Charter contracts heavily favor cruise lines

Mark Pestronk

Q: Our largest corporate client has had a lot of travel throughout the pandemic because it specializes in the healthcare industry. So, as a reward, the corporation wants to give its employees a free cruise on a small ship that would be chartered. The corporation is asking me for my assistance with the contract. Since I have never done a ship charter before, I am wondering whether the cruise line’s contract is fair and whether there’s anything that can be changed. Also, the cruise line will give my agency a commission, but we don’t want to reveal the commission in the charter contract itself. How do we get around that problem?

A: The majority of cruise line contracts are very one-sided. Here are some examples:

  • The charterer (that would be the corporate account) has to pay for future increases in fuel costs, but there is no provision for a discount or refund if the price of fuel drops.
  • The charterer is not allowed to offer its own shore excursions, even if they can be arranged much more cheaply than what the cruise line offers.
  • The charterer can change the itinerary, but if the new itinerary costs more, it has to pay the difference. If the new itinerary costs less, there is no provision for a discount or refund.
  • The cruise line can substitute another ship, even an old one that the client would not want to charter.
  • The cruise line can cancel the cruise at any time for any reason that makes it “impractical” to operate the cruise. The line will provide a full refund, but that is not much consolation when the corporation needs to charter another ship at a much higher price.
  • If the charterer cancels the trip for any reason, there will be no refunds, even if the cruise line resells the trip to another operator for the same price.
  • The charterer must obey the EU’s General Data Protection Regulation, even if that law does not apply.
  • The charterer must indemnify the cruise line against claims for damages asserted by participants, but the cruise line does not have to indemnify you against claims that are clearly the cruise line’s fault.

Since each cruise line’s standard contract is different from all others (even within the cruise line’s family of brands), you need to review it carefully to spot any offensive clauses such as these. The corporation should not sign such a contract without at least asking that these and similar clauses be deleted or altered.

To hide your commission, you can ask the cruise line for a separate commission agreement. You can also obtain authority from the corporation to sign as its agent. Finally, you can have the cruise line issue a net-priced contract to your agency, which would then mark up the price in a mirror contract between you and the corporation.

The net-plus markup is risky because your agency would be stuck if the client did not pay you. Therefore, I do not recommend it unless you trust the account to reimburse you. 

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