In the third of a four-part series on travel agency law, Fox Williams partner Rhys Griffiths, and associate Anna Tindall, explain the relationships which exist between the principal and the consumer; and the principal and the travel agent.
The relationship between the principal and the consumer
A principal (by which we mean the supplier of the travel services) will be bound by the acts carried out by its travel agent where the travel agent had actual or apparent authority to do those acts.
As a matter of practical reality, the concept of ‘apparent authority’ is very broad such that the principal will typically find it very difficult to deny being bound by the acts of the travel agent, even if the travel agent acted outside the scope of its actual authority.
As a matter of practice, travel agents usually arrange for consumers to enter into contracts with principals for the supply of the principals’ travel services.
Provided that the travel agent made it clear to the consumer that the principal’s terms and conditions will form the basis of this contract, the consumer will be bound by the principal’s terms and conditions in relation to the provision of the travel service.
This means that the principal will be the party obliged to provide the travel services to the consumer, and against whom the consumer will have legal claims if there is some failure to perform or improper performance of the travel services.
It is commonly said that the agent ‘drops out’ of the situation once the contract between the consumer and the principal is formed, although this is not strictly accurate because the travel agent typically still has responsibilities to act as the ‘go between’ between the principal and the consumer, for instance in collecting and remitting consumer payments.
Typically, the travel agent will set out its duties to the consumer in its own terms and conditions, which the consumer will be asked to agree to upon entering into the booking.
The relationship between the travel agent and the principal
The duties of the travel agent to the principal are typically set out in a written agency agreement. For instance, travel agents may be required to:
- Promote and sell the principal’s travel services
- Ensure the principal’s terms and conditions of booking are brought to the attention of the consumer
- Obtain the deposit and balance for the travel services and send it on to the principal
- Collect any cancellation and amendment charges on behalf of the principal
- Not make any secret profits in addition to the agreed commission rates or travel agency fees
- Refrain from overselling or making misrepresentations about the principal’s travel services
- Comply with travel laws and regulations, particularly if the travel agent is creating package holidays
In addition to these written terms, a travel agent may owe duties to the principal under the ‘common law’ of agency, although these may be overridden by the terms of the written agency agreement. Under common law, agents typically owe their principals the following duties:
- To obey the lawful instructions of the principal
- To act only within the limits of its authority
- To indemnify the principal for losses suffered as a result of the agent’s failure to comply with its duty to act within the limits of its authority
- To use reasonable diligence and care when discharging its travel agency duties.
Of more significance is the fact that an agency relationship is typically considered as one of the classic examples of relationships which give rise to ‘fiduciary duties’ on the part of the agent. This means that the agent will owe a legal duty:
i. of loyalty and good faith to the principal
ii. not to act against the interests of the principal (e.g. by putting its own interests above those of its principal).
This is because an agent generally has broad discretionary powers to bind the principal – as described above, a principal may be bound by the acts of an agent even if it has not permitted the agent to do those acts.
In the light of the vulnerable position in which this puts the principal, the law imposes these fiduciary duties on the agent.
The final part of Fox Williams’ four-part overview of the law of travel agency will focus on the relationship between the travel agent and the consumer, and the rights and obligations which arise under this relationship.
Part one: The different types of ‘agents’