Contract Law and Overbooking
Contracting for a Room
  • is a binding contract if the six essential elements are met
  • the agreement can take many forms
    • walk-in
    • confirmed reservation
    • guaranteed reservation
    • prepaid reservation
    • blanket reservation
  • when a hotel confirms more reservations than the number of rooms they have
  • legal issues
    • if the hotel cannot accommodate the guest then the hotel has breached the contract and may be liable for damages
    • collect compensatory damages
      • payment of travel expenses seeking alternative lodging
      • telephone calls
      • punitive damages may be awarded
      • need to have a clear policy on walking guests in order to minimize liability
  • overbooking policy should include the following:
    • assist in locating alternative accommodations
    • pay for any additional cost of the room
    • provide transportation to the second hotel
    • pay for all phone calls necessitated by the move
    • consider additional courtesies  (e.g., gift certificate for a complementary room)
    • keep good records to establish the cause of the overbooking
  • ethical issues
    • should we sell rooms we do not have?
    • what if hotel makes a profit on the walked guest?
    • damages to goodwill
Breach of Reservation by the Guest
  • guest who fails to notify hotel of non-arrival has breached the contract and may be liable for damages  (only if the hotel is unable to resell the room or has to sell the room at a lower rate)
Intentional Interference with Contractual Relations
  • a tort is non criminal conduct done by one person that injures another
  • 3 elements are necessary
    1. a valid contract must exist
    2. a third party must be aware of the contract
    3. the third party must intentionally cause one of the parties to break the contract and do business with the third party
Catering and Convention Contracts
  • need to exercise great care
  • all parties need to fully understand and agree to contract terms

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this page is maintained by Reed Fisher
last updated January 15, 2011