chapter 4 hospitalitycontracts. © 2012 stephen c. barth p.c. and john wiley & sons, inc. all...

Chapter 4Chapter 4

HospitalityHospitality

ContractsContracts

© 2012 Stephen C. Barth P.C. and John Wiley & Sons, Inc.All Rights Reserved

Hospitality ContractsHospitality Contracts

Introduction to ContractsIntroduction to Contracts Components of Hospitality ContractsComponents of Hospitality Contracts The Uniform Commercial Code (UCC)The Uniform Commercial Code (UCC) Preventative Legal Management and Preventative Legal Management and

ContractsContracts


In This Chapter, You Will Learn:In This Chapter, You Will Learn:

1.1. The two basic types of valid business The two basic types of valid business contracts.contracts.

2.2. The four essential components that must The four essential components that must be present to create a valid contract.be present to create a valid contract.

3.3. The purpose of the Uniform Commercial The purpose of the Uniform Commercial Code (UCC).Code (UCC).

4.4. The consequences of breaching an The consequences of breaching an enforceable contract.enforceable contract.

5.5. How to avoid legal difficulties related to How to avoid legal difficulties related to contracts before they arise.contracts before they arise.


Introduction to ContractsIntroduction to Contracts

Legalese:Legalese:

PlaintiffPlaintiff - The person or entity that - The person or entity that initiates litigation against another. initiates litigation against another. Sometimes also referred to as the Sometimes also referred to as the claimant, petitioner, or applicant.claimant, petitioner, or applicant.


Introduction to ContractsIntroduction to Contracts

Legalese:Legalese:

DefendantDefendant - The person or entity - The person or entity against against which litigation is initiated. which litigation is initiated. Sometimes Sometimes referred to as the referred to as the respondent.respondent.


Analyze the Situation 4.1Analyze the Situation 4.1

In response to a telephone In response to a telephone inquiry, Vincent's Tree Service inquiry, Vincent's Tree Service offered to trim an apple tree on the offered to trim an apple tree on the lawn outside the front lobby of the lawn outside the front lobby of the Olde Tyme Prime Rib restaurant, for Olde Tyme Prime Rib restaurant, for a fee of $500. Mr. Wilbert, the a fee of $500. Mr. Wilbert, the restaurant's manager, agreed to the restaurant's manager, agreed to the price and a start date of Monday. price and a start date of Monday.



At noon on Monday, Vincent's informed At noon on Monday, Vincent's informed Mr. Wilbert that the job was completed. Mr. Wilbert that the job was completed. The tree trimming went fine, but a large The tree trimming went fine, but a large amount of branches and leaves from the amount of branches and leaves from the tree were left neatly piled near the tree's tree were left neatly piled near the tree's base. When Mr. Wilbert inquired about the base. When Mr. Wilbert inquired about the removal of the debris, Vincent's stated removal of the debris, Vincent's stated that removing the debris had never been that removing the debris had never been discussed, and was not included in the discussed, and was not included in the quoted price. quoted price.



Mr. Wilbert agreed that the topic of Mr. Wilbert agreed that the topic of removal was never discussed, but stated removal was never discussed, but stated that it is generally assumed that when a that it is generally assumed that when a company trims a tree, it will remove the company trims a tree, it will remove the brush it generates; therefore, he refused brush it generates; therefore, he refused to pay until the brush was removed.to pay until the brush was removed.



1.1. Which party's argument seems valid? Which party's argument seems valid? Why?Why?

2.2. How would you suggest the issue be How would you suggest the issue be resolved between these two contracting resolved between these two contracting parties?parties?



Jeremy Moss’s credit card was billed $450.00 by the Langford Inn. The charge was a “no-show” charge that resulted from Mr. Moss not arriving at the hotel on a night that “he” had reserved, via the hotel’s Web site, two rooms (at $225.00 each). The hotel had been sold out that night, and the rooms, in keeping with hotel policy, had been held for Mr. Moss until 4:00 A.M. the next morning.



Mr. Moss contacts the hotel when he receives his credit card statement and protests that he never made the reservations. The reservation data collected on the Web site lists Mr. Moss’s actual address and his home telephone number as well as the credit card number billed by the hotel. Mr. Moss, however, still maintains that he did not make the reservation, and thus demands that the “no-show” billing be removed from his card.



1. Do you believe the hotel is justified in charging Mr. Moss for the no-shows?

2. How could this hotel prevent such misunderstandings in the future?


Components of an Enforceable Components of an Enforceable ContractContract

Legalese:Legalese:

Enforceable Contract Enforceable Contract - A contract - A contract recognized as valid by the courts and recognized as valid by the courts and

subject to the courtsubject to the court’’s ability to s ability to compel compel compliance with its terms.compliance with its terms.



Legalese:Legalese:

Offer Offer – A proposal to perform an act – A proposal to perform an act or to or to pay an amount that, if pay an amount that, if accepted, accepted, constitutes a legally constitutes a legally valid contract.valid contract.



Legalese:Legalese:

AcceptanceAcceptance - Unconditional - Unconditional agreement to agreement to the precise terms the precise terms and conditions of an and conditions of an offer.offer.



Legalese:Legalese:

Consideration Consideration - The payment - The payment exchanged exchanged for the promise(s) for the promise(s) contained in a contained in a contract.contract.



Legalese:Legalese:

Express Contract Express Contract – A contract in – A contract in which the which the components of the components of the agreement are agreement are explicitly stated, explicitly stated, either orally or either orally or written.written.



JoAnna Hart was offered a JoAnna Hart was offered a position as Director of Foodservice position as Director of Foodservice for the independent school district of for the independent school district of Laingsford. She received a written Laingsford. She received a written offer of employment on the first of offer of employment on the first of the month, with a stipulation that the the month, with a stipulation that the offer would be in effect until the offer would be in effect until the fifteenth of the month. fifteenth of the month.



If Ms. Hart were to accept the If Ms. Hart were to accept the employment offer, she would have to sign employment offer, she would have to sign the employment contract, and return it to the employment contract, and return it to the Laingsford Superintendent of Schools the Laingsford Superintendent of Schools before the offer expired on the fifteenth.before the offer expired on the fifteenth.

Upon reading the details of the Upon reading the details of the contract, Ms. Hart felt that the salary contract, Ms. Hart felt that the salary identified in the letter was too low, and identified in the letter was too low, and thus she adjusted it upward by $5,000, thus she adjusted it upward by $5,000, initialing her change on the contract copy. initialing her change on the contract copy.



She then returned the offer letter to She then returned the offer letter to the Schools Superintendent with a the Schools Superintendent with a cover letter, stating she was pleased cover letter, stating she was pleased to accept the position as detailed in to accept the position as detailed in the contract. The contract arrived by the contract. The contract arrived by mail in the office of the superintendent mail in the office of the superintendent on the fourteenth of the month, at on the fourteenth of the month, at which time, the Superintendent called which time, the Superintendent called Ms. Hart to express his regret that she Ms. Hart to express his regret that she had rejected the employment offer. had rejected the employment offer.



During the telephone call, Ms. Hart During the telephone call, Ms. Hart realized that the Superintendent realized that the Superintendent would not accept her salary revision would not accept her salary revision proposal, so instead she verbally proposal, so instead she verbally accepted the position at the original accepted the position at the original rate of pay. The Superintendent, rate of pay. The Superintendent, however, declined her acceptance, however, declined her acceptance, stating that the original stating that the original employment offer no longer employment offer no longer existed.existed.



1.1. Does the school have the legal right Does the school have the legal right to withdraw its offer of to withdraw its offer of employment? Why or why not? employment? Why or why not?


Search the Web 4.1Search the Web 4.1

Log on to the Internet and enter: Log on to the Internet and enter: www.yahoo.comwww.yahoo.com..

1.1. Under Search, type Under Search, type ““hospitality contracthospitality contracts.s.””

2.2. Search for stories related to contracts Search for stories related to contracts and contract negotiations that are and contract negotiations that are making headlines in the news, nationally making headlines in the news, nationally or in your area.or in your area.

3.3. Print out one of the articles and be Print out one of the articles and be prepared to summarize it in class.prepared to summarize it in class.


The Uniform Commercial Code The Uniform Commercial Code (UCC)(UCC)

Legalese:Legalese:

Uniform Commercial Code (UCC) Uniform Commercial Code (UCC) - A model - A model statute covering things such as the statute covering things such as the

sale sale of of goods, credit, and bank goods, credit, and bank transactions. All transactions. All states have adopted states have adopted the UCC, with the the UCC, with the exception of exception of Louisiana.Louisiana.


Introduction to Hospitality Introduction to Hospitality ContractsContracts

Legalese:Legalese:

Caveat Emptor Caveat Emptor – A Latin phrase meaning – A Latin phrase meaning ““let let the buyer beware.the buyer beware.”” The phrase The phrase implies that implies that the burden of determining the burden of determining the relative the relative quality and price of a quality and price of a product falls to the product falls to the buyer, not the seller.buyer, not the seller.


The Uniform Commercial Code The Uniform Commercial Code (UCC)(UCC)

1.1. To simplify, clarify and modernize the To simplify, clarify and modernize the law governing commercial transactions.law governing commercial transactions.

2.2. To permit the continued expansion of To permit the continued expansion of commercial transactions.commercial transactions.

3.3. To provide for consistency in the law To provide for consistency in the law regarding the sale and financing of regarding the sale and financing of personal property in the various personal property in the various jurisdictions (municipalities, counties and jurisdictions (municipalities, counties and states).states).



The Smoking Bones BBQ restaurant serves an excellent spinach salad as an accompaniment to its popular chicken and rib dishes. Michelle Brennan, the restaurant’s manager, purchases, from a local vendor, all of her produce, including fresh spinach used in the salads.



Unfortunately, one of Michelle’s guests becomes ill after eating at her restaurant. The source of the illness is traced directly to the fresh spinach used in the restaurant’s salads. In fact, upon further investigation, it is determined that the spinach, when delivered to the restaurant’s produce vendor, was already infected with E. coli bacteria that matched a strain identified in cattle manure used to fertilize the spinach field.



1. According to the UCC, a seller has a responsibility not to sell defective products. Who, in this example, is the seller?

2. Assume that you were the guest sickened by the bacteria. Who do you believe should be held responsible for the damages you incurred?

3. What specific steps could Michele take to help prevent incidents such as the one described here from reoccurring in her restaurant?


Breach of ContractBreach of Contract

Legalese:Legalese:

Breach of Contract Breach of Contract - Failure to keep - Failure to keep the the promises or agreements of a promises or agreements of a contract.contract.


Preventative Legal Preventative Legal Management and ContractsManagement and Contracts

Legalese:Legalese:

Damages Damages - Losses or costs incurred - Losses or costs incurred due to due to anotheranother’’s wrongful act.s wrongful act.


Remedies and Consequences of Remedies and Consequences of Breaching an Enforceable ContractBreaching an Enforceable Contract

1.1. Suit for specific performance.Suit for specific performance.

2.2. Liquidated damages.Liquidated damages.

3.3. Economic loss.Economic loss.

4.4. Alternative dispute resolution.Alternative dispute resolution.



Legalese:Legalese:

Arbitration Arbitration - A process in which an - A process in which an agreed-agreed- upon, independent, neutral upon, independent, neutral third party third party (the arbitrator), renders (the arbitrator), renders a final and a final and binding resolution to a binding resolution to a dispute. The dispute. The decision of the decision of the arbitrator is known as arbitrator is known as the the ““award.award.””



Legalese:Legalese:

Mediation Mediation - A process in which an - A process in which an appointed, appointed, neutral third party (the neutral third party (the mediator), assists mediator), assists those involved in a those involved in a dispute with resolving dispute with resolving their own their own differences. The result of differences. The result of mediation, mediation, when when successful, is known as the successful, is known as the ““settlement.settlement.””


Statute of LimitationsStatute of Limitations

Legalese:Legalese:

Statute of Limitations Statute of Limitations - Various laws that - Various laws that set set maximum time periods in which maximum time periods in which lawsuits lawsuits must must be initiated. If the suit be initiated. If the suit is not initiated is not initiated (or filed) before the (or filed) before the expiration of the expiration of the maximum period maximum period allowed, then the law allowed, then the law prohibits the use prohibits the use

of the courts for recovery.of the courts for recovery.


Preventing Breach of ContractPreventing Breach of Contract

1.1. Get it in writing.Get it in writing.

2.2. Read the contract thoroughly.Read the contract thoroughly.

3.3. Keep copies of all contract Keep copies of all contract documents.documents.

4.4. Use good faith when negotiating Use good faith when negotiating contracts.contracts.

5.5. Note and calendar time deadlines Note and calendar time deadlines for performance.for performance.


Preventing Breach of ContractPreventing Breach of Contract

6.6. Ensure the performance of third Ensure the performance of third parties.parties.

7.7. Share contract information with Share contract information with those who need to know, and those who need to know, and educate staff on the consequences educate staff on the consequences of contract breach.of contract breach.

8.8. Resolve ambiguities as quickly and Resolve ambiguities as quickly and fairly as possible.fairly as possible.


Establishing an Effective Establishing an Effective Reservation PolicyReservation Policy

Legalese:Legalese:

Confirmed Reservation Confirmed Reservation - A contract to - A contract to provide a provide a reservation in which the reservation in which the provider guarantees provider guarantees the guestthe guest’’s s reservation will be honored until reservation will be honored until a a mutually agreeable time. A confirmed mutually agreeable time. A confirmed reservation may be either guaranteed or reservation may be either guaranteed or

nonguaranteed.nonguaranteed.



Legalese:Legalese:

Nonguaranteed Reservation Nonguaranteed Reservation - A - A contract to contract to provide a confirmed provide a confirmed reservation where reservation where no prepayment no prepayment or authorization is or authorization is required.required.



Legalese:Legalese:

Guaranteed Reservation Guaranteed Reservation - A contract to - A contract to provide provide a confirmed reservation in which a confirmed reservation in which the the provider guarantees the guestprovider guarantees the guest’’s s reservation reservation will be honored regardless will be honored regardless of time of arrival, of time of arrival, but the guest will be but the guest will be charged if he or she no-charged if he or she no- shows the shows the reservation. Prepayment or reservation. Prepayment or payment payment authorization is required.authorization is required.


Legally Managing at WorkLegally Managing at Work

How can we reduce no-show How can we reduce no-show reservations?reservations?


What Would You Do?What Would You Do?

Assume that you manage a 300-Assume that you manage a 300-room hotel. Your local university room hotel. Your local university football team is playing a home football team is playing a home game on Saturday, and demand for game on Saturday, and demand for rooms far exceeds supply. Your no-rooms far exceeds supply. Your no-show rate on reservations for the show rate on reservations for the past three football games has been past three football games has been 8, 12, and 9 percent respectively. 8, 12, and 9 percent respectively. Currently you have 100 nonreserved Currently you have 100 nonreserved rooms.rooms.


What Would You Do?What Would You Do?Prepare a brief report (half-page) Prepare a brief report (half-page) describing how you would answer the describing how you would answer the following questions. following questions.

How many room reservation contracts How many room reservation contracts are you willing to accept? Should you are you willing to accept? Should you require that all reservations be require that all reservations be confirmed? confirmed?

Should you require that all reservations Should you require that all reservations be confirmed? be confirmed?

What factors will you consider as you What factors will you consider as you make your decision? What strategies make your decision? What strategies will you employ to reduce no-shows? will you employ to reduce no-shows?


What Would You Do?What Would You Do?

Write a short essay (half-page) answering Write a short essay (half-page) answering questions 4 and 5, drawing from your questions 4 and 5, drawing from your personal perspective. personal perspective.

4.4. You and your family are traveling out of You and your family are traveling out of state to attend one of your school teamstate to attend one of your school team’’s s away football games. Upon arrival, the hotel away football games. Upon arrival, the hotel where you have a confirmed reservation where you have a confirmed reservation denies you a room because it has none denies you a room because it has none available. What do you think the hotel available. What do you think the hotel should do for you? should do for you?

5.5. What if no other rooms were available What if no other rooms were available within a 50-mile radius of the hotel you within a 50-mile radius of the hotel you originally booked at? originally booked at?


Rapid ReviewRapid Review1.1. Describe two hospitality situations in which a Describe two hospitality situations in which a

verbal contract is superior to a written verbal contract is superior to a written contract, and explain why you believe it to contract, and explain why you believe it to be so. be so.

2.2. Discuss Discuss ““legalitylegality”” as a major component as a major component required of an enforceable contract. Give a required of an enforceable contract. Give a hospitality example of hospitality example of ““legalitylegality”” coming into coming into question.question.

3.3. Using the Internet, go to the home page of a Using the Internet, go to the home page of a national hotel chain. Evaluate the hotel national hotel chain. Evaluate the hotel chainchain’’s reservation booking system from a s reservation booking system from a legal perspective. Address specifically the legal perspective. Address specifically the concept of consideration.concept of consideration.


Rapid ReviewRapid Review

4.4. You are the General Manager of a You are the General Manager of a midsized hotel. Draft a memo for your midsized hotel. Draft a memo for your front desk staff describing the front desk staff describing the rationale and policy for billing guests rationale and policy for billing guests with a confirmed reservation who do with a confirmed reservation who do not arrive at the hotel to use their not arrive at the hotel to use their rooms.rooms.

5.5. Give a hospitality example that Give a hospitality example that illustrates why it is so important to illustrates why it is so important to establish acceptance of an offer prior establish acceptance of an offer prior to the formation of a contract.to the formation of a contract.



6.6. On a busy weekend, you have forecasted that On a busy weekend, you have forecasted that 10 percent of your dining room reservations will 10 percent of your dining room reservations will no-show. Create notes that you would use to no-show. Create notes that you would use to explain to your reservationist why he or she explain to your reservationist why he or she should continue to book reservations when you should continue to book reservations when you are past capacity.are past capacity.

7.7. Consider the concept of Consider the concept of ““ statute of limitations, statute of limitations, ”” as it relates to a guest who has experienced an as it relates to a guest who has experienced an unsatisfactory meal in your restaurant. At what unsatisfactory meal in your restaurant. At what point do you believe the guest would lose his or point do you believe the guest would lose his or her right to protest the quality of products her right to protest the quality of products (menu items) purchased from you. Defend your (menu items) purchased from you. Defend your answer.answer.



8.8. You purchased a warranty for your You purchased a warranty for your telephone system that provides 24-hour telephone system that provides 24-hour response time from the vendor. Draft a response time from the vendor. Draft a letter to the vender protesting the letter to the vender protesting the breach of contract that resulted when it breach of contract that resulted when it took three days for you to get service. took three days for you to get service. Remember that your goal is to have a Remember that your goal is to have a professional relationship with the vendor, professional relationship with the vendor, as well as a working telephone system.as well as a working telephone system.

chapter 4 hospitalitycontracts. © 2012 stephen c. barth p.c. and john wiley & sons, inc. all...

Documents