Mark Pestronk
Q: Our agency is arranging a tour to an underdeveloped country. The local destination management company (DMC) or ground operator has sent us a list of services and a proposed itinerary. When we asked for a contract, the DMC told us that they have never used contracts and do not have a contract form. Would it be possible for us to draft a contract, or do supplier contracts such as these always need to be drafted by the supplier?
A: Supplier contracts are customarily drafted by suppliers, but there is no reason to follow custom here. It is not only possible for your agency to draft the contract with the DMC; it is also potentially beneficial for you to do so. You will be able to avoid clauses that typically favor suppliers, and you will be able to use clauses that would be advantageous to you if problems or disputes arise. Here are some typical supplier contract clauses that you would want to avoid in any contract you draft:
• Supplier may change the itinerary for any reason or specified reasons.
• Supplier may raise the price for circumstances beyond its control or if supplier's local costs increase.
• Supplier may substitute hotels if the new one is "similar."
• Supplier may release tour spots, seats or hotel rooms if you don't provide a complete participant name list by a fixed date.
• Supplier may terminate the contract without liability if performance is impractical or impossible due to reasons beyond its control.
• Your agency must indemnify the supplier against participants' claims.
• Supplier limits its maximum liability to the tour price.
• Supplier disclaims liability for acts or omissions of local subcontractors such as transfer companies.
Here are short descriptions of 10 clauses that you might want in the contract:
• Specify the rate of commission; how the commission is calculated; and exactly when it will be paid.
• Supplier may not raise the price under any circumstances.
• Supplier may not change the itinerary without your advance, written consent.
• Supplier must have liability insurance and provide you with proof thereof.
• Supplier must indemnify you against all participant claims that are related to supplier's acts or omissions, or related to anything that happens on the ground.
• Provide service level guaranties for email and phone response times to you and participants.
• Use rolling payment and cancellation deadlines with final payment and penalties as close to the departure date as possible.
• Provide a waiver of cancellation fees if you must cancel when participants cannot get to the destination due to events beyond their control.
• The courts in your state will have exclusive jurisdiction over any litigation.
• The supplier must pay your attorney's fees if you prevail in litigation.
While the DMC will probably reject some of your clauses and insist on changes to others, you will still be better off starting with your own draft than if the supplier had found a contract form and sent it to you. If you are going to have multiple travelers and groups to the destination, a single contract can cover all of your clients' trips for a year or even more.