Comment: Court ruling brings some contract clarity

Travlaw’s Stephen Mason explains the significance of a recent Court of Appeal judgment

Lawyers have a saying that “hard cases make bad law”. There were times during the case of Sherman v Reader Offers Ltd (ROL) that it seemed this maxim was going to apply in spades for the industry.

The Shermans booked a cruise in Canada called ‘The Northwest Passage (NWP) – in the Wake of the Great Explorers’ for September 2018, a time of year when normally, for a few weeks, the ice melts and the NWP opens up.

Unusually, the Shermans saw none of ROL’s marketing material for the cruise before booking. Had they done so, they would have seen a clear disclaimer that the itinerary was subject to ice and weather conditions, with safety the priority. But the Shermans booked the cruise purely on the recommendation of friends.

Warnings ‘inadequate’

Mrs Sherman rang to make the booking. She paid a deposit, described as non-refundable, and received next day a short-form confirmation of the booking, ROL’s terms and conditions, and an Atol Certificate. Two weeks later the Shermans received an itinerary describing the planned cruise in detail with an invoice.

In 2018, the ice in the NWP was stubbornly slow in melting. The cruise departed from a different port, and after a few days had to give up on the NWP and cross to Greenland to spend longer there than the itinerary provided for.

The Shermans felt short-changed, although ROL sent updates in advance about changes, and issued proceedings, leading to a trial of many days at Winchester County Court during the pandemic. The County Court Judge found that the contract (booking) was made when the documentation arrived the day after Mrs Sherman’s call. Thus, the only description applied to the cruise was “The Northwest Passage – in the Wake of the Great Explorers”.

This was still achievable on the day the cruise set off and the warnings given in advance were adequate. The abandonment of the NWP a few days later was caused by force majeure (an event which could not be foreseen or forestalled). The claim was dismissed.

The Shermans appealed to the High Court, where the Judge took a different view. I should explain, this case was subject to the Package Travel Regulations (PTRs) of 1992, though I doubt the result would be different under the 2018 PTRs, which require the package organiser to ensure the information listed in the PTR Schedule is contained in the contract “depending on the nature of the package” and “if relevant”.

One of many items listed in the Schedule is ‘the itinerary’. The High Court concluded the PTRs meant the contract was not fully concluded until the detailed itinerary was sent. That itinerary was not performed and ROL’s advance warnings were inadequate in that context. The Shermans were successful.

This was bad news for the industry. The Schedule contains a whole raft of information, not just the itinerary but the tourist category of hotels, their ‘main features’, the period within which complaints must be made, and (in the 2018 Regulations) the suitability for those with reduced mobility.

If an organiser accidentally omitted any of these, or genuinely felt they were not relevant, the position would be that there was no contract and at any moment the consumer could walk away and require a full refund.

Point of contract

ROL appealed to the Court of Appeal, whose judgment in April overturned what the High Court ruled, finding the PTRs do not impact when a contract is made. A contract is made when it’s made in accordance with normal legal principles (offer, acceptance, consideration). Failure to send an itinerary, or other relevant information, might or might not breach the PTRs, but the contract is still valid.

The Appeal Court also said two other things of importance. First, that in holidays with inherent risks, a well-worded disclaimer can be effective.

Second, that the ‘flicker of hope’ test is dead. Cases dating back to the Sars epidemic of 2003-04 had established that a holiday company was not forced to cancel a trip (and a consumer cannot cancel a trip) until there was ‘not a flicker of hope’ it could continue. The County Court, High Court and Appeal judges agreed this overstated the hurdle. The true test is that there is ‘not a reasonable possibility’ of the holiday proceeding.

How much difference this makes in practice remains to be seen.

Despite this, ROL was still unsuccessful. The Appeal Judges found ROL had fallen foul of its own booking conditions. So, the Shermans go back to the County Court for their compensation to be assessed.

But for our purposes, this case is good news. If a court says, ‘The PTRs have this effect’, we are all stuck with it. But if it says, ‘You lose because of your booking conditions’, the conditions can be rewritten. The need to keep booking conditions, disclaimers and the like under review at all times is also a lesson from this case.

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