Contracts In The Hospitality Industry: A Business Primer

The landscape of the hospitality industry is heavily influenced by contractual obligations.  Having a strong understanding of your contractual relationships will allow you to make more informed decisions regarding your liabilities and risks, while enabling you to capitalize on your opportunities.

Below are some key nuggets to bear in mind when creating a contractual relationship:

  • Be sure to perform adequate due diligence in selecting a vendor;  Do not hesitate to ask for a list of references and determine whether that vendor utilizes other outside independent contractors to perform its scope of work;
  • Ensure the vendor is properly licensed, insured and/or bonded;  Be sure your contract speaks to any assumption of the risks or limitations of liability;
  • Do not hesitate to negotiate your terms; Find a piece of common ground between you and the opposite party, even if only a personal commonality.  Common ground often builds a bridge to more open and fruitful discussions;
  • Do not necessarily acquiesce to use of the vendor’s form contract.  Form contracts are generally ambiguous and fail to provide you with the adequate protections necessary, should a dispute arise;
  • Secure the right to audit the vendor’s books, as it pertains to the scope of work delineated by the contract;
  • Include thorough and clear termination provisions and procedures in the contract.  Be sure the contract speaks to term renewals and procedures for handling disputes;
  • Ensure the contract adequately addresses the exchange of confidential information including access codes and security codes, non-solicitation provisions and non-competition provisions where applicable.  Be sure your contract includes injunctive relief as a remedy for such breaches;
  • Secure a strong indemnification policy for the acts and omissions of any vendor, their officers & directors or any of their agents.  Be careful: Some indemnity provisions speak not only to an actual third party claim, but also include indemnification for ‘threatened’ or ‘potential’ third party claims.   Determine whether a broad sweeping indemnification clause including ‘threatened’ or ‘potential’ third party claims is suitable for your needs.  Bear in mind most indemnification provisions are mutual;
  • Ensure proper protections are included within the contract to protect ownership and use of your intellectual property, granting only a limited license where necessary; 
  • Ensure any intellectual property created by a vendor is contractually recognized as a ‘work for hire’ and owned by your company.  Absent this provision, the vendor would retain rights in the intellectual property they created;
  • Ensure proper data security measures are addressed in your contracts.  Ensure the vendor adheres to their company’s privacy policy and be sure to delineate any standard of care to be exercised in handling your data.  
  • Clearly delineate any performance standards for the scope of work addressed in the contract;
  • Always consult a corporate attorney to review, negotiate and draft any contracts to be executed.

Tiffany A. Kahnen is the Founding Corporate Attorney at Four Corners General Counsel.  FCGC provides corporate legal counsel at a Fixed Value Price, flat fee.  We work closely with each client to develop legal solutions custom tailored to fit their unique needs, at a predictable rate they can budget for.  We handle all aspects of corporate law, including contractual transactions, risk management & dispute resolution.

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One Response to Contracts In The Hospitality Industry: A Business Primer

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