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J. Catering and Convention Contracts
❊Explain the importance of details and care in entering catering and convention contracts.
■Given the many details involved when planning a catered event, there is virtually no excuse for
not having a written contract. The items that should be included in the writing are identified in
Figure 4-1 in the text.
■The written contract goes a long way to ensuring a successful event, goodwill with the patron,
and avoidance of litigation.
■Explain the scope of conferences and conventions.
•The written contract should include the terms identified in Figure 4-2 in the text.
K. Answers to Case Example Questions
4-1-1. What actions could UHD have taken to ensure that it would have an enforceable claim
against Dusterhoft for the costs of relocating Dusterhoft’s portion of the sewer line?
4-2-1. How might the wording of The Regency’s “contract” have been changed so as to obli-
gate ASSA to rent rooms from The Regency?
Customarily, convention planning includes a time period when the hotel(s) at which the
convention is housed agrees to reserve for a period of time a number of rooms without a
4-3-1. What contract in this case would require a writing? Why?
A sales contract between the “listing agent” of the restaurant and the restaurant owner would
4-4-1. Why does the statute of frauds dispense with the need for a writing where the seller has
delivered goods and the buyer has accepted them?
Among the type of contracts within the statute of frauds that must be in writing to be enforce-
able are contracts for sale of goods in excess of $500. An exception to this clause is considered
The facts in the case were that Adams, or someone associated with Adams, ordered meat
4-5-1. Identify four fraudulent statements made by Klein and LeVine and two fraudulent prac-
tices they perpetrated.
The four fraudulent statements made were
•Klein guaranteed CCLG a 20 to 40 percent increase to the bottom line.
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•Levine told Salazar at a meeting that he could work within their specified budget of $4 per
menu, knowing that the menus would cost $7.00 to $8.88, at a minimum, but failing to
The two fraudulent practices perpetrated were:
•The purpose of getting the customer to sign the application document was to “hook them”
•Klein was also instructed by LeVine to make certain that there were distractions when the
4-6-1. Do you agree with the court’s narrow interpretation of the term “prohibits access?”
Why or why not?
4-6-2. Do you think that the narrow definition of the term resulted in a fair and just result in
this case for the hotel? For the insurance company? Why or why not?
Yes. I was fair and just for the hotel and the insurance company. Had the court case been
4-6-3. How might the clause read to favor the hotel’s interpretation?
4-7-1. Why did the court apply the industry-wide cancellation practice to the contract between
Pennyrile Tours and Country Inns?
The parties did not discuss the hotel’s cancellation policy at the time they entered the contract.
The court therefore sought to determine the likely intention of the parties concerning cancella-
4-7-2. What could Country Inns have done to avoid the application of the industry practice to
its contract with Pennyrile?
Country inns could have included a provision in the contract that incorporated the cancella-
4-9-1. What facts were cited by the court as proof that the damages claim was too speculative
to support a recovery?
Occasionally a contractual duty is not certain, but rather is contingent upon the occurrence or
In the letter of intent, Casino Resorts expressed an interest in acquiring certain gaming-
related assets held by Monarch. The document specifically stated that the contemplated trans-
The facts cited by the courts were as follows:
None of the conditions precedent were performed; Monarch and Casino Resorts did not
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4-10-1. Why is reasonable certainty as to damages a prerequisite for a nonbreaching party to
collect damages?
A breaching party is liable only for the consequences of its breach. If the plaintiff cannot
4-10-2. What facts convinced the court that the breach by Samis Foundation resulted in dam-
ages to Ibiza, Inc. that could be proved to a reasonable certainty?
The facts that convinced the courts were:
•Haas and O’Neill were portrayed as persons with extensive experience in arranging tours
•They entered the one-stop charter market early with packages that others, such as retail
•The market they chose was a fertile one. Las Vegas was very popular with the people from
the Upper Midwest, and the small cities on which they were concentrating offered an un-
•Similarly, the evidence, although weak, supports the inference that, were it not for the can-
cellation by Circo, Cardinal would have been able to fill all its flights except the first
•They were able to do so well on such short notice, particularly because the substituted ho-
tel, being new, lacked the appeal that the better known and advertised Circus Circus Hotel
4-12-1. Why did the court not impose punitive damages?
Punitive damages are a sum of money sometimes awarded to a plaintiff in excess of compen-
The question had not been resolved in the jurisdiction and the facts in the case did not
warrant punitive damages.
4-12-2. Under what circumstances do you think a court might impose punitive damages where
a hotel overbooked?
Punitive damages would be recoverable in tort actions. If the hotel’s overbooking was a result
4-13-1. Why was Wells able to collect for the cab fares to Chinatown but not for the business
losses from failure to acquire the desired equipment at the convention?
The cab fares would not have been incurred but for the failure by the Holiday Inn to provide
Wells with a room. Wells did not establish that the failure to acquire the desired equipment at
4-13-2. Why did the court refuse to award damages for Wells’ cluster headaches?
Pain and suffering resulting from physical injuries or ailments are not recoverable in a breach
of contract case. They are recoverable in tort actions. Wells sued for breach of contract and
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4-13-3. The court referenced a reservation system utilized by Holiday Inns. What impact did
this system have on the outcome of the case?
The court was confident that the system was fairly reliable and minimized the amount
4-14-1. Why is the potential for damages great when a hotel dishonors the reservations of a
tour group?
A group involves many people. The hotel will be liable for damages incurred by everyone in
4-14-2. How can a hotel damage its own goodwill by overbooking?
Guests with reservations who are forced to stay elsewhere because the hotel overbooked will
4-15-1. Why do the courts consider whether the restriction at issue is “limited in its operation
with regard to time and place” when determining whether a noncompetition clause is
reasonable?
Even though Martin Ferrari no longer owns the restaurant known as Rooster’s, he still opened
4-16-1. What is the meaning of the court’s statement in the third-to-last paragraph, “At that
point, replacement income is virtually impossible”?
The court was referring to the duty on the part of the hotel to mitigate its loss. Due to the
4-16-2. Would the decision have been different if the hotel could have rented the room to some-
one else? Why?
Yes, if the hotel could have located another guest to use the room, it would not have suffered
4-16-3. Why could the plaintiff not avoid the contract based on his mistake concerning when
Joel Grey would perform?
The court held that plaintiff’s interpretation of the advertisement was a misunderstanding; the
4-17-1. Do you agree with the distinction made by the court between this case and Freeman v.
Kiamesha Concord, Inc.? Why or why not?
Presumably the student will agree with the distinction. The hotel in Freeman was able to keep
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4-18-1. Do you agree with the court’s conclusion that the rescheduling of the Rural Mail Count
was not an “emergency” situation? Why or why not?
The Rural Mail Count scheduling was certainly an inconvenience, but was not an emergency.
4-18-2. Do you think that the end result of this case, that the plaintiff must pay damages to the
defendant, is fair? Why or why not?
4-18-3. Note that the “For Cause” clause included “curtailment of transportation facilities.” Had
this provision been included in the contract referenced in Southern Hospitality, Inc. v.
Zurich American Insurance Co., discussed, earlier in this chapter (concerning lost hotel in-
come because airline travel was unavailable), might the outcome have been different?
4-19-1. Could Melo-Tone have won the case against Indelicato for breach of contract? Why or
why not?
No. Melo-Tone and Indelicato did not have a contract relationship. In order for one to be
held liable for breach of contract there must be a contract relationship. One cannot be held li-
4-19-2. In what way could Indelicato legally compete with Melo-Tone for Sherry’s business?
Certainly, Indelicato could attempt to convince Sherry that it marketed a superior product,
4-19-3. In the penultimate paragraph we learn that one of Indelicato’s defenses was “the rough
and tumble of the world of commerce.” What is meant by this expression?
The expression emphasizes the highly competitive nature of doing business. They might have
36 ■Chapter 4
Key Terms
Absolute A commitment in a contract, the breach
Agreement not to complete In the sales of busi-
Breach of contract The failure of performance by
Capacity to contract The ability to understand the
Compensatory damage The sum of money neces-
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Contract Law and the Hospitality Industry ■37
Damages The remedy sought by the injured party
Fraud An intentional untruthful statement made to
Genuine assent Another requirement for a valid
Goodwill A favorable reputation producing an ex-
Innocent misrepresentation An untruthful state-
L. Answers to End-of-Chapter Questions
❊Review Questions
1. What are the six essential elements of a contract?
2. What categories of people lack contractual capacity?
3. What is meant by mutuality?
4. What is the legal effect of an illegal contract?
5. Name three types of contracts that are unenforceable unless they are in writing.
The following contracts require writing:
•Contracts for purchase and sale of real property.
•Contracts that cannot be completed within a year from the time they were made.
6. Which of the following types of damages will a plaintiff in a breach of contract case be
able to recover?
A. Lost profits.
B. Pain and suffering.
C. Punitive damages.
Normally, punitive damages are not awarded in a breach of contract case. In an exceptional
7. If a guest cancels her reservation with a hotel, how can the hotel mitigate its loss?
The hotel is obligated to attempt to find another guest to use and pay for the room. To locate
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8. If a plaintiff in a breach of contract case is unable to determine the amount of its loss,
is it entitled to recover any damages?
A plaintiff must be able to provide that it suffered a loss and determine the amount of the loss.
9. List eight items that should be included in a catering contract.
10. List eight items that should be included in a convention contract. Do not include any
of the items you listed in response to Question 9.
11. What is an agreement not to compete?
Agreement not to compete is a provision barring the seller of a business from competing in
the same geographical area for a specified period of time. This type of agreement attempts to
12. What is an attrition clause?
An attrition clause is a contract provision that obligates the organization to compensate the
13. What is a no-cause termination clause?
A no-cause termination clause is a contract provision permitting either party to terminate the
14. What is a forum selection clause?
It is a clause in a contract that pre-selects a particular forum, such as a given state, country,
15. What are the elements of a claim for interference with contractual relations?
The necessary elements of a claim for interference with contractual relations are
•A valid contract must exist between two parties.
16. As a general rule, are contracts entered into on the Internet valid?
❊Discussion Questions
1. Identify whether each of the following is an offer or an invitation to negotiate.
A. Three pounds of fresh shrimp will cost $23.50.
B. I will play the piano at your restaurant from 5:30 until 9:00 P.M. every night during October
for $50 a night.
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C. I have gourmet ice cream for sale.
D. I am thinking about selling my motel.
E. Private swimming lessons are available at the hotel pool for $25 per half hour.
2. Why, in a breach of contract case, must the amount of the plaintiff’s damages be proven
to a reasonable certainty?
3. If a contract term is ambiguous, how will a court decide its meaning? How can parties
to a contract avoid ambiguity?
A court can use trade usage to clarify ambiguity. Trade usage means practices or modes of deal-
4. Which of the following contracts must be in writing to be enforceable?
A. A contract to hire banquet manager for three years.
B. A promise made by a casino patron to cover the betting debts of his friend.
C. A contract to hire a musical trio to play for three weekends at a restaurant for a total of $1200.
This contract would be enforceable without a writing. Many students will say a writing is
D. A contract to purchase three acres of land on which the buyer intends to build a restaurant.
5. Why does the law require a nonbreaching party to mitigate damages?
Failure by the nonbreaching party to mitigate damages results in economic waste. For exam-
ple, if a hotel fails to relet a room when a guest cancels, it overlooks the possibility of earning
6. Why, as a practical matter, should all contracts be in writing?
Without a writing, one party to a contract is likely to encounter a proof problem. Due to failed
7. What determines the obligations owed to a hotel when a person or organization with a
hotel reservation cancels the reservation?
The hotel may have a cancellation policy that permits the guest to cancel without liability until a
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8. To successfully pursue a case for interference with contractual relations the plaintiff
must prove, in addition to other elements, that the defendant was aware of the existence
of the contract between the plaintiff and a third person. What are the policy reasons for
making this a necessary element?
The policy reasons for making this a necessary element are to motivate businesses to lure cus-
9. A name typed at the end of an offer or acceptance sent via e-mail is considered the equiv-
alent of a person’s signature. Why is this so?
❊Application Questions
1. In a telephone conversation with a sales representative of a linen company, the manager
of a hotel ordered $1,000 worth of sheets. Following the conversation he wrote a memo
to file documenting the agreement, initialed it, and sent a copy to the sales representa-
tive. A dispute arose between the parties and the linen company sued the hotel. Does
the parol-evidence rule bar the lawsuit? Why or why not?
No, the statute of frauds does not bar the lawsuit. Normally, to satisfy the statute of frauds,
the writing must contain the signature of the “party to be charged,” otherwise known as the
2. Laurie is planning a reception for her parents’ 50th wedding anniversary. She and her
parents keep kosher, which means they follow dietary laws prescribed by the Jewish re-
ligion. She decided to hold the anniversary party at the Westside Party House because
the manager, under pressure to increase sales, told Laurie the Party House serves kosher
food. Laurie later discovers that the Party House does not serve kosher food. If she
cancels her contract with the Party House and holds the party elsewhere, will she be li-
able to the Party House for breach of contract? Why or why not?
No, she will not be liable for breach of contract. A party to a contract can void it when the other
party utilized fraud. Here a Party House employee apparently intentionally misled Laurie into
3. A restaurant ordered 20 cases of champagne for New Year’s Eve. Delivery was due on
December 29, but the seller failed to deliver. As a result the restaurant was unable to of-
fer its New Year’s Eve patrons a midnight champagne toast. The hotel sued the seller
for breach of contract, claiming lost profits from the midnight toast and from future
parties the angry patrons would be discouraged from hosting at the restaurant. Discuss
the restaurant’s chances for success in this lawsuit.
Clearly, the seller breached the contract by failing to deliver the champagne. The restaurant had
a duty to mitigate its damages. It could have avoided the damages if it had purchased the cham-
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New Year’s Eve patrons have hosted future parties at the restaurant even if the champagne had
4. A contract for laundry services between a hotel and a linen company contains an am-
biguous term. A dispute arose concerning the term and the parties to the contract in-
terpreted it differently. A lawsuit resulted. What rules of contract interpretation will the
court use to determine the meaning of the unclear term?
When contract terms are ambiguous the court will use trade practices. Practices or modes of
5. Tyshawn sold a bar he owned to Nicolette. A provision in the contract precluded
Tyshawn from opening another food or beverage establishment within 10 miles of the
bar for a two-year period. If Tyshawn bought and operated a Motel Six franchise within
a 10-mile radius of the bar and within one year after the sale, would he be in violation
of the contract? Why or why not?
An agreement not to compete is a provision barring the seller from competing in the same
geographical area for a specified period of time. This type of agreement attempts to preserve
for the buyer the business’s goodwill; that is, the expectation that the firm’s established cus-
tomers will continue to patronize the purchased business. If the seller reenters the market and
6. Shania purchased airline tickets to Las Vegas online. Prior to completing the purchase
she was required to initial a statement that said she had read the applicable rules and re-
strictions and she agreed with them. The rules were readily available for her to review
by clicking on an icon. If Shania initials the statement without reading the rules, is she
bound by them? Why or why not?
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