An industry lawyer has condemned travel companies that are careless about whether they act as agents or principals in transactions, arguing that it could cost them their business.

Leading industry lawyer Cynthia Barbor, a partner in law firm K&L Gates, told an ABTA law seminar last week: “It may be tempting to think it does not matter whether you sell as an agent or principal, but it is vital.

“Many companies have not considered their potential liability or are getting it wrong.”

Confusion about what constitutes a package holiday has only added to the difficulties, she said.

“Where services are put together to form a holiday, they may or may not constitute a package under the Package Travel Regulations,” said Barbor.

These give European holidaymakers legal redress in their home country if something goes wrong. Whether companies act as principals – suppliers of a hotel or car hire – or as agents who sell the service, affects their liability.

Barbor said: “Companies often assume they are not liable because they say they are not. This can prove an expensive mistake. A court will look behind the wording to examine the precise nature of relationships.

“You need to look at contracts with suppliers, contracts with consumers, websites, brochures, offers and advertisements and ensure they are consistent.

“If you are acting as an agent, say so and ensure the documentation reflects it,” she said.

Barbor warned against inadvertently offering packages for sale by combining services and presenting them at an inclusive price, for example on Teletext.

Barbor advised companies to examine insurance policies closely. “Are you covered for the cost of defending civil and criminal claims in the UK and overseas, and for the costs of an inquest? Does your insurance cover you as an agent only when you sometimes act as a principal?”

ABTA head of legal services Simon Bunce said: “If you don’t know which side your business falls – principal or agent – you will be in trouble.”