Chapter 13 Food Legislation INTRODUCTION 5 This chapter provides an understanding of some of the requirements that hotels, restaurants and food outlets must comply with when serving, handling, preparing and selling food in New Zealand. It outlines basic legislation covering the selling of food and also examines the agencies that hold key roles in food legislation compliance. HISTORY 10 15 The earliest food legislation can be traced to England and the Assize of Bread and Ale 1266, which regulated the quantity (not the quality) of supplies. Technology in that area could only measure quantity (Atherton & Atherton, 1998) and unscrupulous operators tended to cheat customers by incorrectly weighing and measuring goods. Consumers had to simply rely on their look, touch, feel, smell and taste (Atherton & Atherton, 1998). Since that milestone legislation, there have been many advances in control and regulation of the sale and service of food - not simply in the progressions from quantity to quality, but also in contractual remedies, tortuous liability, consumer protection laws, and criminal liability. Moveover, New Zealand laws are now aided by international and domestic agencies. INTERNATIONAL AND TRANS-TASMAN ORGANISATIONS 20 25 International and trans-Tasman organisations influence the way New Zealand's legal system views breaches of food handling and selling through their guidance and the laying of foundations to ensure that food consumed is of good quality. The key organisations that play a role in ensuring New Zealand's food standards are maintained are: o World Health Organisation (WHO) o Food and Agricultural Organisation of the United Nations (FAO) o Australian New Zealand Food Authority (ANZFA) World Health Organisation (WHO) 30 35 The World Health Organisation was formed on April 7, 1948 and is a United Nations specialist agency in health. Its principle objective is to ensure that all people have the highest possible level of health. WHO defines health as a state of complete physical, mental and social well-being, and not merely the absence of disease or infirmity (World Health Organisation, 2004). WHO aims to (World Health Organisation, 2004): Reduce excess mortality, morbidity and disability Promote healthy lifestyles and reduce risk factors to human health arising from environmental, economic, social and behavioural causes Developing health systems that improve health outcomes, respond to people's legitimate demands and are financially fair Framing an enabling policy, creating an institutional environment for the health sector and promoting an effective health dimension to social, economic, environmental and development policy. WHO has six regional areas. New Zealand is part of the Western Pacific World 5 Health Organisation region, which is home to approximately 1.6 billion people (Western Pacific Region, 2004). The regions help create national food safety policies, plans of action, legislation, and risk management practices. Despite this undertaking, many countries have neither developed nor enforced the standards, nor drafted and enacted relevant legislation nor developed food safety education and training for food handlers and consumers. Food and Agricultural Organisation of the United Nations (FAO) 10 15 20 The Food and Agricultural Organisation of the United Nations (\"FAO\") was inaugurated in 1945. Its mandate is to increase levels of nutrition, standards of living, improve agricultural productivity and the condition of rural populations. It achieves this by helping developing nations and countries in transition to modernise and improve agriculture, forestry and fisheries and to ensure nutrition for all. For this to occur, food security is necessary i.e. people have access to regular and sufficient high quality food to lead active, healthy lives (Food and Agricultural Organisation of the United Nations, 2004). FAO's key activities are (Food and Agricultural Organisation of the United Nations, 2004): Putting information within reach - serving as a knowledge network Sharing policy expertise - on policy, planning, drafting legislation and creating national strategies Providing a meeting place for nations - as a neutral forum, rich and poor nations can come together to build a common understanding Bringing knowledge to the field - it has displayed its knowledge in thousands of projects and can supply technical know-how and manage large projects. Australian New Zealand Food Authority (ANZFA) 25 30 35 40 The Australian New Zealand Food Authority was established in 1991 under the Food Hygiene Regulations 1974. The ANZFA is a bi-national organisation, its purpose being to protect the health and safety of people in New Zealand through the maintenance of a safe food supply. This is achieved by setting and developing excellent food standards throughout Australia and New Zealand. ANZFA's objectives are: Protecting public health and safety Providing enough information on food to enable consumers to make informed choices and prevent fraud and deception Preventing misleading and deceptive conduct Promoting fair trading in food Promoting trade and commerce in the food industry Promoting consistency between domestic and international food standards Its functions are to: Develop, vary and review food standards Make recommendations to the Australian New Zealand Food Standards Council Oversee food surveillance Educate and carry out research on food safety Coordinate food recalls 5 Develop policies on importing food Develop codes of practice for the industry These objectives are carried out through the Australian New Zealand Food Standards Council (the Council), The Australian New Zealand Food Standards Code (the Code), legislation and local councils. Australian New Zealand Food Standards Council 10 The Council was established under the National Food Standards Council Agreement 1991. It comprises of one Minister from each Commonwealth, State and Territory government in Australia and a representative from New Zealand. The role of the Council is to receive draft recommendations from the ANZFA, which it can adopt, amend, reject or return for reconsideration. A draft that is accepted is published in the Commonwealth Gazette, specifying when the recommendation will come into effect, and it is then incorporated into the Code (Atherton & Atherton, 1998). Australian New Zealand Food Standards Code 15 20 25 30 35 40 The Code is a joint set of food labeling and composition standards developed especially for the New Zealand and Australian food industries. The Code took effect on 20 December 2002 and ensures that the same rules apply to all food labeling between the two countries. Legally, food manufacturers have to inform consumers about what the food contains on the packaging. While it is an offence in New Zealand for someone in the food industry not to comply with the Code, in Australia it is a criminal offence. It is also an offence to sell food which is damaged, has deteriorated, perished, been adulterated or is unfit for human consumption (New Zealand Food Safety Authority, 2004). Labeling is of key importance under the Code and requires (New Zealand Food Safety Authority, 2004): Name of food - food product must be accurately named and/or described on the label. Lot identification - premises where the food is packaged and/or prepared and the batch it comes from. Name and address - the supplier's name and business street address must be displayed. Mandatory warning statements, advisory statements and declarations for certain ingredients / substances - some products require special advisory statements or warnings about the food or ingredients. Ingredient list - ingredients must be listed by their common name, a description or generic name. Ingredients are the substances used in the preparation, manufacture and handling of food and include food additives, compound ingredients and added water. Food additives - the class name of the additive, followed by its specific name or code number, must be declared. Where an additive is a vitamin or mineral, that name may be used. Date marking - most packaged foods with a shelf life of less than two years must have either a use by date, a best before date or a baked on date. Directions for use and storage - must indicate the period that all food will keep for, indicated by a date mark and the necessary storage requirements. Nutritional information - a panel should display a range of information including average quantities or minimum/maximum quantities. 5 10 15 Percentage labeling - the percentage of the characterising ingredients, and/or components of most food products must be indicated on the label. Net content - this is required under the Weights and Measures Regulations 1999. One reason for the precise information on the labeling of food items is to protect people with allergies or those on food-restricted diets. The New Zealand Food Safety Authority is responsible for implementing labelling requirements and monitoring. Exemptions to the labeling requirements under the Code are: Food made and packaged on the premises from which it is sold Food packaged in the presence of the purchaser Food in inner packs not available for individual sale Whole or cut fresh fruit and vegetables in transparent packages Takeaway and delivered food Food sold at fundraising events Food not in a package Despite these exemptions, specific health and safety information should be given to consumers if food contains specific products such as nuts (New Zealand Food Safety Authority, 2004). HYGIENE AND FOOD CONTAMINATION 20 25 30 It is integral that all people working in the food industry practice and possess high standards of hygiene and food handling in the workplace, as bacteria and other organisms can infest food and lead to illness or even death. If hygiene is not maintained, the following situations can arise: Poor product quality leading to o Reduced shelf life o Increased expenses o Narrowing profit margins, as cost of goods sold increases Customer complaints, which require resolving by personnel Loss of reputation, which leads to a loss of customers and therefore less revenue Court proceedings, including fines, damages or closure of the premises. This can also lead to loss of profits Food wastage, with lower stock turnover and higher stock losses The importance of hygiene cannot be stressed enough. The following section looks at good hygiene techniques and some of the bacteria that can grow, if these techniques are not followed. This section also discusses how food hygiene risks can be reduced. Food Hygiene Regulations 1974 35 All premises that sell food must comply with these regulations. District Council ensure that these regulations are met through licensing schemes. A basic outline of the regulations is as follows: 1. General 40 Premises should be: o Well constructed o In good repair o Offer no entrance or harborage for rodents 2. Floors 5 Should be: o Constructed of impervious and easily cleaned material o Resistant to wear and corrosion o Adequately graded and drained o Rounded - following specific regulations concerning the rounding of floors to walls 3. Walls 10 Internal walls should be: o Constructed of dust proof material o Smooth and non-absorbent o Easily cleanable, without damage to the surface 4. Ceilings 15 Every ceiling or - where no ceiling is provided - undersurface of the roof, and every support should: o Provide a smooth surface that is dust-proof o Permit efficient and thorough cleaning In every room where food is prepared, the ceiling or undersurface of the roof should be: o Non-absorbent and light in colour o Easily cleanable, without damage to the surface 5. Lighting 20 Should: o Enable effective inspection and cleaning of the premises o Enable the purpose for which the premises are used to be satisfactorily carried out o Allow for minimum illumination intensity of 215 lux at a point 900 mm above the floor 6. Ventilation 25 Premises should be provided with the ventilation necessary to maintain comfortable standards and should be adequate enough to: o Prevent the air on the premises from becoming excessively heated o Prevent condensation and the formation of excess moisture on the floors, walls and ceilings o Remove objectionable odors, fumes etc 7. Space 30 35 Premises should contain sufficient floor space to: o Enable every person working to carry out that work efficiently o Allow easy access for cleaning purposes Every workspace isle should be: o Unobstructed o Sufficiently spacious to allow movement 8. Changing facilities 40 Should be provided with: o Adequate and suitable lockers o Arranged so as to prevent the contamination of food by contact with hands or clothes o Separate change rooms for men and women 9. Toilet facilities Should be: o Sufficient, according to the Building Code o In a convenient location 10. Wash / hand basins 5 Should be: o Of sufficient quantities - at least one hand basin for every ten employees o Installed near as practicable to every person engaging in food handling and preparation 11. Water supply 10 Premises should: o Provide an adequate supply of clear, wholesome water o Ensure that all sink water is at a temperature of not less than 63 degrees Celsius o Provide hot water at a temperature of not less than 83 degrees Celsius for every other purpose 12. Plumbing 15 Premises should be provided with appropriate plumbing to the satisfaction of the Environmental Health Officer of the local district council 13. Sewage disposal Should be sufficient, with suitable drains to carry away all sewage, in accordance with the requirements of the Building Code 20 25 30 35 14. Yards Every yard should: Have clear pathways connected with the yard and working areas Be paved Have reasonable access Exempted from the requirements of the Food Hygiene Regulations 1974 are Food Safety Programmes. These are designed to identify and control food safety risk factors in order to establish and maintain food safety. Essentially, the Food Safety Programmes help businesses correctly identify risks and hazards that make food harmful to consumers. The advantages for a business in implementing a Food Safety Programme include (New Zealand Food Safety Authority, 1994): Limiting the number of food poisoning cases Reduction of customer complaints Adoption of preventative (instead of reactive) responses to situations Increased consumer confidence in the business and food it sells Being prepared for the future when Food Safety Programmes become mandatory Having control over your environment and the food sold in the business. Food Poisoning 40 The regulations provide a basic level of protection from poor food handling which can lead to food poisoning. Food poisoning is the result of consuming food that is contaminated with harmful microorganisms and toxic chemicals. Types of food poisoning include: 5 10 Chemical food poisoning - contamination of food with chemicals such as pesticides, disinfectants, heavy metals or high concentrations of preservatives. Food containing natural toxins - plants and species of fish contain natural toxins that can have violent reactions when consumed Physical objects - from foreign bodies like glass, plasters, earrings and cigarette burns Microbial food poisoning Biological food poisoning o Bacterial - produce toxins harmful to the human body o Viruses - smaller than bacteria and can live in contaminated food o Fungi and yeast - can grow on most food, equipment and building surfaces with residues of moisture and nutrients Some examples of bacteria or viruses that cause food poisoning include: Salmonella 15 Salmonella is a harmful bacterium, which can cause illness for four to seven days with symptoms of diarrhea, fever and abdominal cramps. It occurs through contaminated foods, often of animal origin, including beef, poultry, milk and eggs. However all food, including vegetables, may be contaminated through contact with raw food that has the bacteria - via unwashed hands, utensils, surfaces and liquids. Elderly people, infants or those with impaired immune systems are more likely to experience severe illness. Cooking generally kills salmonella. Listeriosis 20 25 30 Listeriosis is a type of flu which can develop days or even weeks after eating contaminated food. It can cause fever, muscle aches and sometimes gastrointestinal symptoms, such as nausea or diarrhea. If the infection spreads to the nervous system, the symptoms include headaches, stiff neck, confusion, loss of balance or convulsions. Severe cases can also lead to meningitis, blood poisoning and miscarriage. The bacterium Listeria is usually found in soil and water. Vegetables can become contaminated from the soil or from manure used as fertiliser. Bacteria are capable of growth at refrigeration temperature and are found in a variety of raw foods, such as uncooked meats and vegetables, as well as processed foods that become contaminated after processing. People most at risk of Listeriosis are the elderly, newborn and those already ill (Centre for Disease Control & Prevention, 2003). Campylobacter 35 Campylobacter is reportedly the most common type of food poisoning in New Zealand, and is an infectious disease. Symptoms include diarrhea, cramping, headaches, abdominal pain and fevers. The illness typically lasts around one week, but occasionally it spreads to the bloodstream and causes a serious life-threatening infection. Campylobacter grows best at temperatures around 40 degrees Celsius, with most cases associated with handling raw poultry or eating raw or undercooked poultry meat, or drinking untreated water (Centre for Disease Control & Prevention, 2003). Staphylococcus Aureus 40 Staphylococcus aureus is a bacterium carried on the skin or in the nose of healthy people. Infection arises when large quantities of bacteria make their way into a person's internal respiratory and 5 digestive system. Symptoms include nausea, vomiting, stomach cramping and, in severe cases, headaches, muscle cramping and transient changes in blood pressure and pulse rate. To avoid infection, it is imperative for food handlers to wash their hands constantly and wear protective clothing. Basic good manners must also be observed e.g. when around food, not blowing their nose or spitting. The bacterium is one of the most common causes of skin infections, the majority being minor and usually treatable with antibiotics. However, it can cause serious infections, such as pneumonia or surgical wound infections (Centre for Disease Control & Prevention, 2003). Reducing the risk of food poisoning: Some Tips 10 15 20 25 30 35 40 How can the risk of food poisoning be reduced? 1. Undertake a food contamination risk assessment and rank foods from a high level of risk to a lower level of risk: o High risk products include milk, cheese, dairy products, meat, seafood, eggs, soups and desserts o Middle risk products include breads, vegetables, cooked rice and pasta o Low risk products include uncooked rice, pasta and dehydrated foods 2. Commercial food handlers should observe the following list of practical tips: Purchasing Raw material should only be purchased from a reputable and approved supplier Suppliers should be chosen for their ability to: o Guarantee temperature-controlled transport that ensures the products are fresh and in a usable condition o Provide frequent delivery times and days, be flexible, and respond on demand and to requirements Materials should be checked on delivery to ensure they are not contaminated or damaged Food must be delivered within shelf dates and be at the correct temperature on arrival Storage Stack all ingredients to ensure the stock is rotated - first in, first out Check all shelf-life stickers to ensure the oldest products are at the front to be used first Store all foods above the ground to allow for cleaning and ventilation Always store food at the correct temperatures: o Frozen foods 18 degrees Celsius o Perishable and high risk foods 5 degrees Celsius o Meat and fish 2 degrees Celsius oFruit Cool conditions o Dry goods Kept dry Keep food covered or enclosed in containers, especially food that is ready to eat Dry goods must be kept separate from vegetables or other raw foods Raw, fresh and frozen foods should be kept separate Food that is removed from the freezer should not be refrozen Cooking The ideal cooking temperature is 82 degrees Celsius Water used for processing and preparation needs to be contaminant-free and of a quality fit for human consumption - use of filer water is recommended 5 10 Ensure that food that is not on display for more than two hours Make sure that food is served as soon as possible after preparation Always keep hot foods hot and cold foods cold Reheating Food must be reheated at or above 80 degrees Celsius (for microwave and oven reheating) After reheating, food should be eaten as soon as possible Do not reheat food more than once If food is to be kept hot before serving, it must stay above 70 degrees Celsius If it is to be refrigerated, it should be cooled quickly and then put in the fridge The time between o Refrigeration and cooking / processing o Cooking and eating o Cooking and refrigeration o Refrigeration and serving must be kept as short as possible 15 20 25 30 35 40 Handling Food handling should be minimized, and high-risk foods must not be left sitting out at room temperature Do not refreeze any frozen goods that have already been thawed Use utensils such as tongs, forks, spoons and scoops to handle food, where possible Avoid touching the parts of crockery or cutlery that come into contact with food Try and use separate utensils and surfaces e.g. bench space, for meat and other fresh food preparation Keep the workspace clean and uncluttered Ensure that dirty dishes are kept separate from clean ones at all times Spotting spoilage Remove or throw away foods with signs of spoilage Signs of spoilage include: o Odour o Sliminess o Discolouration o Souring o Gas If in doubt, throw it out Personal hygiene for people handling food They must: Wash their hands before and after handling any food or equipment. This should be done with warm water and soap for at least 20 seconds. Wash them at 15 minute intervals to ensure cleanliness Wash their hands immediately after going to the toilet Minimise: o Touching their face o Licking their fingers o Biting their fingernails 5 10 15 20 25 30 35 o Sneezing or coughing over food or in open food areas o Smoking; or when smoking, they must wear another item of clothing over the top of kitchen uniform o Touching their hair, ears and earrings Not prepare or handle any food if they suffered from diarrhea in the previous two or three days Cover any cuts or sores on their hands with a bandage and use gloves Cover their hair Keep uniforms clean - wash them on a regular basis Remove jewellery as it harbours bacteria, can cause possible injury if caught in machinery, or burns if it comes in contact with heat Inform management of sickness or poor health, as you are putting other people at risk Selling Food cannot be sold that is: Unfit for human consumption Adulterated Damaged, deteriorated or perished Not to the nature or quality demanded by the consumer Not to the standards set by the Food Standards Code Packaging Goods must be in: Approved packaging that will not contaminate, harm, or alter the food product Well-sealed and leak-proof packaging Packaging that protects the food from damage under normal handling conditions Packaging that is clearly labelled and date coded, with the shelf life date and production date present Premises hygiene Have a carefully maintained cleaning schedule that ensures that all kitchen items are regularly cleaned efficiently and regularly Pull items out from the walls and clean behind and beneath them regularly Remove dampness in kitchens and storage areas, as rodents and bacteria are drawn to these Launder mops, cleaning clothes, dust clothes and other cleaning equipment frequently Clean underneath bench and stove canopies Clean up food spillages immediately, as they can attract pests and insects Keep all cleaning fluids away from good Store cleaning products in marked containers and follow the manufacturer's instructions Ensure that rubbish is removed throughout the day to outdoor waste areas. Make sure outdoor waste areas are kept clean and tidy to avoid attracting undesirable rodents or birds CONCLUSION 40 Food legislation is a complex array of agreements, codes and legislation. A minefield of restrictions need to be understood by food retailers to ensure they understand their requirements and do not endanger the health of customers. Two of the most important considerations for food retailers are to maintain good standards of hygiene on premises and encourage high personal standards of cleaniness in staff, which can be achieved by education and by monitoring staff compliance. These precautions protect both workers and consumers, and contribute to the overall success of a business. Discussion: 5 1. What is food poisoning and what can cause it? 2. What personal hygiene steps should be taken to ensure that food is not contaminated? 3. What impact can contamination have on a business? 4. What is the key element of good stock rotation? Chapter 15 Travel Agency and Agents Generally 5 INTRODUCTION E-tourism is on the rise, with more and more consumers feeling confident enough to make online bookings. Nevertheless, many travelers still rely on local travel agents to arrange their trips because of the overwhelming quantity of transportation and accommodation options and combinations available. What is sometimes forgotten is that travel consultants also have legal obligations. This chapter examines agency law, the role of travel agents, and their legal obligations when organizing trips on behalf of clients. 10 GENERAL PRINCIPLES OF AGENCY 15 20 In order to understand travel agency, it is first necessary to understand the general principals of agents. Any type of agency is defined as \"a relationship which arises whenever one person acts on behalf of another person (principal) and has the power to make contracts which affect the principal's legal position with regard to a third person (Gerbic & Lawrence, 2002, p.410). There are different types of agents who are determined by the scope of their authority: Special agents - have limited authority to contract and one special purpose of function. For example, a travel agent is only authorized to act on behalf of a client to arrange a specified holiday (Atherton & Atherton, 1998) General agents - have authority to contract on behalf of a principal in the usual course of trade, profession or business Universal agents - have restricted authority to contract on behalf of a principal TRAVEL AGENCY 25 Travel agency have duties and responsibilities in particular areas, including: Common law Consumer Guarantees Act 1993 Privacy Act 1993 Terms of trade 30 Common law 35 A person proclaiming to be a travel agent professes: To have appropriate qualifications and experience to perform the work To use reasonable skill and care in carrying out the work That if they fail to perform work as represented, then clients may take action against them to recover loss suffered or to compensate for loss of enjoyment. Consumer Guarantees Act 1993 The Consumer Guarantees Act 1993 applies to travel agents, as they supply a service to the public. The Consumer Guarantees Act imposes the following responsibilities on travel agents: 5 Where clients express a wish for travel agents to make arrangements for a particular purpose (e.g. special requirements, dates or needs) and travel agents agree to do so, then the travel agents are, in effect, guaranteeing that the arrangements will meet the particular purpose or requirements. In some cases, if suppliers fail to satisfy a particular purpose, travel agents may be liable for the actions and default of the suppliers. Travel agents have a duty to clients to ensure that they complete their service within a reasonable time frame or according to the time in the contract, and that the prices are reasonable or according to the contract. Fair Trading Act 1986 10 15 20 25 The Fair Trading Act applies to travel agents, as they are classed as people 'in trade'. The Act provides that: Travel agents must not mislead or deceive clients or act in a way likely to result in clients being mislead or deceived (TAANZ, s 14). This applies to travel agents representation, both verbal and written. Travel agents must take particular care in the following situations: o Quality of service represented and actually supplied o Cost of services e.g. add-ons and prices subject to change o Identity of principal supplier. Travel agents should be aware of the contents of brochures from suppliers. To avoid liability for any false statements made by suppliers, travel agencies should do the following: o Disclose that brochures are from the suppliers, and that they have no up-to-date knowledge of their contents o State that they are merely passing on the suppliers' instructions to clients o If they are aware of errors or misrepresentations, then they must point them out to clients Privacy Act 1993 30 35 40 Travel agents must comply with the Privacy Act 1993 with regards to personal information held about clients. Travel agents have the following obligations to clients: To obtain personal information about clients that is necessary for them to perform, within the law, their functions and activities To only obtain personal information from clients about themselves, unless it is publicly available Travel agents must inform clients of: o The purpose of the information o Other parties who may receive the information o Their right to access and correct any information held Travel agents must maintain reasonable security to protect personal information against disclosure, access and use Travel agents must use personal information only for the purpose authorized by clients Travel agents must not disclose information to third parties, unless the information was obtained for that purpose Information should not be held longer than necessary Terms of Trade 5 10 15 20 25 30 35 40 Travel agents also have terms of trade when dealing with others, such as: Disclosing that they are agents for a supplier, in order to bring about a contract between a client and supplier Disclosing that if the 'principal' supplier defaults or fails, they are not liable Their obligation to fully inform clients of the basis of their charges for services provide TRAVEL AGENTS ASSOCIATION OF NEW ZEALAND INCORPORATED (TAANZ) The Travel Agents Association of New Zealand Incorporated is a trade association that provides extra security for customers when dealing with travel agents. Founded in 1962, TAANZ ensures that all its members offer (TAANZ, 2004): Added value Leading-edge technology Quality through membership criteria, the TAANZ bonding scheme and the Code of Ethics and Practice Protection Accountability Education Efficiency Fair payment Airline refunds Direct marketing Submissions to Government policy Reduced credit card fees A feature of TAANZ is its customer protection scheme. The scheme is offered through a bonding system, whereby customers are given an assurance that if they deal with a TAANZ member, they will receive some protection against a travel agent's failure (TAANZ, 2004). To carry out this scheme, every fill member of TAANZ must belong to a bonding scheme, which meets claims lodged by customers to a maximum amount of $250,000. The protection provided is restricted and applies when customers do not receive the tickets or benefits for which they have paid a TAANZ member (TAANZ, 2004). The bonding scheme does not guarantee the performance of other suppliers, like hotels or airlines that go bankrupt or are unable to perform services they agreed to undertake. It also does not protect people who have taken out insurance against the losses the bonding scheme covers (TAANZ, 2004). To join TAANZ, members must (TAANZ, 2004): Meet strict membership and financial criteria and be subject to an annual financial review Abide by TAANZ's Code of Ethics and Practice Participate in TAANZ's bonding scheme for the protection of consumers Participate in a structured industry training programme and meet recognized national standards and qualifications. OTHER AGENCY RELATIONSHIPS 5 While travel agency is one form of agency relationships, they can be created in a number of ways in the tourism sector by appointing someone to act on behalf to make plans and book things. As such, individuals need to be aware of how they can be formed and the obligations and rights that are afforded to them. Formation of an Agency 10 15 20 25 30 35 40 Agency relationships can be formed by in a number of ways within the tourism sector by: Agreement Operation of law Ratifcation Estoppel Agreement o Express Agreement - an agency may be created by express agreement between a principal and an agent. The principal may appoint the agent orally, in writing or by deed o Implied Agreement - an agency may be created as a consequence of a person's status in a business relationship. For example, a partner in a partnership or a company director of a firm is an agent for the other partner or company directors. Operation of Law (Necessity) In special circumstance, the law deems an agency to exist even without agreement between the parties. Agency of necessity can arise where a person, the agent: o Is in possession of property, owned by another person, the principal; o An emergency arises which places the property in sudden danger; o The person in possession cannot obtain instructions from the owner on what to do with the property. In these sorts of situations, the person in possession becomes an agent. The agent is bound to take action to preserve the property, without the owner's authority to do so. Ratification Another method of creating an agency relationship is through ratification. Ratification means confirmation or approval (Gerbic & Lawrence, 2002). Ratification occurs where a person, the agent: o Performs an act of contracting with a third party on behalf of another person, the principal o Without the consent of the principal; and o The principal adopts the unauthorized act of the agent. This adoption by the principal gives the effect of prior authorization of the act, thereby 'backdating' the agency (Gerbic & Lawrence, 2002). For ratification to be valid, all of the following requirements must be present: 1. the agent must tell the third party that he or she is acting as an agent 2. the agent must disclose that he or she is acting on behalf of a named principal at the time of the contract. 5 10 15 3. The person who can ratify the agent's acts must be named principal on whose behalf the act was performed. 4. A contract may be made on behalf of a company before the company is formed, if the contract (otherwise known as a pre-incorporation contract) provides for its own ratification within a specified period or, if no time is mentioned, within a reasonable time after incorporation (Companies Act 1993, s 182(2)). 5. At the time of ratification, the principal must have the capacity to ratify the agent's act. 6. The principal must be aware of all material facts or be prepared to adopt the agent's act without complete knowledge of facts. The principal cannot ratify illegal or void contracts. 7. Ratification must be made within a reasonable time after the contract. 8. The principal cannot ratify only favourable parts of the contract. Estoppel Ageny by estoppel, otherwise known as apparent or ostensible authority, occurs when a potential principal says or indicates to a third party that authority has been given to a potential agent (when it has not) and the third party relies on the principal's false statement. In such cases, the principal cannot deny the third party. Authority of Agents 20 25 Agents are usually given some specific authority, which determines their ability to bind the principal (Gerbic & Lawrence, 2002). Principals are only bound to third parties when acts come under the agents' authority. However, any acts by agents in excess of their authority do not affect principals unless the \"principal subsequently ratifies the act or has held out the agent as having authority\" (Gerbic & Lawrence, 2002, p. 419). Where agents act beyond their authority, they can potentially be held liable to principals for breaches of contract, or to third parties for breaches of implied warranty of authority. Obligations of Agency Relationships In agency relationships, both principals and agents have rights and duties they owe to each other, and they can be entitled to remedies in contract and at common law if these are breached. The duties of agents and principals are as follows: Agents' Duties 30 35 40 o To follow instructions (if lawful) o To be diligent and use reasonable skill o To act in person (not delegate unless authorized to do so) o Loyalty o Confidentiality o To keep accounts o To act in the best interest of principals o Disclosure o Not to make a secret profit Principals' Duties o Payment of commission to agents o Payment of all expenses and costs incurred in fulfilling duties 5 10 15 Agents' Remedies Where there has been a breach by principals, agents are entitled to the following remedies (Gerbic and Lawrence, 2002): o Contractural remedies, such as damages o Damages arising from indemnity o Equitable remedies o Right of lien, including agents holding goods until outstanding money is paid Principals' Remedies Where there is a breach of duty by agents, principals are entitled to the following remedies, including (Gerbic & Lawrence, 2002): o Contractural remedies, such as damages o Recovering money or property o Dismissing agents o Withholding payment of agent's commission o Action in tort CONTRACTUAL EFFECTS ARISING FROM AGENCY RELATIONSHIPS 20 25 30 35 40 Agency relationships are more far-reaching than those which exist between agents and principals. They can also affect third parties, giving rise to liabilities. The effects include (Gerbic & Lawrence, 2002): o If a principal is stated to a third party: The agent has no personal liabilities to the third party. However, an agent must have authority and ratification The principal can sue the third party. The third party can sue the principal o If a principal is not state to a third party: The third party can agree to the principal not being disclosed, and the effects on the third party are the same as if the principal were disclosed And the agent misrepresents who the principal is, then the contract can be declared void under the Contractual Remedies Act 1979 o If a principal is undisclosed and the existence of an agency concealed: The third party can sue either (but not both) the principal or agent The agent is able to sue the third party The agent still has indemnity from the principal The principal can sue the third party, unless the third party had clearly and previously stated they did not want to contract with the principal. o If an agent receives payment form a third party: The debt to the principal is discharged And the agent does not pass the payment to the principal, the payment is still discharged And the agent does not pass the payment onto the principal, the principal is able to sue the agent only Some liabilities can also arise in tort, property and crime. 5 10 15 20 Tort o Principals can be held vicariously liable for the actions of agents. In simple terms, any tort committed by an agent can also make the principal liable - vicariously liable. For example, tort actions such as deceit, defamation and negligence. o Third parties can sue agents or principals together or separately. o Principals can sue agents. Property o If agents do not pass over property or money to principals, the agents: Have to account for the money or property to the principals May be held liable for breaches of contract or quasi-contract (restitution) o If agents have disposed of property: Principals may bring an action in tort for damages for the tort of conversion. o If a third party is in possession of property: In equity, a principal may recover property or money only if it is traceable or identifiable and the third party knew the agent should have passed it to the principal. If the property is sold by merchantile agents or sold in good faith to a third party, the principal cannot recover it. Crime o If an agent is used by the principal to commit a crime and does so innocently, then the agent is not liable. o If an agent commits a crime, then the principal is not liable. TERMINATION OF AN AGENCY 25 30 35 Can be terminated: 1. Through the actions of the parties, including: Performance or completion of the agency Mutual agreement of both parties Repudiation (withdrawal) by agent Revocation (withdrawal) by principal Breach of duties (cancellation) 2. Through an operation of law, including (Gerbic & Lawrence, 2002): Death by agent or principal Enactment of legislation to make agency illegal Insanity or bankruptcy of principal Frustration - by external and unforeseen events, such as war or earthquakes CONCLUSION 40 Travel agents must carry out their obligations seriously. Agency relationships must be carefully managed by agents and principals to fulfill the obligations and duties required of them. While customers are given some protection under consumer protection legislation, they are not fully covered by it. TAANZ, the travel agents' trade association, does have a scheme to cover customers of member travel agents. If a customer has paid a travel agent the sum owed for their trip and the agent defaults, the association will refund the customer. This only applies to travel agents that are members of TAANZ 5 10 Discussion 1.What are the names of the parties in an agency situation and what are their roles? 2. Give examples of types of agents that are used in everyday situations, particularly in the tourism and hospitality sector. 3. How can an agency relationship be created? 4. What types of agents exist? What are the differences between them