Mark Pestronk
As of mid-March, the Centers for Disease Control and Prevention is advising Americans over 60 not to take long plane trips and Americans not in good health to avoid cruises. Many flights, cruises and tours are being canceled, and the situation is changing daily. So, let me address some new legal questions about the coronavirus. (See part 1 here.)
Q: The supplier has canceled my client's trip, and the supplier is offering a credit toward a future trip, but my client demands a refund. How can I tell if my client is entitled to a refund?
A: You have to review the supplier's terms and conditions (T&Cs). If they state that, in the event the supplier cancels, it will provide a refund, then your client is entitled to one. If the T&Cs are not specific or silent on the question of what happens when the supplier cancels, or if the client never agreed to the T&Cs, then you have to look to general principles of law to find the answer.
The general rule is that, if a contracting party doesn't get the product or service that he bought, he is entitled to a refund. However, there are exceptions, and one of them is covered in my next answer.
Q: My agency operates tours, and my T&C state that we act only as agent for the travel suppliers. If we have already sent the money to the suppliers and can't get it back, but we have to cancel our trip, can we avoid liability to our client by relying on the disclaimer in our T&Cs?
A: Although there is no guaranty about how a judge or jury will decide the case if a consumer sues, agents such as travel advisors are not liable under the law for the acts or omissions of their principals such as travel suppliers. If your T&Cs adequately disclosed your agency status and identify the travel suppliers, your agency should not be liable for the refund.
Even the state seller of travel laws recognize the agency exception. For example, the California law states that, if the travel services are canceled, the seller must refund the money unless it can show that the client's funds were transmitted to the travel suppliers. The implication is that the seller does not have to refund any money it does not receive back from the vendor.
Q: If my client has paid the supplier by credit card and his trip is canceled by the supplier, and if the supplier won't agree to a refund, will the credit card company charge back the supplier?
A: Assuming that the client is entitled to a refund under the supplier's terms and conditions (T&Cs), the credit card company should provide the refund. If the supplier's T&Cs are silent or unclear on the refund question, the credit card company will probably side with the cardholder.
Q: Is your answer different if our agency was the credit card merchant?
A: Unfortunately, probably, not. That's why, when you use your own merchant account, you run a risk of chargebacks, so you need iron-clad T&Cs that give you a chance at winning a chargeback dispute.