Are You An Agent For A Supplier Or Fiduciary For The Client?

by Paul Ruden
Are You An Agent For A Supplier Or Fiduciary For The Client?

A recent Travel Market Report survey asking readers about topics of legal interest brought a familiar question to the forefront. Since it ties back to the very first columns I wrote about being a travel agent in the age of terrorism, it is pertinent to address it now.

The question is whether a travel agent is a fiduciary for his or her client or an agent for a supplier principal and thus protected by the principal-agent concept. In fact, you can simultaneously be both an agent for a supplier and a fiduciary in relation to your client. Let me try to explain.

Take the two typical cases: 1) an agent makes a mistake that a reasonable agent would not have made in the same circumstances; (2) a supplier, whose selection was reasonably recommended by the agent, makes a mistake that injures the client in some way.

If the agent made the mistake – as, for example, by failing to communicate relevant information about the physical demands of a tour or failing to inquire about the current status of a resort property known to be “under renovation” – the error is likely to result in liability under the fiduciary standard of conduct. That standard requires the agent to act in the interest of the client at a very high level of diligence and professionalism. The agent cannot avoid liability by proving he was an agent acting for a principal, because it was the agent’s own conduct that led to the injury.

Are you with me so far?

In the second case, where the supplier is responsible for the injury to the client – let’s say by failing to perform a booked flight or concealing from the agent, and thus from the client, the existence of safety issues at a resort – the agent should be protected by the agency principle. The liability should belong only to the agent’s principal, the travel supplier, as long as the agent made the proper and timely disclosures to the client.

The key to securing the protection of the principal-agent relationship is straightforward and easy to understand and apply: You must disclose the existence of the agency relationship and the identity of the principal/travel supplier in time for the client to refuse to proceed with the booking. This should be done in writing early in the process of giving advice to the client and in no case later than the initiation of actual booking. The earlier the notice is given, the better. And it is a good practice to repeat the notice in correspondence, emails and similar communications.

When the relationship between a travel agent and its suppliers is disclosed, travel agents should rarely, if ever, be held responsible for the failure of the supplier to perform as promised. The principal-agent relationship is an additional arrow in your defensive quiver and can give you additional leverage in any settlement negotiations following an injury to the client’s interests. The core legal principle is that an agent is not liable for the acts or omissions of a principal, which can be any travel services supplier, only if the agent disclosed the existence of the agency relationship and identified the principal to the agent’s client. If that approach is followed, all claims by consumers arising out of non-performance by a travel supplier should succeed only against the supplier, and not against the agent acting on the supplier’s behalf.

Note that it is critical not only to expressly state the existence of the agency relationship but also to identify the principal to the client. Failure to identify the principal may cost you any protection you might otherwise get from stating in correspondence with the client that “I am an agent and not liable for the acts or failures to act of my principal.” If there are multiple suppliers involved in a transaction, you can say something like “ABC Travel, Inc., serves solely as an agent for each travel services provider named in this brochure [or ‘named as part of your itinerary’] and is not responsible for their performance of contracted services.”

Another important thought on this subject: make sure your agency disclosure is explicit, clear and positioned in the transaction so that the client cannot plausibly argue that “I never noticed that disclosure because it was buried in a bunch of fine print.” Use bold-face type or other distinguishing methods to make the disclosure stand out from the often detailed and obscure information that may surround it. Some states require that this exculpatory language be in a certain font size or meet other physical criteria to make it stand out. You should consult your agency’s attorney about this.

A final question related to this topic is whether a travel agency can disclaim liability for its own mistakes. Only you can decide whether it is wise, as a client-relationship issue, to try to disclaim responsibility for agency conduct. If you want to include such a disclaimer, you must understand that in many jurisdictions, your ability to do it depends on the nature of the mistake: was it “ordinary negligence” or “gross negligence?” Ordinary negligence is the failure to use reasonable care, as in “the level of care a reasonable travel agent would use in similar circumstances.” Gross negligence refers generally to conscious and voluntary disregard of the need to use reasonable care. It is seen most often in agents who believe their principal role is to take orders for bookings rather than serving as a professional advisor.

It may be possible in your state to disclaim responsibility for ordinary negligence, but it is usually not acceptable to disclaim for gross negligence. Again, you should consult your agency counsel to fully understand what is expected of you and your agents and to get proper help in drafting a disclaimer.

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