This article discusses an element of civil code known as Agency Law. The purpose of this article is to simply introduce the reader to laws that may affect their business as a travel agent and does not intend to offer legal advise. As in all legal matters the person to turn to for advise is your legal professional. The author of this article is not a legal professional.
Let’s start by asking a simple question.
What is a Travel Agent?
The most common term for someone who sells travel is “Travel Agent”, but legally what does this mean? The term “Agent” means that you are acting on someone’s behalf, known as a “Principal”. A “Principal” that an agent represents may be a supplier, a client, or another third party. An “Agent” may represent a supplier, a client or another third party, two of the three, or all three at the same time.
What is “Agency” and how is it established?
Here is a definition of “Agency” from Blacks Law Dictionary.
‘A relationship, created either by express or implied contract or by law, whereby one party (called the principal or constituent) delegates the transaction of some lawful business or the authority to do certain acts for him or in relation to his rights or property, with more or less discretionary power, to another person (called the agent, attorney, proxy, or delegate) who undertakes to manage the affair and render him an account thereof.’
What is Agency Law?
It is the law regarding a Principal and an Agent. The law defines establishment and responsibilities of principal and agent. The law also defines element of “control” between principal and agent and it provides for the duties and termination of agency. Finally the Law defines legal responsibility of Principals and Agent.
What is a Fiduciary?
The most common is a trustee of a trust, but fiduciaries can include business advisers, attorneys, guardians, administrators of estates, real estate agents, bankers, stock brokers, title companies, or anyone who undertakes to assist someone who places complete confidence and trust in that person or company.
A fiduciary is held to a standard of conduct and trust far above that of a stranger or of a casual business person. It is the highest possible standard of care in business. A fiduciary must avoid “self-dealing” or “conflicts of interests” in which the potential benefit to the fiduciary is in conflict with what is best for the person who trusts him/her/it. For example, a stockbroker must consider the best investment for the client, and not buy or sell on the basis of what brings him/her the highest commission.
Whose agent is a travel agent?
Before the Airline Deregulation Act of 1981, travel agents were appointed by the Air Traffic Conference who executed an “Agency Sales Agreement: with travel agents that defined a travel agent’s duties and obligations to the ATC;s member carriers.
The Agreement imposed a fiduciary obligation upon the appointed travel agents. Today, the Airline Reporting Corporation (ARC) continues appointing travel agents and executing the “Agency Reporting Agreement” on behalf of its member airlines imposing a fiduciary responsibility upon its appointed travel agents.
Travel agents must adhere to the standards as set forth in Agreement and are held liable for any deviation of the standards. As an example, a travel agent that sells a client a “Hidden City Fare” to save the client money, will be charged the difference between the fare and the fare they should have sold. The agent breached their fiduciary obligation to the airline and will have to pay the debit memo.
Travel agents act as agents for the supplier who is the principal in the transaction.
What About the Client?
Remember that the definition of an agent is ‘A Relationship, Created Either by Express or Implied Contract“
Let’s say that the name of an agent’s agency is “Your Travel Agent” A new client visits the agency and asks “Are you MY Travel Agent?” The agent responds “Yes, I am YOUR travel agent?” In this case it would seem that the agent is implying that they are entering into an agent / principal relationship with the client.
The client would have every reason to believer the agent has a fiduciary responsibility to them,
Here are the differences in the relationship with the client
As an agent of the supplier, you only have to be fair and honest with the client. You can’t cheat or grossly misrepresent information to the client. It is very difficult for a client to bring a lawsuit successfully when your agency relationship as an agent of the supplier has been disclosed.
As an agent for the client, you are held to a much higher standard of care for the client’s arrangements. If something goes wrong and you either knew or should have known about it, the client can sue using a claim of Breach of Fiduciary and be awarded substantial damages.
Here is how to Use Agency Disclosure Notices.
* Always have your clients sign it in writing
* Introduce it at the beginning of a conversation
* Have Your attorney prepare it for you as each state’s agency laws are different.
* You can find samples of Agency Disclosure Agreements in the Forms and Documents Group at TravelProfessionalCommunity.com
So, let’s recap the most important points.
* Agency Relationships may be created by implication
* Travel Agents are generally agents for the supplier
* Agency disclosure notices should be in writing and signed by every client.