CHAPTER 8 a ee, & Learning Outcomes At the end of the chapter, you should be able to: 1. explain the reasons for complying with existing laws and regulations; 2. describe the basic component of an event management agreement or contract; 3. clarify the other clauses or components of an event contract; 4. discuss other event management agreements; 5. describe thé synergistic relationship of contracts, permits, and licenses; 6. explain the risk management procedures; and 7. discuss the risk control measures. According to Dr. Peter Tarlow, risk management and safety expert, all events carry two risks: (1) the risk of a negative occurrence both on-site and off- site and (2) the negative publicity that comes from this negative occurrence. Whenever people are brought together, there is an element of risk. _ Most modern events have the potential for negligent activity that can lead to long and costly litigation. The concern for risk management and other legal and ethical issues has increased due to the increase in the number of professionally managed events. During the mid-1970s, most events were organized by amateurs. Because of the lack of training in risk management, there was a corresponding interest by the legal profession in bringing litigation against negligent event managers. Professional event managers are now becoming smarter with regard to legal, ethical, and risk management issues. 124 Scanned with CamScannerCompliance with Existing Laws and Regulation There are many reasons why an event must comply with existing laws and regulations. The four primary reasons are: 1. to protect one’s legal interests; 2. to abide by ethical practices; 3. to ensure the safety and security of the event stakeholders; and 4. to protect one’s financial investment. Protecting One's Legal Interests Preparing contracts, permits, and licenses that are required and complying with other legal requirements will ensure that the event may proceed without interruption. Contracts or agreements may range from a simple letter “or memorandum of understanding to complex documents with long riders or attachments. The event manager should hire a competent legal counsel to review all standard agreements such as hotel contracts to ensure their validity prior to execution. The process of obtaining permits and licenses may require weeks or even months to accomplish, so, the event manager must carefully research each jurisdiction where he or she will produce an event and meet the time requirements. The cost of permits and licenses are usually nominal. However, larger events or events that pose high risks such as the Grand Prix auto racing may require the posting of expensive bonds. Adherence to Ethical Practices One of the requirements of a profession is to follow a code of ethical conduct. Because event management has emerged as a modern profession, a code of ethics has been developed by the International Special Events Society (ISES). Several related industry organizations such as the Meeting Professionals International have similar codes. A code of ethics shows what is standard and customary in both a profession and a geographic area. Ensuring the Safety and Security of Event Stakeholders A safe event environment is one that is protected from future harm. The event manager is responsible for constructing a safe, secure environment .125 Scanned with CamScannerand sustaining it during the course of an event. The event manager should not transfer the responsibility to others. The event manager has a legal and ethical responsibility to event stakeholders to design and maintain a safe and secure event environment. Protecting One’s Financial Investment Practicing thorough legal, ethical, and risk management proactive measures may help the event produce greater revenues. Lapses in legal, ethical, and risk management judgment may cause not only loss of property, life, and money but also loss of the event’s good name. Basic Components of an Event Management Agreement or Contract The event management contract shows the agreement between two or more parties regarding their mutual interests as specified in the agreement. A binding contract must contain the following basic components: the parties, the offer, consideration, and acceptance. Parties The names of the parties must be clearly identified. The agreement must be described as being between these parties and the names that are used in the agreement must be defined. The typical event management agreements are between the event manager and his or her client or between the event manager and his or her vendor. Other contracts may be between an event professional and dn insurance company, an entertainment company, a bank, or other lending institution. 7 Offer The offer is the service or product given by one party to another. The event manager may offer consulting services to a client, or a vendor may offer products to an event manager. The offer should list all services that an event professional offers to provide. Any miscommunication may lead to costly litigation in the future. . 126 Scanned with CamScannerConsideration The consideration clause defines what one party will provide the other upon the acceptance of an offer. Acceptance When both parties accept an offer, they execute or sign the agreement confirming that they understand and agree to comply with the terms and conditions of the agreement. Other Components In addition to the key components, event management agreements usually include other clauses or components. - The most typical clauses are: Terms The terms clause defines how and when the funds will be paid to the person making the offer. If the event manager offers consulting services, he or she may request a deposit in the amount of the first and last month’s retainer and then require that the-client submit monthly payments of a certain amount on a certain date every month. These terms define the financial conditions under which the agreement is valid. Cancellation Events are always subject to cancellation. Thus, it is important to provide for this contingency legally with a detailed cancellation clause. The cancellation clause usually defines under’ what circumstances either party. may cancel, how Notification must be provided, and what penalties may be required in the event of cancellation. - Force Majeure (Act of God) | In the force majeure clause, both parties agree on which circumstances, deemed to be beyond their control, will allow an event to be canceled without penalty to either party. These occurrences may include hurricanes, earthquakes, floods, volcanic eruptions, tornadoes, wars, famines, or other disasters. 127 Scanned with CamScannerArbitration It is acommon practice to include in event management agreements an arbitration clause in place of a legal judgment when both parties fail to agree. The use of arbitration may save both parties substantial costs over traditional litigation. Billing Because many events involve entertainers, the agreement must define how entertainers will be listed in advertising and in the program. Time is of the Essence The time-is-of-the-essence clause instructs both parties that the agreement is valid only if it is signed within a prescribed period of time. This clause is usually inserted to protect the person making the offer from loss of income due to late execution by the buyer. Assignment Agreements should ‘contain clauses indicating that the contract may not be assigned to other parties. For example, if Mary Santos has executed the agreement on behalf of XYZ Company, the agreement may not be transferred to Santos's successor if Mary Santos leaves the XYZ Company. Insurance Agreements usually detail the type and limits of insurance that must be in force by both parties as well as a requirement that each party co-insure the other. Hold Harmless and Indemnification In the event of negligence by either party, the negligent party agrees to hold the other party harmless and to defend (indemnify) them against harm. 128 Scanned with CamScannerReputation Some event managers include a specific clause that recognizes the importance of the purchaser’s reputation and states that the event manager will . exert his or her best efforts to protect the purchaser's reputation during the event. The Complete Agreement i The complete agreement is the final clause which states that the agreement constitutes the full understanding of both parties. Other Agreements There are other management agreements aside from the main event agreement. These are: 1, Consulting agreement - an agreement in which one party, usually the event manager, agrees to give consulting services to another party. Employment agreement - an agreement in which an employee agrees to particular terms of employment. . Exhibitors contract - an agreement between the exhibitors and the sponsor of an exhibit to rent a booth at the exhibit. Hotel contract - an agreement between the hotel and the organization holding an event to furnish rooms, function space, and food and beverages services for a particular event'or several events. . Non-compete agreement - an agreement in which an employee agrees not to engage in a contract ina particular industry for a certain period of time after the conclusion of employment. . Purchase order - an order to a seller to supply products or services. & Sponsorship ‘agreement - an agreement between a sponsor and an event organizer in which the event organizer agrees to give marketing services to the sponsor for specific payment. 129 Scanned with CamScanner8. Vendor agreement - an agreement between the.seller and the event manager to supply particular services or products for an event. Meaning of Permits ~ Permits are issued by local governments. They allow the event manager to hold event activities. A permit is issued only after the necessary documents have been submitted and the necessary payment has been made. Meaning of Licenses A license is issued by a government agency or by a private association. It allows the event manager to hold a particular activity. There is a slight difference between a permit and a license. There are strict requirements for obtaining a license than those required for obtaining a permit. Permits and licenses must be acquired for several events. The bigger the event, the more permits and licenses must be acquired. Synergistic Relationship of Contracts, Permits, and Licenses The event manager must comprehend the importance of contracts, permits, and licenses in organizing modern events. Contract permits and licenses have legal, ethical, and risk management effects. To produce positive results, event managers should cooperate with the concerned agencies. Risk Management Procedures When people gather together for celebration, reunion, and business or education purposes, there is a corresponding risk of losing life or property. Several accidents have happened at events. The effects of these disastrous happenings are increased expense, loss of money, and loss of business. Experts inrisk management have established basic rules to manage risks during events. These are: 1. Avoid or diminish the risk - each circumstance should be. assessed for possible risks. These risks should be determined and avoided. 130 Scanned with CamScanner2. Transfer the risk - for risks that cannot be avoided and for which the event manager should not be held liable, the event manager should review and check whether they are the responsibility of someone else, as in the case of a delegate slipping on a wet floor in the restroom. Suppliers in events are required to share. in the liability for the event. . Devise backups and alternatives - alternative plans should be ready to be put into place. . Distribute the risk - obtaining various sources of revenue for an event including many sponsors can reduce the risk of failure to generate the needed revenue. Risk Control Measures The following are the risk control measures: a Elimination plans - for example, removal of dangerous children’s equipment . Substitution plans - for example, replacing slippery tiles in the restroom with non-slippery tiles . Isolation plans - for example, isolating dangerous or noisy equipment Engineering controls - for example, using fences to prevent access to busy roads ' Administrative controls - for example, using warning signs, trained staff, and well-developed procedures ~ Contingency plans - for example, evacuation as a contingency plan in case the risk cannot be completely avoided 131 Scanned with CamScannerEvents must comply with the standard and customary regulations and procedures. There are four basic reasons why an event must comply with existing Jaws and regulations. The reasons are to protect one’s legal interest, to abide by ethical practices, to ensure the safety and security of the event stakeholders, and to protect one’s financial investments. «The key components of an event management agreement or contract are the parties, the offer, consideration, and acceptance. Event management agreements usually include other clauses, the most typical of which are terms, cancellation, force majeure, arbitration, billing, time is of the essence, assignment, insurance, indemnification, reputation, and the complete agreement. In addition to the main event consulting agreement, there are other event management agreements, namely consulting agreement, employment agreement, exhibitor- hotel contract, non-compete agreement, purchase order, sponsorship agreement, and vendor agreement. Contracts, permits, and licenses have a synergistic relationship. All these three instruments are necessary for the professional operation of modern events. A strategy of risk management is essential to protect the event organizer and to ensure that the delegates have a safe and enjoyable experience. It is important that event organizers anticipate the risks and try to curtail and minimize the risks. 132 Scanned with CamScannerDISCUSSION QUESTIONS 1. Explain the reasons why an event must comply with existing laws and regulations. 2. Describe the basic components of an event management agreement or contract. 3. Discuss other clauses or components. 4. Describe other event management agreements. 5. Define permits and licenses. : 6. Clarify the synergistic relationship of contracts, permits, and licenses. Explain the importance of risk management procedures. Describe the four basic rules in risk management. 9. Discuss the risk control measures. , KEY TERMS AND CONCEPTS agreement license ‘ reputation arbitration litigation : risk components - legal ‘rider contract purchase order security force majeure permit terms clause insurance risk management vendor agreement identification clause tisk control CHAPTER ACTIVITIES 1. Design a risk management plan for your event. Describe how the plan will change based on changing weather conditions. 2. Research on the types of insurance that must be purchased to reduce your financial exposure. 133 Scanned with CamScannerCHAPTER QUIZ I. Identify the following: 1, A legal document defining responsibilities for all parties concerned : 2. A document giving official permission to conduct a specific activity 3. An order to a vendor to provide services or products 4, An agreement in which an employee agrees to specific terms of » employment 5 5. A means of safeguarding or protecting against risk or injury 6. A judicial proceeding 7. An agreement between a vendor and an event manager to provide specific services or products for an event 8. A clause which defines how and when the funds will be paid to the person making the offer 9. The service or product given by one party to another 10. A clause which defines what one party will provide the other upon the acceptance of the offer II. Enumerate the following: 11-12. The risks of an event 13-16. Reasons why an event must comply with existing laws and regulations 17-20. Rules in risks management 135 Scanned with CamScannerREFERENCES Angelo, R.M. Hospitality Today: Michigan: Educational Institute of the American Hotel and Motel Association, 2006. Brown, M.T. Working Ethics..San Francisco: Jossey- Bass, 2005. Goldblatt, Joe. Special Events-Events Leadership for a New World. New Jersey: - John Wiley and Sons Inc., 2005. Hall, SJ. Ethics in Hospitality Management. Michigan: Educational Institute, 2005. Keiser, J.R Principles and Practices of Management. New York: Van Nostrand Reinhold, 2005. Leiper, N. Tourism Management. Melbourne, Australia: RMIT Publishing, 2005. Mintzberg, H. Generic Strategies. New Jersey: Prentice Hall, 2005. Rice; Catherine. The AMA Guide for Meeting and Event Planners. New. York: Thomson Publishing Co., 2005. 137 Scanned with CamScanner