Mark Pestronk
Q: Our agency recently won the travel contract for a major company. We sent the company our standard corporate travel management contract, and they have refused to sign because we have a clause stating that the corporation "shall indemnify, hold harmless and defend Agency against Agency's debts to airlines and ARC arising from credit card chargebacks by Client when there is no signed and imprinted charge form." The company states such a provision is too open-ended, since it basically prohibits them from disputing any ticket charge. Can we rephrase the clause to make it more palatable and still protect us?
A: I agree that such a clause, which I try to add to every travel management agreement that I draft or revise, is very broad. It is designed to avoid an important problem that could be catastrophic for an agency in the worst-case scenario.
If a corporate account uses either a centrally billed card system or an individually billed system, the corporation has the right to dispute any charge for any reason. Once a charge is disputed, the card company credits the account and sends the airline a chargeback notice.
The airline then sends you a debit memo stating that the cardholder disputed the charge. Sometimes the carrier states a reason, and sometimes it doesn't, but that doesn't really matter. As you know, once an airline sends you a debit memo for chargeback, the only foolproof method of successfully disputing it is to produce a signed and manually imprinted Universal Credit Card Charge Form (UCCCF). If the corporation does not use physical cards, then such dispute is impossible by definition.
Even if the account has physical cards or the employees use their own cards, it is unlikely that you will be able to produce a signed and manually imprinted UCCCF. Your exposure is potentially unlimited.
To make matters worse, ARC has claimed the right to designate a ticket for which you did not get a signed, card-imprinted UCCCF an "improperly reported sale"; ARC can demand a cashier's check or wire transfer on 24 hours' notice.
However, you can probably rephrase the broad clause by focusing on the most common reasons for chargebacks. Three specific problems give rise to most chargebacks:
First, corporate travelers who have problems with airline service sometimes dispute the charge without realizing that the agency must pay the airline regardless of whether the traveler was satisfied with the service.
Second, unscrupulous ex-employees of the company sometimes continue to use the company's card for personal travel, leading travel managers to dispute the charge as unauthorized.
Third, corporate finance department personnel sometimes dispute transaction fee charges because they cannot match the agency's fee with a particular ticket, so they assume (without checking with the agency) that the fees must be unauthorized.
Therefore, try rephrasing the clause so that the account must: "indemnify, hold harmless and defend Agency against airline debit memos for credit card chargebacks arising out of: (a) Client employees' problems with airline service or (b) unauthorized charges by former employees of Client." Further provide that the company "shall attempt to resolve directly with Agency any disputed transaction fees before initiating a chargeback of such fees."