When an individual reserves a hotel room or makes a dinner reservation, the reservation often can be cancelled with as little as 24 hours notice without charge. When booking a block of rooms or reserving catering services, however, hotels and caterers typically require a written contract to guarantee the reservations. Standard contract terms specify the per-person rates, the rooms or meals that will be provided, and the minimum number of people who will be in the party. Hospitality contracts often also include a cancellation clause to protect the hotel or caterer from lost revenue in case of cancellation. Cancellation clauses permit recovery of the revenue that would have received if the reservation had not been cancelled. A cancellation clause thus prevents event planners from shopping for a better deal after signing a contract. Here are some common issues that may arise in drafting or negotiating cancellation terms.

Sliding Payment Scale
If a hotel or restaurant learns of the cancellation early enough, there is a better chance of reselling rooms or booking another event. Planners are likely to request sliding scale cancellation fees based on a percentage of anticipated revenue. The closer the cancellation occurs to the arrival date, the higher the percentage of revenue that must be paid.

Credit for Resold Rooms or Meals
Ordinarily, a hotel or restaurant can recover cancellation damages even if the hotel resells the same rooms or the restaurant caters to different guests on the same night. Event planners are increasingly likely to ask for a credit if the rooms are resold or another event is catered for the same date. Planners may also ask to verify resale revenues by requesting occupancy reports or gross receipts.

Reduction for Rescheduled Reservations
If an event is rescheduled rather than cancelled, event planners may ask for reductions or waivers of cancellation damages in exchange for rebooking the rooms or catering services for the new dates.

Timing of Payment
Cancellation clauses normally require full payment of cancellation damages immediately after canceling the reservation. If the cancellation damages include a credit for resale, event planners may ask to pay after the event dates after any applicable credit has been determined. Alternatively, the hotel or caterer may propose a timeline for calculating credits from resold rooms and set a deadline to issue a refund.

For assistance in drafting or negotiating a cancellation clause for an event, please contact David Zehntbauer at 503-224-6440, or email him at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it Mr. Zehntbauer leads Dunn Carney's Hospitality Team, which represents restaurants, lodging facilities, beverage distributors, and other businesses within the hospitality industry.

Closely Held
Business Team

The Closely Held Business Team - Dunn Carney is dedicated to assisting business owners in navigating through the opportunities and challenges the law presents to advance each owner’s success in business. They understand the multifaceted issues business owners face each day and the need for responsive and proactive legal counsel.

Team members include:
Randy Duncan, Team leader
Bob Allen
Shane J. Antholz
Ric Ashe
Merrill Baumann
David Buono
Brian Cable
Jack Cooper
Ken Davis
Tim Hering
Frank Hilton
Elizabeth Howard
Scott Jonsson
Robert Kerr
JoDee Keegan
Eric Smith
Kyle Stinchfield
Bob Winger
J. David Zehntbauer

Our Hospitality Team assists business owners and industry associations with all their legal needs including real estate services, entity formation, employment issues and litigation. Our hospitality attorneys have a diversity of specialties tailored to address the needs of our clients.

Hospitality Team members:
J. David Zehntbauer, Head of the Hospitality Team
Robert L. Allen
Kenneth S. Antell
Brian R. Cable
Daniel J. Drazan
Anne D. Foster
James M. Hillas
JoDee K. Keegan
Kyle J. Stinchfield
Kjersten H. Turpen