Mark Pestronk is a Washington-based
lawyer specializing in travel law.
Q:Our agency recently won the travel contract for a major company. We sent the company our standard cor-
porate travel management contract, and
they have refused to sign because we have a
clause stating that the corporation “shall in-
demnify, hold harmless and defend Agency
against Agency’s debts to airlines and ARC
arising from credit card chargebacks by Cli-
ent when there is no signed and imprinted
charge form.” The company states such a
provision is too open-ended, since it basi-
cally prohibits them from disputing any
ticket charge. Can we rephrase the clause to
make it more palatable and still protect us?
A:I agree that such a clause, which I try to add to every travel management agreement that I draft or revise, is
very broad. It is designed to avoid an im-
portant problem that could be catastrophic
for an agency in the worst-case scenario.
If a corporate account uses either a centrally billed card system or an individually
billed system, the corporation has the right
to dispute any charge for any reason. Once
a charge is disputed, the card company
credits the account and sends the airline a
The airline then sends you a debit memo
stating that the cardholder disputed the
charge. Sometimes the carrier states a reason, and sometimes it doesn’t, but that
doesn’t really matter. As you know, once an
airline sends you a debit memo for chargeback, the only foolproof method of successfully disputing it is to produce a signed and
manually imprinted Universal Credit Card
Charge Form (UCCCF). If the corporation
does not use physical cards, then such dispute is impossible by definition.
Even if the account has physical cards
or the employees use their own cards, it is
unlikely that you will be able to produce a
signed and manually imprinted UCCCF.
Your exposure is potentially unlimited.
To make matters worse, ARC has
claimed the right to designate a ticket for
which you did not get a signed, card-im-printed UCCCF an “improperly reported
sale”; ARC can demand a cashier’s check or
wire transfer on 24 hours’ notice.
However, you can probably rephrase the
broad clause by focusing on the most com-
mon reasons for chargebacks. Three specif-
ic problems give rise to most chargebacks:
First, corporate travelers who have prob-
lems with airline service sometimes dispute
the charge without realizing that the agency
must pay the airline regardless of whether
the traveler was satisfied with the service.
Second, unscrupulous ex-employees of
the company sometimes continue to use
the company’s card for personal travel,
leading travel managers to dispute the
charge as unauthorized.
Third, corporate finance department
personnel sometimes dispute transaction
fee charges because they cannot match the
agency’s fee with a particular ticket, so they
assume (without checking with the agency)
that the fees must be unauthorized.
Therefore, try rephrasing the clause so
that the account must: “indemnify, hold
harmless and defend Agency against airline debit memos for credit card chargebacks arising out of: (a) Client employees’
problems with airline service or (b) unauthorized charges by former employees
of Client.” Further provide that the company “shall attempt to resolve directly with
Agency any disputed transaction fees before
initiating a chargeback of such fees.”
To submit a question for Legal Briefs,
email Mark Pestronk at mark@pestronk
Agencies’ chargeback clauses should cover specific causes
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dispute a charge
due to poor airline