Q: Our agency is finding that most large and midsize corporate-account awards are being decided by corporate procurement officials who are primarily interested in getting the lowest transaction fees. One account made us agree to a clause in our travel-management contract stating that we "represent and warrant that Agency does not charge lower transaction fees to any other corporate account or client." Another account's contract required that we "represent and warrant that the fees listed are as low as, or lower than, the fees charged to any other corporate account." Are these clauses ongoing contractual promises throughout the life of the contract, so that we have to refrain from lowering our fees for any new client in the future? Even if they are not on-going promises, how can we remain profitable if we have to keep agreeing to clauses such as these?
A: When a contract states that a party "represents and warrants" something, the clause normally refers only to the status quo at the time the contract is entered into. The word "represents" refers to a statement of present fact that the other party is entitled to rely on, and the word "warrant" is simply redundant in this context.
Your "representation and warranty" has to be true merely as of the day the contract is signed. It does not bind your behavior in the future.
Therefore, unless there was another clause referring to your future conduct, you were free to charge new clients lower fees the day after you signed this contract. You were even free to amend your other, current contracts to charge lower fees.
I realize that many corporate procurement officials, travel managers and even corporate executives might interpret the clauses that you quote to constitute a promise that has to remain in effect for the duration of the contract. However, their interpretation would be incorrect, as their legal departments would no doubt tell them.
If the procurement official had wanted you to commit not to charge any client any lower fees in the future unless you also lowered them for this account, the account's attorney could easily have drafted such a clause.
For example, such a clause might state something such as this: "During the term of this Agreement, Agency will not charge any other corporate account or client lower fees than those listed herein," or even this: "In the event that agency charges a lower fees to another account, Agency shall lower the fees herein to match said lower fees."
If you are presented with a clause like the ones quoted above, you can counter by refining your fees to cover all of the very specific services that you are going to perform for this account or by limiting your commitment to accounts with a similar volume range. If the contract incorporates your proposal in response to a lengthy request for proposal (RFP), you can tie each of your fees to exactly what that RFP requires you to do.
For example, in your fee list, you can define a "transaction" as a process requiring you to perform all of the work "in Sections A1 through A17 of the RFP." Therefore, your promise not to charge a lower fee for a "transaction" would apply only to another account that required the same 17 steps to be performed.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected].