Source: Robin Roth, Senior Contracts Editor
E-Specs: January 31, 2006

As contracts grow ever more complex, it is surprising how often this basic question is still asked: is it OK if the contract has no cancellation clause? Naturally, the hope (and too often the assumption) is that if the contract fails to mention anything about total group cancellation, there will be no charge. But since a contract is by definition a legally enforceable agreement between two parties, how could one party totally renege on its obligations and not suffer legal consequences? Wishful thinking...and in this case a clear breach of contract; the dispute would have to be settled in court or by arbitration.

Cancellation by one party without cause is breach of contract since performance of the contract would be impossible. However, not all breaches of contract “kill” the contract and result in a lawsuit. Contract law distinguishes between a material (significant) and an immaterial breach. A less significant breach may not kill the contract since it can be ignored, excused or negotiated. Material breaches occur when one party makes it impossible to perform the contract, fails to perform in accordance with the intent of the contract, or refuses to perform at all.

To avoid future problems, all material terms should be clearly spelled out in the contract. This includes all potential liabilities like cancellation and attrition. If there is to be no charge for these, the contract should clearly state that. (For small meetings that are booked short term a simple cancellation statement can be used, such as "Due to the short term nature of this booking there will be no charge for full group cancellation.") Include clauses that spell out terms for rights of termination for cause, Force Majeure, meeting space, etc. As an additional measure of protection, add language at the end to the effect that the contract contains all of the agreed terms, conditions, benefits and liabilities. This may be helpful if the facility or supplier attempts to add group performance or other charges after the contract has been executed.

(Note: This information is not intended to be "legal advice." A qualified attorney should be consulted to review all contract issues.)