Monthly benchmark revenue paid to hotels suspended by OYO as it invokes 'force majeure'

Team SoOLEGAL 6 Apr 2020 2:10pm

Monthly benchmark revenue paid to hotels suspended by OYO as it invokes 'force majeure'

OYO wrote to its hotel partners citing 'force majeure' provisions on their agreements as the Covid-19 pandemic seriously affected their hotel business. OYO has announced that it is suspending payment of monthly benchmark revenue to its hotel partners as it considers it difficult to fulfil its obligations under its master service agreement because of Covid-19 pandemic.

While announcing this OYO stated, “This abrupt, extra-ordinary and unprecedented drop in your hotel’s revenue as a result of the COVID-19 can hardly be considered to be in the ordinary course of business. OYO’s performance and obligation in relation to the benchmark revenue under the agreement has become extremely onerous and commercially impracticable”.

In the letter, OYO states that because hotel revenues have declined and are unlikely to increase in the coming months, it is forced to exercise its 'force majeure' rights in suspending monthly target revenue payments or any other sums payable to the hotels. But, a number of angry hotel owners said OYO could not claim 'force majeure' because the provision had never been included in the original agreements.

Commenting on the situation, Vice President Gurbaxish Singh Kohli, Federation of Hotel & Restaurant Associations of India (FHRAI) said: "The hotel industry is in the midst of a major economic catastrophe and the conduct of OYO is completely below the belt."

A Mumbai hotel owner who got the letter and has two hotels with OYO said this isn't OYO's first instance of arbitrarily changing contracts. “How would the 'force majeure provision' be used if the agreement we signed with them contained no such provision, and when sales boomed OYO never gave us the amount owed”, he added. The owner also stated that OYO owes him ₹12 lakh from the past 6 months.

Tagged: OYO   Covid19   force majeure'   Gurbaxish Singh Kohli   benchmark  
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