Define Management Agreement

This part of the management contract describes how long the companies under the management contract have control of the function, department or company. The duration can range from a few months to several years. You may also need to consider the terms and conditions related to the duration of the contract. For example, if the management company does not meet its performance objectives, the management contract may be terminated, even if its duration has not yet expired. Management contracts usually have a duration of one year which defines the period during which the parties are bound by their agreement. Most contracts also provide that the owner can terminate the contract “for a significant reason”, for example.B. due to the inability of the management company not to fulfill the contract (usually after a termination and an opportunity to remedy the failure of the management company), the misappropriation of funds by the company or the commission of another offence or misdemeanour, and possibly the failure of the property, revenues, expected profits or occupancy levels. Similarly, the contract generally provides for the right of the management company to terminate “for important reasons”, for example. B when the owner does not pay the management company or the costs of funds whose financing has been agreed by the owner on the basis of a budget approved by the owner. The most interesting questions arise in the case of contracts in which either party can terminate the contract “for no reason”.

These provisions are almost always accompanied by so-called “liquidated damages” clauses, which provide for payment to the management company in the event of termination. If the management company has fulfilled its obligations under the contract but is terminated before the expiry of the contract, it is appropriate for the company to obtain compensation. It is important to negotiate this figure in advance and, preferably, advance a fixed amount that the owner can budget if the owner decides to regain control of the day-to-day operation of the hotel before the contract expires. The management company will likely require a termination payment based on the remaining term of the contract at the time of termination and the average monthly payment to the management company prior to termination. A typical provision would multiply the remaining months of the contract by a percentage of the average monthly fee earned by the management company prior to termination. When an organization or company hires a management company, it is usually necessary to perform certain tasks….

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