Agent or Principal?
You may be acting as an agent, a principal, or a mixture of both. Whatever your activities, it's vitally important that you understand your status when buying and selling travel services - and not just because of your ABTA membership.
Agent
An agent sells travel arrangements on behalf of a principal. It isn’t selling its own products. The agent brings about a contract between the client and the principal and it isn’t a party to that contract itself. It provides an outlet for the client to purchase the travel services from the principal. The agent collects the client’s payment and passes it to the principal. The price of the services is set by the principal, not the agent. The key features of an agent include:
- owing a duty of care to the principal
- an obligation to account to the principal
- remuneration by commission rather than by way of private profit
- marketing and promoting the principal’s products
- authority to collect payment, and apply and collect cancellation fees on behalf of the principal.
Principal
In general terms, the principal is the party that's contractually bound to the consumer to provide the travel services. This may be a traditional tour operator, a supplier, or a third party such as an airline or a bedbank. A principal may sell direct to the consumer, or through an agent or agents. Indications of principal status include but aren't limited to:
- the way you advertise and sell travel arrangements, i.e. if your marketing seems to indicate that you're supplying the services yourself
- issuing an invoice in your own name
- the booking being subject to your own terms and conditions
- any representations made about liability for the actual provision and performance of the contract
- any representations made about your obligation for health and safety
- purporting to have insurance cover for liability claims
- marking up a supplier’s price
- your supplier agreements specifying your respective roles
- liability under the Tour Operators’ Margin Scheme for VAT.
Principal business is either licensable or non-licensable. Licensable business is the sale of travel arrangements that are covered by an ATOL - both packages and flight-only arrangements. Non-licensable business is the sale of travel arrangements (packages and single element (non-inclusive), such as accommodation-only) that don’t involve a flight.
Remember, if you’re selling travel services together, they may form a package within the meaning of The Package Travel, Package Holidays and Package Tour Regulations 1992-SI 3288/1992. In this case, you’ll be acting as a principal.
