In this second part of our overview of the law of travel agency, we explain some of the legal practicalities to consider when setting up a travel agency and why the Package Travel and Linked Travel Arrangements Regulations 2018 are important to understand. You can read part one: the basics of an agency relationship here.
How does one become a travel agent?
In order to be a travel agent in the legal sense, the travel company must be appointed by its principal (e.g. a hotelier) as its agent. This is typically set out in a written agency agreement, which will determine the rights of the parties. In addition to this formal appointment, the travel agent must then ensure that it discloses the fact that it is acting as an agent to third parties (e.g. consumers) and that it does not give third parties the impression that it is acting as a principal.
The law will generally respect the terms of the contracts entered into by the parties. If the contract denotes a travel company as an agent, then that will usually determine the issue. However, there could be situations in which the courts would disregard the terms of the contract if it found that the contracts were a “sham” and/or did not properly reflect the economic reality of the relationships between the parties. Indeed, the UK tax authorities have tried to pursue this argument in relation to the business models of a number of online travel agents. So far it has failed, primarily because of the emphasis given by the courts on the importance of the courts respecting the terms of contracts.
How does the creation of a package holiday affect the travel agent’s status?
The involvement of the travel agent in the creation of an itinerary for the consumer might lead to the creation of a package holiday (or a linked travel arrangements) under the Package Travel and Linked Travel Arrangements Regulations 2018. Moreover, if the travel agent sells a flight to the consumer, whether on its own or as part of a package holiday, then the travel agent might be required to hold an ATOL pursuant to the ATOL Regulations 2012.
Does this change the status of a travel agent into a principal?
The short answer is “no”, provided that the travel agent is careful to ensure that the sale process and the consumer “paperwork” maintains its status as a travel agent. There is otherwise a risk that the travel agent may end up selling a package of travel services under a single contract to the consumer and so act as a principal.
The next part of our overview of the law of travel agency will focus upon the relationship between the principal and the consumer and secondly, on the relationship between the principal and the travel agent. We will look at the rights and obligations which arise under these relationships.