Home' micenet eMag : micenet December 2018 Contents LEGAL ISSUES | MATT CROUCH
find that many participants, including event
managers, PCOs, venues and other
suppliers for events and, yes, some lawyers
too (perish the thought!), seem to consider:
1. termination of the contract; and
2. cancellation of the event,
as being essentially the same thing. In
fact, they are very different animals...
This is not just an esoteric point of law or
theory. Events do get cancelled and,
unfortunately, sometimes a party to a
contract wants to end the deal – but they are
two very different animals with very different
practical and legal consequences.
Termination of the contract: A contract, as
we know, is a binding agreement between
two (or more) parties, usually for the supply
of goods or services. We’ll use the example
of a PCO’s contract to manage a conference
for a client.
A contract of this kind is often a long-term
thing. Typically, there will be a lengthy period
before the conference actually takes place.
The PCO has a lot to do. It will often create
an event design, a budget, arrange a venue
and other suppliers (such as food and
beverage, audio-visual services) arrange and
design a website, promotional material and
attract sponsors and exhibitors delegates...
Some contracts allow the parties to terminate
“for convenience”, ie, “at will, without cause.
Most contracts will have termination-for-
cause provisions. These clauses allow one
party to end the contract if the other party fails
to perform their obligations – and are found in
an infinite variety. Sometimes a party can
terminate immediately; in other cases there is
It’s a question that often pops up in the meetings and
events sector, says Matt Crouch.
a window of time to rectify a breach of the agreement before termination rights are exercised.
Assume the client is unhappy with the PCO’s services and wants to terminate the contract for
breach. Whether the client can terminate the contract will depend on whether there has actually
been a breach and what the termination clause says.
The client would issue a notice of termination to the PCO. If the client gets this wrong, by
purporting to terminate the contract when it is not really entitled to do so, the client would itself
be in breach of the contract – but assume for the sake of this example that the client is within its
rights to terminate. From the effective date of termination, the contract is at an end. Neither
party is legally obliged to continue to perform its obligations. The PCO would stop work and the
client would cease paying fees to the PCO.
Despite termination, some provisions of the contract would remain on foot – that is, they
“survive” termination because they are intended to. Provisions dealing with liability, indemnities,
warranties, intellectual property and confidential information are examples.
Contracts often also include obligations for the supplier (here, the PCO) to provide
“transitional services”. If the contract ended by termination, the supplier may be required to
assist the client to move to an alternative supplier, by providing information etc.
Finally, and importantly, if the client terminates the agreement for breach, the client also has
the right to sue the PCO for loss caused by that breach. If, instead, the client exercises at will
termination rights, usually the client would have to pay the PCO for the work done up until the
date of termination – but the effect is the same: the contract is at an end. Cancellation of the
event is entirely different. The conference may not be financially viable or some external matter –
such as the explosion of an un-pronounceable Icelandic volcano or a pilots’ strike – means it
cannot be held as intended and needs to be cancelled.
In a situation like this, the contract needs to remain on foot. It is the event that is cancelled,
not the contract – and usually cancellation is the client’s decision alone. There may be a lot of
work for the PCO to do to notify suppliers, sponsors, exhibitors and delegates and they may be
entitled to refunds. Deposits already paid may need to be claimed back. The PCO should to be
paid for the work up to cancellation of the event and for additional work needed as a result of
cancellation – and for that, the contract needs to remain on foot.
Termination and cancellation provisions in your contracts need to be written with appropriate
balance of risk and reward and avoiding, where possible, harsh, automatic or “hair-trigger”
termination. Termination clauses in particular are often “asymmetrical”, meaning that one party
has more (or sometimes) the only rights of termination. As a colleague said: “There is no such
thing as a standard salad sandwich, so why should there be a standard termination clause?”
Your contracts need tailored termination and cancellation clauses. Beware cheap copies! m
Matt Crouch is the Principal of Matt Crouch Legal and can be contacted at: email@example.com
TERMINATION VERSUS CANCELLATION:
WHAT’S THE DIFF?
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