As explained in our April 18, 2012 column, "The Termination of Hotel Management Agreements," and as the Appellate Division, First Department confirmed last month in the highly publicized case, Marriott International v. Eden Roc,1 there is no longer any doubt that hotel management agreements are terminable by the hotel owner notwithstanding that there may be decades remaining on the term of the contract and even the absence of any default. The law is clear: these contracts are terminable under common law and constitutional principles concerning the revocability of agency agreements and personal services contracts.2
The ability to terminate a hotel management agreement is, not surprisingly, of critical importance to hotel owners, providing owners with the ability and flexibility to protect their multi-million dollar investments from mismanagement by an unwanted manager of its business. For decades, courts have repeatedly protected this significant termination right, refusing to enjoin terminations and even middle-of-the-night takeovers by hotel owners even if such termination may constitute a breach of the contract. The reason: hotel management agreements are often both agency contracts, revocable at will by the principal hotel owner, and personal services contracts, the termination of which courts have long refused to enjoin as antithetical to this country’s prohibition against involuntary servitude.3
