The Difference between an Ordinary Contract and a Contract with
typical contract between two parties, say you and a contractor putting in a
concrete driveway for your home, neither party is a fiduciary to the other. You are
each act in your own best interest within the terms of the contract. In
contrast to the typical business contract, the hotel management agreement
creates a completely different type of legal relationship between the hotel
owner and the hotel operator.
repeatedly been held by the courts to create an "agency"
originally crafted this relationship because they wanted total control of the
hotel without ever having to get approval of the owner. They got
this control by being designated the owner's agent to hire all employees, set
up all bank accounts, enter into all agreements for the hotel, set marketing
strategies, and so on.
Fundamental Rules Apply to every Agency and Fiduciary Relationship
hundreds of years, the English common law developed fundamental legal
principles that will apply in every agency situation. For
example, an agent is a fiduciary. A
fiduciary has many duties such as a duty of loyalty, full disclosure, and
the rights and duties that come with an agency relationship can be waived by a
fully informed written consent, and others cannot be waived no matter what.
Every Hotel Manager is the Agent and Fiduciary of the Owner
that virtually every hotel manager is the agent of the owner, no matter what
the hotel management agreement says. Some operators like Marriott try to avoid
the "agency" label in their management agreements. Other
major brands usually acknowledge they are agents and deal with their
obligations in a different manner. But it is
very common for any knowledgeable party to look for and to assert that the
hotel operator is an agent.
Morals of the Marketplace versus Fiduciary Duties
operator is an agent, then as a matter of law, the operator assumes fiduciary duties
(except under the law of Maryland, which Marriott had amended to remove the
universal common law provision). These
fiduciary duties go beyond the terms of the hotel management agreement and are stricter
than the so-called "morals of the marketplace" that governs typical
commercial contracts. Again, it
is common for knowledgeable hotel counsel to assert and seek to enforce these
those fiduciary duties is the obligation of the agent to prefer the principal's
interests (i.e. the interest of the hotel owner) over its own. This is
certainly not a novel claim in agency law, but has not been that common in
hotel management agreement litigation to date.