Hospitality Law
United States, Some parts of the U.K., Canada, and India are the only countries that follow a common and civil law legal system
Contingency fee is usually a percentage of the settlement
Contingency fees allow everyone to go to court so long as they can find a lawyer to represent them
Lawyers will not take a case if they believe they cannot win it
Definition of Law
Law is an instrument of social control whose function is to regulate within certain limitations human relations
The law evolves very slowly, and it is continually changing primarily because it is not a pure science that is based on universal truths, instead the law changes as society changes its values(law always lags behind technology)
Philosophy of Law: Law is a prediction of the way a court will decide specific legal questions
Precedent(Stare Decisis): law has to stand(it can't just be changed)
Punitive damages are awarded when you do something so egregious so awful
Law
A body of rules to which people must conform their conduct
A form of social control
A set of rules used by the courts in deciding disputes(Procedural rules)
Consists of rules enforceable in court requiring people to meet certain standard of conduct
Dilution is when you make a brand look bad
Concepts of Law
Rights- the capacity of a person with the aid of the law to require another person or persons to perform or refrain from performing an act
Duties- the obligation imposed by law upon a person by which he is required to perform a certain act or to refrain from performing a certain act
Duty to protect
Duty to act
Duty to refrain from acting
Hospitality Law
Applies to:
Restaurants
Places that offer lodging to the public
Travel agents
Recreational facilities
Health clubs/spas
Theaters
Night clubs
Sports facilities
Stare Decisis—a Latin term that means “let the decision stand” or “to stand by things decided”—is a foundational concept in the American legal system. To put it simply, stare decisis holds that courts and judges should honor “precedent”—or the decisions, rulings, and opinions from prior cases.
Punitive Damages- They are awarded by a court of law not to compensate injured plaintiffs but to punish defendants whose conduct is considered grossly negligent or intentional.
Procedural law is how it proceeds through the law. Procedural law is a set of rules and guidelines that govern how courts conduct business and how cases proceed
Dilution law is a part of trademark law that protects famous marks from being confused or diminished by the use of similar trademarks or trade names in commerce. Dilution can cause two main types of harm to a famous mark:
Blurring: When the mark's distinctiveness is impaired by association with a similar mark
Tarnishment: When the mark's reputation is harmed by association with a similar mark
Classification of Law
Civil law:
• A wrong is usually done by an individual
• Objective is compensation of injury
• Party who commences the lawsuit is generally the injured party(Plaintiff-the person who brings the complaint- the person who complains first)
Criminal law:
• A wrong is done against society at large and involves violation of a criminal statue
• Objective is punishment of the person who did wrong
• Society is represented by the District Attorney
Civil Law
Contracts:
Agreement between two or more parties that are enforceable in court
Torts:
A violation of legal duty by one person causing injury to another
Negligence(a Tort):
Breach of legal duty to act reasonably
A complaint/petition, it will come to you individually through mail usually, and once you get the notice you have 20 days and a Monday to respond to a complaint
Call your insurance policy or a lawyer once you get a complaint- you can represent yourself if you choose to
There will usually be 3 responses to a complaint:
• Denial
• Affirmative defense
• Denial and bringing up grievances
99.9% of all cases settle before they go to trial
Normally around 6 jurors, although there may be 12 in some cases
Summary judgement- a court judgment that's entered against one party in a civil case without a full trial. The purpose of a summary judgment is to determine if there's a need for a trial by evaluating the evidence and pleadings. If the judge grants the motion, the case will be resolved without a jury, witnesses, or open court evidence
Remedies in Civil Cases
Compensatory Damages:
• Medical bills
• Lost wages
• Pain and suffering
• Loss of services
Punitive Damages:
• Money over and above compensatory damages
• Awarded as a punishment of the defendant
• Awarded only in cases where the defendant’s wrongful acts are
• aggravated by:
○ Violence
○ Malice
○ Fraud
Criminal Law
Examples of Crimes:
• Theft
• Assault
• Rape
• Penalties and Remedies:
• Community Service
• Fines
• Jail
• Probation
• Death
Common Law vs. Civil Law
Common Law
• Judge-made law;
• Case law is the most important source of law
Civil Law (aka Statutory Law)
• Consists of a legal code of general principles, which is the source of law
Three sources of Law:
• Statutory Law
• Common Law
• Administrative Law
Dram shop statute: You can't legally serve alcohol to someone who is visibly intoxicated
Constitutions & Statutes
Constitutions
• Specify how government officials will be selected
• Federal and state constitutions vary (e.g., selection of judges)
Statutes:
• Statutes are laws enacted by federal, state or local jurisdictions
• Until late 19th century statutes were secondary to court decisions
• Today legislatively enacted law is extensive and common
Administrative law
An agency is created when Congress passes
enabling legislation, which describes a problem and
defines the agency’s powers.
Administrative Regulations
• Rules and regulations adopted by administrative agencies that
• have the force of law
• E.g., IRS decisions, nursing home standards, zoning regulations
• Newest and fastest growing source of law
• Administrative law concerns the duties and proper running of an
• administrative agency
• We will return to agencies later
Common Law
(AKA Case Law)
Common law predominates in tort, contract, property and agency
law;
• Based on stare decisis, meaning “let the decision stand” (previous decisions are generally upheld in similar cases.)
• Incorporates predictability and flexibility
• “Stare decisis is usually wise policy, because in most matters it is most important that the applicable rule of law be settled than that it be settled right.”- Justice Louis Brandeis
• Incorporates predictability and flexibility
Law is not black and white, it lives in the gray matter
Common Law Rests On Precedent
• There is no place to look for a statement of “the law”
• The law emerges through precedent found in court decisions
• Common-law judges and lawyers reason by analogy, which allows leeway in formulating new legal rules or modifying old ones, because analogies are neither correct nor incorrect, only more or less persuasive
Applying Precedent….
• Judges may distinguish a current case from previous ones
• Judges may find that a case differs from all previous cases or that a previous case was wrongly decided
• Only interpret the law, but this is often ignored
Applying the Law
Example- Tort of Battery
• An act by the defendant which brings about harmful or offensive contact to the plaintiff’s person
• Intent on the part of the defendant to bring about harmful or offensive contact to the plaintiff’s person
• Causation
Applying the Law- Putting it All Together
• Battery is a harmful and offensive contact with the plaintiff’s person
• What is harmful and offensive?
• Plaintiff’s person includes anything closely connected with the plaintiff’s person.
• Something not touching the plaintiff is not closely connected.
• Direct contact is not necessary if the defendant sets the force in motion that ultimately results in contact with the plaintiff.
• No battery exists if the contact is part of the daily hustle and bustle of life (No intent)
Example Cases:
• Person hits another on the head – Battery
• Person taps another on the shoulder accidentally while in line at the movies – No Battery
• Person snatches plate from another’s hand – Battery
• Person gives someone poisonous cheese – Battery
• Person grabs pried necklace sitting on the table next to the victim – No Battery
Organizational Structure – The legal entity that owns a business
Operational Structure – The relationship between a business’s ownership and its management
External v. Internal Relationships
Factors to Consider in Determining Business Structure
▪ Ease of formation and maintenance
▪ Liability
▪ Taxation
▪ Transfer of ownership(or Termination)
Common Hospitality Organizational Structures
• Sole Proprietorship
• General Partnership
• Limited Partnership (LLP)
• C Corporation
• S Corporation
• Limited Liability Company LLC
Sole Proprietorship
• A business organization in which one person owns and, often, operates the business.
General Partnership
• A business organization in which two or more owners agree to share the profits of the business but are also jointly liable for its debts.
Limited Liability Partnership (LLP)
• A business organization with two classes of owners. The limited partner(s) invests in the business, but may not exercise control over its operation, in return for protection from liability.
• The general or managing partner(s) assumes full control of the business operation and can also be held liable for any debts the operation incurs
Limited Partner
• The entity or person in a limited partnership relationship who is liable only to the extent of his or her investment.
• Limited partners have no right to manage the partnership.
General (or managing) Partner
• The entity or person in a limited partnership relationship who makes the management decisions and can be held responsible for all debts and legal claims against the business.
Corporation
• A group of individuals granted a charter, legally recognizing them as a separate entity with rights and liabilities distinct from those of its individual owners (Also knows as a C corporation)
Dividends
• A portion of profits received by a shareholder usually in relation to his or her ownership (shares) of a corporation
S Corporation
• A type of business entity that offers liability protection to its owners and is exempt from corporate taxation on its profits. Various restrictions limit the circumstances under which an S corporation can be formed.
Limited Liability Company (LLC)
• A type of business organization that protects the owners from liability for debts incurred by the business without the need for some of the formal incorporation requirements.
• The federal government does not tax the profits of LLC’s; however, some states do tax the profits, but others do not.
Common Hospitality Operating Structures
• Owner-Operator
• Franchise
• Management Contracts
• Shared Services
Owner-operator
• A type of operating structure in which the owners of a business are directly responsible for its day-to-day operation.
• May be referred to as an “independent.”
Advantages
• No required educational requirements
• Make your own decisions
• Establish your own policies & procedures
Disadvantages
• You carry all the responsibilities
• You are the main investor
• You are subject to all liabilities (depending on the entity type)
• Little, if any, public recognition
• Reduced purchasing power
• Lack of operational support
Franchise
A contract between a parent company (franchisor) and an operating company (franchisee) to allow the franchisee to run a business with the brand name of the parent company, as long as the contract concerning methods of operation are followed
Franchisee
The person or business that has purchased and/or received a franchise.
Franchisor
The person or business that has sold and/or granted a franchise.
Management contract
The legal agreement that defines the responsibility of a business owner and the management company chosen to operate the owner’s business
Shared Services
The term used to refer to a sharing economy
• Airbnb
• VRBO (Vacation Rental by Owner)
The Agency Relationship
Respondent Superior
• Literally – “Let the master respond”
• A legal theory that holds the employer (master) responsible for the acts of the employee
Principal
• Employer, the person hiring and directing employees (agents) to perform his, her or its business.
Agent
• A person authorized to act for or to represent another, usually referred to as the principal.
Fiduciary responsibility
• The requirement that agents act in the best interest of their principals.
Independent Contractor
• A person or entity that contracts with another to perform a particular task, but whose work is not directed or controlled by the hiring party.
Important things to think about- exposure to liability, ease of dissolution, ease of formation, taxes
Contract Basics
The beginning of the contract starts with the negotiation
Contracts can be defined for most purposes as an agreement which the law will enforce in some way
Contracts:
• Must contain at least one promise
• Written and/or Verbal
• Types that must be in writing
Contract Components(Elements):
• Manifestation of mutual assent(offer and acceptance)
• Consideration(a bargain for exchange)
• Legality of objects(whatever we are contracting for the object must be LEGAL ex: can't sell cocaine in contract)
• Capacity of the parties(they must be competent-not intoxicated)
Members of the contract must be able to understand the nature and consequences of their actions for it to be considered a contract
Contract Classification
• Informal
○ an agreement, orally or written, usually of a simple nature.
• Express
○ An express contract is an exchange of promises where terms by which the parties agree to be bound are declared either orally or in writing
• Implied
○ Created by the conduct of the party (ex: eating bag of chips while grocery shopping-imply that you're going to pay for it before you leave)
• Unilateral
○ Promise for an "act"(ex: missing dog poster)
• Bilateral
○ Two promises exchanged; "an act for an act"
• Void
○ No legal effect
• Voidable
○ Optional enforcement (ex: contracts with minors may be optionally enforced)
• Quasi
○ an obligation of one party to another imposed by law independently of an agreement between the parties.
Common law: Services, real estate, insurance, employment, other not governed by stature
Governing law
case law sales of goods and leases of gods
Common law and statutes
Sale of Goods(U.C.C. g
The Uniform Commercial Code(UCC)
To simplify, clarify and modernize the law governing commercial transactions
To permit the continued expansion of commercial transactions
To provide for consistency in the law regarding the sale and financing of personal property in the various jurisdictions(municipalities, counties, and states)
Fraud is a defense in getting out of a contract as well as a tort
Definiteness
• Definiteness of an offer must be sufficiently clear with respect to:
Price
• Subject matter
• Quantity
• Time of performance
Duration of Offers
• Lapse of Time
• Revocation/Irrevocable
○ Option Contracts
○ Firm Offers
○ Statutory Irrevocability
○ Irrevocable offers of unilateral contracts
• Rejection
• Counteroffer
Acceptance
Effective moment
1. Authorized means
2. Unauthorized means
3. Stipulated provisions in an offer
4. Acceptance following a prior rejection
Conduct Invalidating Consent formed in Contracts
• Duress
• Undue Influence
• Fraud/Misrepresentation
○ Elements of fraud:
○ False representations
§ Silence,
○ Material Fact
§ Excluded from fact
○ Knowledge of falsity and intention to deceive
§ Actual Knowledge
§ Lack of belief in the statements truthfulness
○ Justifiable reliance
• Mistake
○ A state of mind that is not in accord with the facts
○ Unilateral mistake- no relief
○ Ambiguity- most common type of mistake category
§ Arises when the offer is ambiguous and the offeror and offeree have different subjective understandings as to what is meant by the ambiguous term
○ Uniformed offeree- the offeree assents to the term of the offer but in fact has not read or understood the offer
§ NO relief
• Consideration
○ A bargain for exchange
○ The payment exchanged for the promise(s)
○ Promise to refrain from doing something you have a legal right to do
• Breach of Contract
○ Failure to keep the promise or agreements of a contract
• Remedies and Consequences of Breaching an Enforceable Contract
○ Suit for specific performance(ex: a bride suing a bakery and wanting them to make her a cake as compensation)[courts may overturn it if it is too personal ex: asking for a portrait, since they require a long time being stuck in a room with one person]
○ Liquidating damages
○ Economic losses
○ Alternative dispute resolution
• Damage
○ Losses or costs incurred due to another's wrongful act
Meeting space contracts detail the services a meeting facility will provide to guests of an organization, as well as the terms under which the facility will provide those services
Meeting planners are a group of professionals that plan and organize meetings and events for their employers and clients
• Convention centers
• Restaurants
• Country clubs
• Meeting halls
• Hotels (might have a group lodging contract included)
Group Lodging Contract
A group room contract is necessary when an individual or organization requires many hotel rooms, e.g. for a convention.
These contracts are almost always in writing.
Often drawn up months before the event.
Room Block: Number of room nights being held for the group
Cut-off date: The date on which any rooms contracted, and thus held for sale, but not yet picked up (reserved) by the group are returned to the hotel’s general rooms inventory.
Essential Hospitality Contract Clauses
• Length of time the contract price terms exist
○ Cut-off date for group room block
○ Coupons, for example, include an expiration date
Identification of who is authorized to modify the contract
• Most contracts require that modifications be in writing and signed by all parties
Deposit and cancellation policies
• A deposit guarantees a reservation
• A fair cancellation policy must consider the best interests of both the guests and the hotel
Allowable attrition
• Allowable attrition refers to the amount of downward variance that may be permitted in a contract before some type of financial obligation (liquidated damage) is incurred on the part of the guest. Also known as ‘slippage.’
Payment terms
• All contracts have payment terms, but some hospitality contracts can become very complex.
○ Master Bill
○ Delegates/Attendees
Indemnification
• To make one whole; to reimburse for a loss already incurred.
• The Group shall be liable for any damages to the hotel caused by any of its officers, agents, contractors, or guests
See end of handout for sample indemnification clauses
Attrition is Simply…
The loss of previously estimated guest counts
Example:
• An individual is organizing a large family reunion.
• The reunion is months away, yet the individual will want to know the specifics of room rates and meal prices.
• The prices, however, may depend on the “pick-up,” or actual number of served guests.
• In most cases, the larger the number of sleeping rooms sold or meals provided, the lower the price may be.
• When the contract is signed, the actual number of attendees is likely an unknown.
• If the attendee estimate is 200, but only 100 attend.
• Allowable attrition clauses inform both parties of the impact, on price, of a reduced number of actual guests served
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Indemnification: protecting someone from financial loss or legal responsibility for something that goes wrong
Attrition: Reduction in the number of projected participants or attendees