Q: A group of 500 conventioneers contacted us to obtain a block of hotel rooms in a major convention city. We obtained detailed, commissionable group quotes from three properties, and the group picked one of them. We proceeded with travel arrangements, but the group suddenly stopped doing business with us and might be working with the chosen hotel directly. Are we still entitled to our commissions? What if the rate quotes we obtained were noncommissionable and we planned to make money by marking up the hotel?
A: The problem you describe, which I call "group bypass," appears to be all too common. Too many groups have no compunction about cutting out the middleman to save a bit of money.
Ideally, you should have a contract with the association, company or institution whose members form the group. The contract should prohibit bypass and specify any damages for breach.
However, I realize that most of the time, for a variety of reasons, you have no contract with the group, or you have nothing but an email exchange that does not address the bypass or damages issues. In those cases, your rights, if any, would arise under each state's principles of agency law.
Under New York law, for example, you are entitled to compensation from the seller, which in this case would be the hotel. The rule is that "an agent is entitled to a commission when he brings the minds of the parties together, in that he has procured a buyer ready, willing and able to purchase on the seller's terms and conditions."
This rule is known as the "procuring cause doctrine," which requires that "there must be a direct and proximate link, as distinguished from one that is indirect and remote, between the bare introduction and the consummation [of the deal]."
In your case, the requirements for compensation have surely been met: you have brought the parties together; procured a buyer willing to purchase on the seller's terms; and there is a direct link between your introduction of the hotel to the group, on the one hand, and the group's stay at the hotel, on the other hand.
California law, to take another example, is similar: "An agent whose compensation is conditional upon his accomplishment of a specified result is entitled to the agreed commission only if he is 'effective cause' of accomplishing the result, the quoted phrase meaning when his efforts have been sufficiently important in achieving a result for accomplishment of which the principal has promised to pay him, so that it is just, that the principal pay the promised compensation."
In your case, I have no doubt that your efforts would meet this standard. Other states' legal standards are probably very similar.
Therefore, while the hotel would no doubt refuse to pay the commissions that it quoted, a court would probably award damages equal to those commissions.
On the other hand, if the rates quoted were noncommissionable, the hotel owes you nothing. You could sue the group only for the reasonable value of your services.
If you have an email exchange in which the group's representative accepts your markup for the hotel, then the reasonable value of your services would be the markup times the number of room nights that the group ultimately used.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected].