Mark Pestronk
Q: A large, multinational corporation has acquired one of our agency's major corporate accounts. The multinational has a travel management contract with a mega agency. At some point in the near future, our account will probably tell us that it needs to switch to its parent company's agency. However, our contract is for a term of three years and does not allow either party to terminate without cause. Could we enforce the contract by requiring the account to continue to do business with us, or could we sue the account for lost revenue or profits if it stopped using us?
A: With so many mergers and acquisitions in the corporate world these days, lots of agencies are losing corporate accounts in the way you describe. The chief beneficiaries seem to be the top 10 or so mega agencies, here and abroad.
The contract you describe is quite unusual, as most corporate travel management contracts allow the corporation to terminate at any time, for any reason or no reason, on 30, 60 or 90 days' notice. When a travel agency presents a contract that does not allow such termination, the account's very first change is usually to add such a clause.
Whether your contract is enforceable against the account depends on the exact wording of the contract, the law of your state and the form of the acquisition by the multinational company.
In addition to the termination clause, you would need to review the rest of the contract quite carefully. For example, if the contract does not expressly state that the account will not use any other travel agency, the account is free to start using the mega and stop using you, even while your contract remains in effect.
Therefore, always try to insert an exclusivity clause in your corporate account contracts. The account should not only promise not to use other agencies but ideally should also agree not to allow employees to book directly with suppliers.
Under the law of most states, a court will not compel a defendant to perform an ordinary services contract, so you probably would not be successful in getting a court to require the account to continue to do business with you. Instead, you could sue for damages for breach of contract.
The amount of damages that you could recover also depends on the law of your state. Ideally, you should be able to recover all revenue that you would have earned during the contract term, assuming that volume stayed the same. You might even be able to recover lost commissions and overrides, unless the contract excluded consequential damages.
The form of the acquisition matters because you need to know whether your client corporation is still operating. Most large-company acquisitions are stock purchases, leaving the selling company as a subsidiary of the buyer, which means that your account is still in business and able to be sued.
However, some acquisitions are asset purchases, leaving the seller as just a corporate shell with no business and nothing left to sue. On the other hand, some mergers result in a new corporation that is an amalgamation of the two merger partners, in which case the new company must not only honor your contract but also extend it to the business travel of the other merger partner.