Legally Speaking: Anatomy of a contract case in COVID times

The wording of contracts is king. A recent case proves this truism once again.

Ramsey Solutions contracted to hold a large, annual seminar at Gaylord Palms Resort in Kissimmee, Fla., in July 2020. Gaylord is managed by Marriott Hotel Services. The contract included 1,000 rooms for five nights each plus conference space. Ramsey paid a deposit of approximately $1.2 million.

The pandemic reared its ugly head in March 2020. As the event neared, Marriott advised Ramsey that social distancing and masks would be required, per county mandates. Ramsey was not happy. A week before the event, Ramsey canceled. Marriott declined to return the deposit. Ramsey sued and Marriott counter-sued for breach of contract.

And so began the parsing of contract language. The written agreement stated Ramsey could terminate without penalty if the hotel became involved in any “public scandal, political controversy, crime, fraud or other event that in Ramsey’s sole judgment will impair or damage its brand or good will by hosting an event at the hotel.”

Ramsey argued this clause gave it unfettered discretion to terminate the agreement. In a pretrial decision, the court disagreed. The judge ruled that the catch-all phrase (“or other event”) must be interpreted narrowly to include only items of the same type as those listed. The pandemic does not qualify “by any stretch of the imagination,” wrote the judge.

The agreement also stated either party can cancel without liability “if circumstances beyond the reasonable control of the parties, such as acts of God, war, acts of domestic terrorism, strikes or similar circumstances, make it illegal or impossible to provide or use the hotel facilities.” The court held that the pandemic constitutes an “act of God” that triggers the clause. But the court rejected Ramsey’s argument that requiring guests to wear masks and socially distance rendered the use of hotel facilities illegal or impossible.

Ramsey also objected to other limitations imposed by the pandemic, including a prohibition on in-room dining set-up (but roomservice delivery would remain available). Marriott disputed that the contract required it to make the referenced amenities available.

The court determined that further clarification of the contract and related circumstances was needed. Next step: settlement or trial.

The lessons are clear. Always study contract language before you sign. Try to anticipate possible unexpected occurrences. Negotiate unacceptable terms. 

Karen Morris is a lawyer, municipal judge and Distinguished Professor at Monroe Community College in Rochester, N.Y., where she teaches hospitality law.