litigation, Arbitration & Dispute Resolution

Mark S. Adams is an experienced trial lawyer, partner, and senior member of JMBM’s Global Hospitality Group®. In his more than 14 years with the Firm, Mark has created an international reputation as a Hotel Dispute Lawyer, handling litigation, arbitration, and alternate dispute resolution in hundreds of matters affecting hotels, resorts, restaurants, and other hospitality properties.

We caught up with Mark for some candid insights about him and his practice.

Q: Mark, you have had an amazing litigation career. What is the secret of your success?

A: I rarely lose, and that’s because I have a fantastic support team, unrivaled in talent. We also believe in and practice the Global Hospitality Group® mantra of “aggressive and passionate advocacy.”

Q: That is a good summary, particularly with your track record. But what is the philosophy or approach that leads to such success?

A: I customize my strategy and approach with each client in each situation. First, I need to understand my client, their goals, and other concerns. Then we initiate an iterative process where the client and I explore all relevant facts affecting the matter, what laws and contracts may govern, the aggressiveness of the parties, and various options for proceeding.  Numerous factors affect our choices, including timing for resolution, funding available to the paying party to accomplish a resolution and creative non-monetary solutions. There is no successful cookie-cutter approach.

Q: Controlling litigation costs is important for clients. If a client cannot avoid litigation, what do you do to work with the client to control the costs of pursuing or defending a claim?

A: The cost of litigation is important to all our clients, whether it is a relatively minor matter or a “bet the company” case. The cost-benefit analysis may vary depending upon the circumstances.

Here is how I advise clients to control litigation costs: CONTINUE READING →

Published on:

By

22 December 2023

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Resort Fee Litigation.

Hotel Dispute Lawyer: How Pennsylvania Resort Fees Settlements Could Play Out for US Hotel Industry

Hospitality Litigation, Arbitration & Dispute Resolution

On December 12, 2023, Mark S. Adams, Hotel Dispute Lawyer, was a guest on the Hotel News Now podcast where he discussed the effects of mandatory fee disclosure litigation in Pennsylvania on the hotel industry.

Consumer advocacy groups, law firms and federal and state governments have begun to push back on hidden resort fees, which are often not disclosed until customers near the end of the booking process. Resort fees are charged in addition to hotel room rates and can include things like amenity fees and destination charges.

In Pennsylvania, the state’s attorney general reached settlement agreements with Omni Hotels & Resorts, Choice Hotels International and Marriott International over their fee disclosure practices. According to Adams, the main objective in these cases was to ensure full transparency. If a hotel has a mandatory fee, they will have to let customers know upfront.

“I see the impact as being multifaceted,” explained Adams. “One, it’s good for the consumers because you know what you’re buying. Two, I think it’s actually good for the industry.”

He went on to explain that because some of the biggest hotel brands have become compliant with full disclosure, the smaller brands will get on board. CONTINUE READING →

Published on:

By

19 December 2023

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Resort Fee Litigation.

On July 1, 2024, a comprehensive ban on pricing goods and services without including all mandatory fees will go into effect in California. This ban is the result of a bill recently signed into law by Governor Gavin Newsom, and similar proposed legislation has gained bi-partisan support from state governments and federal authorities. In the below article, JMBM partner Mark Adams discusses the implications of these legal developments for hotel owners. He emphasizes the need for full transparency to avoid financial penalties, litigation, and reputational damage.

The Final Check-Out: Bidding Farewell to Undisclosed Mandatory Resort Fees

by

Mark S. Adams, Hotel Dispute Lawyer
Partner & Senior Member
JMBM’s Global Hospitality Group®

Reprinted from the Hotel Business Review with permission from www.HotelExecutive.com.

In October this year, California Governor Gavin Newsom signed into law (effective July 1, 2024) a sweeping ban on pricing goods and services without including all mandatory fees or charges.

Presently pending in the U.S. Senate is a bipartisan-supported bill that would do the same.

These bills join state governments, federal authorities, state attorneys general, and consumer advocacy groups in intensified scrutiny of undisclosed mandatory resort fees included in hotel rates. Additionally, several state attorney generals and consumer groups are targeting hotels that charge undisclosed resort fees.

In response to this developing trend, it is imperative for hotel owners to quickly implement full transparency, revealing the total cost of mandatory resort fees upfront. Failure to do so may result in significant financial penalties, expensive litigation, and reputational damage among consumers, who often do not view these fees favorably.

What are Resort Fees?

Resort fees are extra charges imposed by hotels and resorts, ostensibly for providing certain amenities. This additional cost is typically calculated daily and added to the basic room rate. Resort fees are sometimes relabeled as a facility fee, destination fee, amenity fee, urban fee, or  resort charge. In the end, they are all the same thing; and even if a guest does not actually use the amenities associated with the resort fees, they are still required to pay for them.

Consumer Complaints About Hotel Resort Fees

Resort fees have become a significant point of contention for consumers worldwide. These mandatory charges, often added to hotel bills after booking, have been criticized for their lack of transparency and fairness. Many consumers claim to be blindsided by these additional charges, only realizing they are being charged a resort fee when they check out. This lack of upfront disclosure makes it difficult for consumers to accurately compare room costs and budget for their stay. CONTINUE READING →

Published on:

By

23 January 2023

See how JMBM’s Global Hospitality Group® can help you.

The Global Hospitality Group® of Jeffer Mangels Butler & Mitchell LLP (JMBM) is pleased to announce publication of the 5th edition of The HMA & Franchise Agreement Handbook, a guide for hotel owners, developers, investors and operators considering a hotel management agreement (HMA) or franchise agreement, or dealing with the challenges of termination of one.

Co-authored by JMBM’s Global Hospitality Group® Chairman, Jim Butler, senior Group member Robert E. Braun and Mark S. Adams, the 5th edition of The Handbook includes an updated section on why long-term management and franchise agreements may now be terminable, with all-new material exploring historic changes to Maryland law that may affect these contracts on hotels across the country.

The new edition features commentary from two faculty members at Cornell University’s Nolan School of Hotel Administration; an overview by Chekitan S. Dev, the Singapore Tourism Distinguished Professor, and a Foreword by Jan A. deRoos, HVS Professor of Hotel Finance and Real Estate Emeritus. “The authors’ objective of providing the keys for ‘breaking the code’ to HMAs and franchise agreements is fully realized,” writes deRoos. “The work is revised and updated with an understanding that the great questions never change, but the answers do.” CONTINUE READING →

Published on:

By

5 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. 

Coronavirus issues are likely to affect every business and industry, and the hotel industry is looking at an immediate and out-sized impact. JMBM partner Mark Adams deals with these issues across all industries on an international basis, and he has a deep involvement and understanding of the hospitality industry’s unique contracts, issues, customs and practices. In the second of his series of articles regarding the coronavirus, Mark discusses the importance of jurisdiction and contract wording when considering force majeure as a defense.

Coronavirus COVID-19 force majeure:
Contract provisions and governing law are important

by

Mark S. Adams, Hotel Dispute Lawyer
Partner & Senior Member
JMBM’s Global Hospitality Group®

Force majeure provides an excuse for a party’s non-performance of its contractual obligations as a result of an extraordinary event or circumstance beyond the control of the parties, such as act of God, war, strike, riot, etc.

What law governs the contract? Common law or civil law principles?

Unless there is an express provision in the contract, force majeure does not exist as a standalone defense in common law jurisdictions such as the U.S. and the U.K. In civil law jurisdictions, such as France and Germany, however, force majeure is implied into every contract, unless the parties agree otherwise. In order to minimize unintended consequences, contracting parties in both jurisdictions include force majeure provisions in their agreements.

In common law jurisdictions, the general rule is strict liability for the breach of a contract. This reflects the principle of pacta sunt servanda (preserving the sanctity of the contract). But there are exceptions. Common law jurisdictions excuse performance when it is not practical and could only be done at excessive and unreasonable cost. In the U.S., the Restatement (Second) of Contracts § 261 (1981), states:

“Where, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.”

In the U.K., the similar doctrine of “frustration of purpose” is likewise a defense to non-performance. Frustration of purpose occurs when an unforeseen event undermines a party’s principal purpose for entering into a contract such that the performance of the contract is radically different from performance of the contract that was originally contemplated by both parties. Whether under an “impracticable” or “frustration” jurisdiction, the standard for relief is a high one, and is subjective. That subjectivity can only be definitively resolved by litigation and judicial intervention.

Specify conditions short of “impracticable”

To avoid the uncertainty of such subjective standards, contracting parties in common law jurisdictions typically include force majeure provisions to specify events or circumstances that will excuse performance of contractual obligations by a party. Such specified force majeure events might not rise to the level of “impracticable” or “frustration.” By negotiating force majeure provisions, the parties can better allocate the consequences of non-performance as between themselves. For example, in a supply contract for the purchase of medical grade masks, if the manufacturer/seller is suddenly unable to timely deliver the masks to the buyer because of a trucking strike, the manufacturer could suffer the consequences of the substantially increased costs of delivering the masks by a private carrier. So long as the delivery costs are not prohibitively higher, the manufacturer will be liable for breach of contract if the manufacturer does not perform.

The doctrines of “impracticable” or “frustration” are of no avail in these circumstances. And even if they might be available, the application of them would have to be litigated. But if a properly worded force majeure provision is in the contract it could excuse performance in the event of trucking strikes, and the manufacturer would be off the hook. CONTINUE READING →

Published on:

By

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 S. Adams, Hotel Dispute Lawyer
Partner & Senior Member
JMBM’s Global Hospitality Group® 

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 →

Contact Information
Jim Butler, Chairman
Global Hospitality Group®
Jeffer Mangels Butler & Mitchell LLP
(310) 201-3526 • jbutler@jmbm.com
www.HotelLawyer.com

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Please do not include any confidential or sensitive information in a contact form, text message, or voicemail. The contact form sends information by non-encrypted email, which is not secure. Submitting a contact form, sending a text message, making a phone call, or leaving a voicemail does not create an attorney-client relationship.

Copyright © 2014 – 2024, Global Hospitality Group®
JUSTIA Law Firm Blog Design