Mark Pestronk
Mark Pestronk

Q: Our agency specializes in high-end leisure sales to high net worth clients. I have read that some agencies have annual "retainer agreements" with their clients. They charge a flat fee per month or per year for all leisure travel for the client and his or her family. That sounds like a good idea to me, but what would such an agreement provide for? What if there were few or no trips in a given year because of a pandemic or the like? Would the client be able to avoid paying? Do agencies usually rebate the commissions to the clients? Is such rebating even legal?

A: Retainer agreements appear to be increasingly common, especially in the large cities on both coasts. Some agencies require these agreements from all clients, as do some independent contractors who are in high demand because of their reputation, skills and knowledge.

There are two types of such retainer agreements. With the first one, the client pays a fixed fee for unlimited work by the agency or advisor. With the second, the client pays an annual fee just for the privilege of having the agency or advisor available, and then the client also pays fees per service or transaction.

The trouble with the first arrangement is that the client can make so many changes and requests (both reasonable and unreasonable) that you could end up making no money from them. This can especially be the case where the client's personal assistant is your contact, as any sort of misunderstanding by the assistant can double or triple your workload.

So, ideally, your retainer should provide for an annual fee, paid up front, with automatic renewal unless one party gives at least 30 days' advance notice of nonrenewal, plus a fee per trip. You could provide that you will quote the fee per trip in advance, once you know the general outline of the client's plans for the trip.

Also ideally, all payments should be by credit card so that you can process the annual renewal without asking the client for a check or a wire. You would be the credit card merchant.

Your agreement should state unequivocally that the annual fees are nonrefundable under any circumstances. If the client is dissatisfied with your service, the client can stop using you, but there will be no refund. Therefore, if the client stops taking trips due to a pandemic or any other reason, you can at least keep the annual retainer.

The retainer agreement is the proper place for inserting your disclaimer of liability for supplier acts or omissions as well as anything else that goes wrong on a trip. The disclaimer should also provide that you will not refund your service fees if, for any reason beyond your control, not all the trip arrangements go smoothly.

The agreements I have seen and drafted do not provide for commission rebates, but there is no enforced law against them. However, some cruise lines have agency agreements that prohibit the practice.

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