Legal Quiz

Storyline One:

Pricewrong Holidays is a tour operator that features short-haul package holidays. The average holiday price for a two-week summer breaks tends to be in the region of £400 per person.

Aside from late bookings, which Pricewrong Holidays regards as bookings made within 12 weeks of departure where the total cost of the holiday must be paid at the time of booking, a deposit of 20% of the holiday cost has to be paid at the time of booking with the balance to be paid 12 weeks before departure.

The booking conditions contain cancellation charges which provide that, if a customer cancels more than 12 weeks before departure their money is refunded; if the cancellation is within 12 weeks but before eight weeks of departure, cancellation charges are 60% of the holiday cost; and any cancellation within eight weeks of departure is subject to 100% cancellation charges.

On 1 September 1999, Pricewrong Holidays receives a letter from a high-profile consumer association. It alleges that the cancellation charges are penalties and are therefore unenforceable, that they are contrary to the Unfair Terms in Consumer Contract Regulations 1994 and that the association is entitled itself to take court action against Pricewrong Holidays.

Question one: unless the cancellation charges are a genuine attempt to estimate Pricewrong Holidays’ potential loss, they would be regarded as an unenforceable penalty.

Question two: this is debatable – the 1994 regulations do not apply to contractual terms designed to comply with or reflect existing legislation (such as the Package Travel Regulations). However, this exception is not contained in the Unfair Terms in Consumer Contracts Regulations 1999 which come into effect on 1 October 1999 and will replace the 1994 Regulations.

Question three: As a result of the 1999 Regulations as from 1 October 1999, it would.

Pricewrong Holidays’ (please see Storyline One) booking conditions also contain a provision that any name change will automatically constitute a cancellation subject to 100% cancellation charges with the full price of the holiday having to be paid by the ‘new’ person going on the holiday.

Bob, Terry, Joe and Sam have booked a two-week summer break with Pricewrong Holidays. Some 10 weeks before departure, Joe and Sam both discover that, for different reasons, they will be unable to go.

Joe is unable to go because he has been told he is about to be sent on a four-month posting to France and he has no other option other than to go.

Sam’s reason is slightly different. He has got engaged and decides he wishes to go on holiday with his fiancee. Joe and Sam do both though arrange for other friends to go in their place but Pricewrong Holidays refuses to allow any transfer of the booking to take place insisting that 100% cancellation charges apply and the replacements must also pay the full cost of the holiday.

Question one: No. Regulation 10 of the Package Travel Regulations allows a consumer to transfer his booking provided that the original price of the package is paid and that any additional costs which arise as a result of the transfer are paid.

Question two: Yes. Regulation 10 applies automatically to someone who is prevented to proceeding with the package and employment commitments should fall within this.

Question three: On the basis of Regulation 10, he will not be able to do so, but may be able to do so on the basis that the cancellation charges are excessive and are an unenforceable penalty and/or contrary to the Unfair Terms in Consumer Contracts Regulations.