Chapter 15 The Travel Industry

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 2 Summary of Objectives  To examine international, federal, provincial and territorial regulations  To define agency and the duties of each party in an agency relationship

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 3 International Government Regulation  International regulations include The Warsaw Convention 1929The Warsaw Convention 1929 The Chicago Convention 1944The Chicago Convention 1944 The Bermuda Convention 1946The Bermuda Convention 1946 The Hague Protocol 1955The Hague Protocol 1955

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 4 Federal Regulation  Federal regulations include the following statutes: Carriage By Air ActCarriage By Air Act Aeronautics ActAeronautics Act National Transportation ActNational Transportation Act Immigration ActImmigration Act Competition ActCompetition Act  The Canadian Tourism Commission creates policy and partners with the private sector.

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 5 Actual and Apparent Authority of an Agent  The principal authorizes the agent to contract with a consumer on the principal’s behalf.  A contract negotiated outside the scope of the authority of the agent will not bind the principal.  If the agent is acting within the apparent and expected scope of authority, the consumer is not required to ask if the agent has actual authority to act.

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 6 Principal-Agent Relationship  An agency relationship can be created by contractby contract by ratificationby ratification by estoppelby estoppel by necessityby necessity

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 7 Employee and Independent Agent  The agency relationship can be created between a principal and an employee or between a principal and an independent agent.  In general, a principal is vicariously liable only for acts occurring in the course of employment by an employee.

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 8 Duties of Agent to Principal  Conduct expected from an agent by a principal includes the following: ObedienceObedience CompetenceCompetence oFor example, the advice of travel agents has the force of professional opinion and consumers are entitled to rely on it

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 9 Duties of Agent to Principal 2  The personal performance aspect usually required in an agency agreement may restrict delegation of duties.  The principal can expect the agent to act with honesty toward the public – in cases of fraudulent misrepresentation the consumer can sue the principal.  The principal can expect the agent to act with good faith since a high degree of trust and professionalism is required of all agents.

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 10 Duties of Principal to Agent  There is a competence and good faith requirement expected of the principal.  The agent can expect payment of commissions earned and reimbursement of costs incurred.

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 11 Liability of Agent and Principal  Agents are protected from default by a principal upon duly informing the consumer that the relationship is one of agency.  However, an agent who leads the consumer to believe he or she is the principal may be liable to the consumer.

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 12 Duty of Care  The travel agent has a duty of care to the consumer: To provide complete and accurate informationTo provide complete and accurate information To ensure all aspects of the tour will satisfy a reasonable personTo ensure all aspects of the tour will satisfy a reasonable person  Travel agents and wholesalers failing in these duties may be liable for breach of contractbreach of contract breach of duty of care in negligencebreach of duty of care in negligence

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 13 Vicarious Liability  If a travel agent knows or should have known of the questionable service reputation of a tour operator, the agent can be found to be vicariously liable to the consumer.

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 14 Mental Distress  The plaintiff must prove the parties to the contract contemplated the shock, disappointment and annoyance that a breach of duty of care might cause.

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 15 Verbal Contracts  Contracts arranged verbally are very common in the travel industry.  The plaintiff’s burden of proof is the balance of probabilities.  Courts tend to rely on the accuracy of the traveller’s memory, and to find the agent to be honest but mistaken.

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 16 Disclaimer  A disclaimer is a statement on a contract, travel brochure or ticket.  It attempts to limit the liability of the person or company relying on it.  It must be clearly written.  It must be brought to the attention of the consumer.

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 17 Court Actions  Most travel litigation is heard in small claims court.  Judges play a more inquisitorial role since the parties are generally unrepresented by lawyers.

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 18 Insurance  In the past decade, there has been an increase of about 30 percent of claims against travel agents.  Agents should purchase errors and omissions insurance.

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 19 Other Legal Rights  Other legal rights often being litigated include refunds of ticketsrefunds of tickets baggage claimsbaggage claims the rights of travellers with disabilitiesthe rights of travellers with disabilities the right to cancel transportationthe right to cancel transportation

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 20 Other Legal Rights 2  The right to refuse or eject troublesome travellers  The right to refuse illegal ticket holders  The right to refuse pets

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 21 Trust Money  The use of customer funds received by travel agents is circumscribed to the following situations: The purchase of the travel service the customer has contracted forThe purchase of the travel service the customer has contracted for Reimbursement of funds to the customerReimbursement of funds to the customer If and when it is earned, the payment of a commission to the agentIf and when it is earned, the payment of a commission to the agent

Copyright © 2007 by Nelson, a division of Thomson Canada Limited 22 Provincial or Territorial Travel Acts  This legislation protects consumers from poorly managed operations and unscrupulous agents and operators  The statutes require the registration of agents and the use of trust accounts by agents  The Travel Acts have created compensation funds for customers suffering losses because of the conduct of agents or operators