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Hotel, Restaurant, and Travel Law:A Preventive Approach, Seventh Edition
Chapter 13Travel Agents and Airlines—Rights and Liabilities
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Introduction
The American travel industry originally catered to three categories of travelers:
Wealthy
Business people
Government officials
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Introduction (continued)
Travel industry has grown to serve more people
Has become more complex
Problems have also grown
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Introduction (continued)
Travel agents do not just sell tickets
They also dispense travel information
Offer advice on all aspects of a trip
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Introduction (continued)
Travelers are very aware that they may be entitled to compensation when their travel plans go awry
Disappointed travelers seek recompense in court via litigation
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Makeup of the Travel Industry
Generally comprised of four groups:
Suppliers of travel services
Travel wholesalers
Travel agents
Travelers
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Agency Law
Issues arise whether the travel agent is a legal representative of the supplier of travel services or a legal representative of the traveler
Sometimes they are representative of the traveler and sometimes the representative of the travel supplier
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Agency Law (continued)
Outcome of a case is often determined by whether the travel agent acted as the agent of the traveler or of the supplier
Agency is a relationship in which one person acts for or represents another based on authority voluntarily given by that other person
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Agency Law (continued)
Principal is the person who authorizes someone to act on their behalf
Agent is the person so authorized, the one who represents or acts for the principal consistent with the principal’s direction
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Agency Law (continued)
Classic example is employer (principal)/ employee (agent)
Principal is legally bound by the agent’s act and agent is not
If a travel agent acts as an agent for an airline, the airline is required to provide air transportation
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Agency Law (continued)
When an agent acts outside of delegated authority, the agent may be liable for fraud
When a travel agent acts as an agent for a tour operator when selling a trip, the agent must inform the client of the tour operator’s identity
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Agency Law (continued)
Agency relationship must be distinguished from that of independent contractor
Independent contractors are people who contract to do work for someone else, but are engaged in an independent business for themselves
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Agency Law (continued)
Independent contractors Furnish their own supplies and
equipment
Pay their own expenses
Set their own hours of work
Paid fees or compensation, not a salary
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Tariffs Rule or condition of air travel that binds the
airline and passengers
Cover such items as: Limitations on the airline’s liability for damaged
baggage Procedures for filing a claim Rules for reservations and check-in times Limits on the airline’s liability for schedule
changes and flight delays Personal injury liability limitations
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Tariffs (continued)
Applicable agency is the Department of Transportation
Some tariffs contain one-sided language favoring airlines
Copies of tariffs are available upon request at airports
Conclusively and exclusively govern rights and liabilities between airline and traveler
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Remedies for Small Damages
Small Claims Court Forum that encourages people to act as
their own advocate
Class Action Suits All people who have suffered losses from
same cause jointly sue a defendant
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Rights of the Traveler
When travel plans do not turn out as represented and purchased, the law is quite supportive of the traveler and provides a remedy in many circumstances
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Baggage Claim—Domestic and International
When travelers hand their baggage to an airline, they are entering into a contract with the airline
The contract binds the airline to deliver the baggage to its destination and return it to the traveler upon arrival
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Baggage Claim—Domestic and International (continued)
Failure to deliver baggage = breach of contract
Because of frequency of lost or delayed baggage, tariffs protect the airline from unlimited liability
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International Flights
Until 2003, international flights were covered by the Warsaw Convention
International treaty that sets limits of liability for lost, stolen, damaged, or misdelivered baggage
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International Flights (continued)
Under convention, liability for checked luggage is $9.07/pound up to 44 pounds (approximately $400)
Passenger is informed of limitation on airline ticket
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International Flights (continued)
In exchange for limited liability, the airline is presumed to be responsible when luggage is missing
Airline can rebut this presumption if it can show that it took all possible precautions to avoid loss
Passengers have the option to purchase insurance to cover loss in excess of the Convention’s maximum
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Rights of Airline Captains Passengers are confined in the
aircraft for duration of the trip
If someone seeks to jeopardize the safety of the passengers, calling the police is not an option
Law allows pilots to remove a ticketed passenger prior to takeoff
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Overbooking Many people make airline reservations and
do not appear for the flight
Problems arise when there are fewer no-shows than expected
The airline will bump some passengers
The airline is well-advised to assist the customer in arranging alternate travel plans
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Rights of Would-Be Passengers
Involuntarily bumped travelers may be entitled to damages for breach of contract
If the carrier fails to assist a traveler in making alternate plans, punitive damages may be awarded
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Priority Rules for Seating When overbooking occurs, law
specifies how to determine who will be denied seating
Airlines must first ask for volunteers
Airline must apply its priority rules, which are developed and filed with the Department of Transportation
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Overbooking on International Flights
Governed by Warsaw Convention
Permits a maximum recovery of $400
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Punitive Damages on International Flights
Passengers bumped from international flights are not entitled to punitive damages
Although protected from liability, the airline is well-advised to assist its customers in arranging alternate travel plans
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Additional Legal Issues Involving Airlines
Lack of documentation for international travel
Wrongful rejection of identification documentation
Wrong destination
Liability for negligence
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Liabilities of Travel Agents and Charter Tour Companies
Key role in travel industry
Their influence has decreased significantly with the advent of home computers
Today agents are information specialists on whose expertise much of the traveling public relies
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Liability for Own Actions A travel agent is not an ensurer that
all aspects of a trip are safe
The travel agent cannot be reasonably expected to guarantee that a traveler will have a good time or return home without having experienced an adverse adventure or harm
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Duty to Investigate Third-Party Suppliers
Agents have a duty to customers to:
Investigate their operations Locate material information about them
that is reasonably available Disclose that information to their
customers
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Recommend Travel Insurance
Travel agents are well-advised to suggest travel insurance to their customers
Insurance compensates for cost paid for the vacation if the trip is cancelled for certain reasons
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Security Incidents
If travel agents are aware of security issues with a hotel or other service, they should disclose that information to the traveler
Agents are well-advised to inquire about recommended destinations to ensure their relative safety
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Liability for Breach of Contract by Third-Party Service Suppliers
When a customer purchases a trip from a travel agent and the trip does not materialize as portrayed, the agent may be liable for breach of contract
If a wholesaler goes bankrupt or out of business, the travel agent will bear the loss
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No Liability for Third-Party Suppliers’ Negligence
Travel agents are not liable for the negligence of hotels, resorts, or other service providers
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Tour Operators Not liable for negligence of third-party
suppliers
Not liable for suppliers’ contract breaches
Not generally liable when a tour participant is injured at an attraction on tour
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Disclaimers by Travel Agent Disclaimer—term in a contract that
attempts to avoid all liability by one party of the contract
Effectiveness is questionable
Include in contract information that defines relationship between all parties
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Errors and Omissions Insurance for Travel Agents
Covers the loss of the agent when an error is made
Minimizes for the agent the financial effects of errors made
Business and reputation will suffer with each lawsuit, and the cost of insurance will escalate
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Credit Card Fraud
Many airline tickets are sold by phone and Internet
Ample opportunity for credit card fraud
Travel agents must be vigilant
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Rental Cars
Important component of travel industry
Presents potential problems for travelers and rental companies
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Overbooking
Company may be subject to fine in some states
Most rental companies will pay the difference if a traveler has to rent at a higher price from another company
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Accidents in Rental Cars Questions arise as to whether a rental
company is liable to people injured
Generally not liable
Negligent entrustment—providing a product for use to another person and knowing that person is likely to use it in a dangerous manner
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Rental of a Car Known to Be Defective
Rental company can be liable if it knowingly rents a vehicle with mechanical problems
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Unauthorized Drivers
Authorized drivers are the lessee and anyone else the rental company approves in writing
Everyone else is an unauthorized driver Includes valets
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Age Discrimination with Car Rentals
Law in some states allows rental companies to refuse to rent to people under 25
Other states prevent companies from refusing to rent to people who are at least 18, provided insurance coverage is available