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Consumer law

Consumer Law

The Package Travel, Package Holiday and Package Tours Regulations 1992[1] were created following European Directive 90/314/EEC. The main objective was to clarify the lack of redress a consumer has in a package holiday contract and was adopted by the United Kingdom on the 31st December 1992. Following a number of complaints the Regulations were believed to have created a strict liability regime for tour operators, making them responsible not only for breach of their own obligations, but also for the faults of their subcontractors. Described by the Consumers’ Association as a ‘missed opportunity’, close examination of the provisions suggests that the imposition of strict liability is open to challenge and thereby offers the holidaymaker no more protection than was already available under pre-existing common law. This discussion will consider whether the common law, combined with existing legislation and the influence of trade associations such as the Association of British Travel Agents (ABTA) made the Regulations superfluous in that sufficient protection was already provided to the consumer and thus additional legislation was unnecessary.

As package holiday contracts are a relatively new concept within the English legal system, and thus the case law in this area is scarce and based upon common law principles, consideration will be given to the principles applied in the cases both before and after the implementation of the Regulations. The effect of the provisions incorporated into the trade association agreements must also be considered, as there is a strong argument that these provide for more protection to the consumer than the legislation. Strict, or fault-based liability was an important consideration in ‘The Last Resort’, an article published by David Grant, and this will be considered throughout. Finally it is submitted, contrary to the proposition that common law rights offer more protection to the consumer, that the Regulations do provide more protection to the consumer.

Before proceeding to consider the effect of the Regulations it is important to note that the legislation concerns only ‘package holiday contracts’ that contain a prearranged combination of at least two components. Thus, the Regulations will cover all contracts that include a combination of transport, accommodation and other tourist services ancillary to neither, and for a period of at least twenty-four hours.[2] The contract concerns the creation of a package by a tour operator and is usually publicised in one or more holiday brochures. The consumer contracts for an inclusive price a number of components as determined within the brochure and reliance is placed upon the tour operator’s expertise to carry out the services. The arrangement is not dissimilar to that of a building contract where the client employs a principle to carry out the various duties of the contract by implementing vicarious performance. However, unlike the building contract where there is an implied obligation of strict liability in all cases of breach,[3] the law surrounding package holiday contracts falls short. The courts have been reluctant to impose strict liability on tour operators for the negligent acts of others and the contractual relationship with the client remained uncertain.

Whilst consumers’ organisations believed that the tour operators should be under strict liability, the tour operators would contend this by claiming liability should be based on fault and thereby excluding themselves for events to which they had no control. Thus, by the simple insertion of an exclusion clause, subject to the protection offered to consumers’ by the Unfair Contract Terms Act 1977, or by passing themselves off as either agents or mere arrangers of services, the tour operators were in a position to insulate themselves from liability. As package holiday contracts were a new concept originating from the 1960’s there were few cases decided that could establish the position in law. The most authoritative decision was taken from Wall v Silver Wing (1981)[4] and was applied in a number of subsequent decisions prior to the Regulations.[5] Owing to the negligence of the hotelier, the plaintiffs sued the defendant tour operators on the basis of an implied term that the hotel would be reasonably safe for the purpose for which they were invited. However, as the tour operator had no control over the activities of the hotel, the court rejected the implication of the term both in law and in fact. It would be ‘wholly unreasonable to saddle a tour operator with an obligation to ensure the safety of all the components of the package over none of which he had any control at all.’[6] Thus, in accordance with the traditional view that there is no liability for the negligence of others, the level of liability would appear to have been fault based. Only if the plaintiffs could prove that the tour operator was directly negligent would he be able to form an action under his contractual obligations.

Despite the adoption of fault-based liability, there were dicta to suggest that the courts would be prepared to apply a minimum duty to take reasonable care. Thus, if tour operators failed to provide a holiday of the contracted quality, or failed to provide the facilities contracted for, they would be liable to the client in damages.[7] Whilst this was the case, the extension to the level of liability received very little support until Cook v Spanish Holiday Tours 1990[8]. In response to the defendants claim that they were obliged only to book a room for the client, Lord Goddard imposed strict liability upon tour operators to supply all the components of the package, ‘it isn’t much good booking a room if you can’t have a room’.

Although this remained the position in a number of subsequent cases the package tour contract witnessed a significant change of direction in 1990. ABTA’s revised Code of Conduct was a direct result of the imminent Package Travel Directive and sought to ensure a much higher level of liability on tour operators than was previously imposed. In a radical overhaul, and with encouragement from the Office of Fair Trading, the tour operators were mandatory obliged to include, as a term of any package holiday contract, the responsibility to accept liability for both acts and omissions caused by their employees, agents, subcontractors and suppliers.[9] In addition, were the components of the package proved to be deficient or of an unreasonable standard they were further obligated to indicate their acceptance of such liability. Thus, the revisions effectively imposed strict liability on the tour operator for all matters arising from the package with one exception. Only if issues relating to death, personal injury or illness were found to be directly attributable to the tour operator would he be liable. ABTA’s dominance in the travel market ensured that the tour operator would remain liable in all ‘quality defects’ and this liability would extend to injuries sustained as a result of the negligence of their suppliers.

Thus, in light of the revised Code of Conduct consideration of implied terms would not have been an issue in the Wall v Silver Wing case as the injuries in that case were a direct manifestation of the hotelier’s negligence. The plaintiffs would have succeeded and liability would have been imposed on the defendant tour operator. Contrary to the traditional view that there could be no liability for the negligent acts of others the tour operators could no longer insulate themselves from liability of the package even though they had no control over its components.

With this level of liability one must consider whether there was ever a need to implement further provisions to safeguard the consumer. However, in compliance with the need to implement measures of harmonisation throughout the member states of Europe, the government were obligated to legislate in accordance with Directive 90/314/EEC. Due to the large number of complaints the Package Travel, Package Holiday and Package Tours Regulations 1992 were introduced to ensure that tour operators would accept strict liability, subject to exceptions, for a breach of contract. Regulation 15(1) sets out the boundaries to the level of liability for tour operators and appears to indicate strict liability not only for their own actions, but also for the actions of their suppliers. Thus, irrespective of whether the contractual obligations are to be performed by the tour operator ‘or by other suppliers of services’ they are liable to the consumer for the proper performance of the contract. Whilst the words in Regulation 15(1) appear to impose strict liability, it is somewhat restricted in the following paragraph. Regulation 15(2) relieves the tour operator of liability whenever he can establish that the failure in the performance of the contract was due neither to his fault nor that of his suppliers. The Regulations simply enshrined the ABTA code of conduct into domestic law and were applicable to all package holiday contracts. In contrast to the Code, which applied only to those who complied with it, the Regulations were binding upon all contracts for package holidays and therefore legally binding.

Further implications arise under the wording of Regulation 15(1) as to the liability of the tour operator ‘for the proper performance of the obligation under the contract’. Whilst the Regulations set out the requirements of a package holiday contract, they omit to conclude with certainty the level of liability to be imposed. The obligations under the contract however will depend ultimately on the courts application of both express and implied terms and remains elusive. Professor Atiyah submits that ‘one of the most important and difficult questions which arises in examining the extent of the parties’ duties under a contract is to decide whether the parties are absolutely bound to do that which they have contracted to do or whether they are merely bound to do their best to secure performance of the contract’.[10] It would appear however that the answer to this proposition had already been previously considered.[11]

One must consider whether the tour operator is merely under a duty to take reasonable care when selecting the supplier, as in Wall v Silver Wing, or whether that duty extends to ensure that reasonable care has been taken during the exercise of all the components of the package. Whilst the tour operator would contend that the service he performs is merely to organise the holiday the Supply of Goods and Services Act 1982 states that in all contracts for the supply of a service, where the supplier is acting in the course of a business, there is an implied term that the supplier will carry out the service with reasonable care and skill.[12] The extent of tour operators’ liability therefore is a matter of application of the implied term and the courts may refer to the Regulations in considering the extent of its use.

Although the Regulations do not expressly provide authority for the use of the implied term, Regulations 5 and 6 impose a number of obligations on the tour operator that give rise to its application. Thus, the tour operator is under a duty to provide contractually binding information to the consumer that includes a detailed itinerary of the package[13], and is to be incorporated into the brochure. All such terms will constitute implied warranties[14] and the tour operators’ failure to comply may result in both civil and criminal liability.

In Wong Mee Wan v Kwan Kin Travel Services Ltd[15], a case subsequent to the implementation of the 1992 Regulations, the Privy Council implied a term into a package holiday contract that the services would be carried out with reasonable care and skill. In this case the defendant tour operator had twice subcontracted the performance of an obligation to convey a party of people across a lake in China. As a result of the negligence of the boat driver the plaintiff’s daughter was drowned and an action was brought against the tour operator. Unlike Wall v Silver Wing they were held liable for death on the basis that their lordships were primarily concerned with the construction the contract itself. Throughout the brochure and itinerary the tour operator expressed their responsibility for the provision of the various components of the package and an assumption of special responsibility was applied. Despite acknowledging that the tour operator may have excluded liability by expressing themselves as mere arrangers of services,[16] contrary to ABTA’s Code of Conduct, they distinguished Wall v Silver Wing on the grounds that the implied term did not amount to ensuring ‘the safety of all the components of the package’, but merely to imply a term that the services would be carried out with reasonable care and skill. In light of the wording contained throughout the brochure their lordships deemed the defendants conduct not to comply with the requirement to exercise such care and skill, a clear proposition that they are not ‘merely bound to do their best to secure the performance of the contract’.

It is clear that their lordships use of the implied term was a primary tool in deciding the case and its justification derives from Regulation 6. However, the level of liability would perhaps be more transparent if the courts were willing to decide upon matters based on policy. In considering the extent of the parties’ insurance and the ability to pass liability down the chain of distribution then it is submitted that tour operators would be strictly liable to the client for all matters that could be directly attributed to either themselves or their suppliers. Whilst their lordships would appear to have acknowledged that the tour operator could oust liability by inserting a carefully drafted clause into the contract, this would obviously succumb to the requirements of the Unfair Contract Terms Act 1977 and its test of reasonableness.

The use of the common law will continue to play an important role within the package holiday contract despite the implementation of the Regulations. Whilst Regulation 6 confirms that all the details contained within the package constitute implied warranties there will always be occasions when certain matters are not catered for.[17] The courts will therefore continue to apply implied terms in determining the extent of the tour operator’s liability. As a matter of policy the extent of that liability will be determined on a case by case basis with special consideration given to attaining justice. Of course the courts will always show preference to the consumer in a commercial transaction and the lack of redress that would ensue from private actions being taken abroad would weigh heavily in any decision. Moreover, by holding the tour operator strictly liable for the negligence of his suppliers does not remove the tour operators’ chance of redress, he can simply form a direct action under his own contract.

The radical overhaul of ABTA’s Code of Conduct in 1990 imposed strict liability on tour operators’ in all aspects pertaining to quality defects of the package. Whilst it is submitted that there was no further need to extend this liability as sufficient protection was already in force, it must be remembered that not all tour operators would adopt the policy. The Code itself was never legally binding in any event and the Regulations simply instil the guidance in law to all cases. Furthermore, whilst the Code of Conduct referred to suggest that strict liability was in force at the material time of the cases discussed, that protection was effectively reduced by a further review in 2000.

It is clear that the law surrounding the package holiday contract has progressed. In Wall v Silver Wing the liability of the tour operator was fault-based and little redress was offered to the consumer when there was no direct negligence on the part of the operator. As observed in Cook v Spanish Holiday Tours however this liability was extended and the tour operator became strictly liable to ensure that the provision of services was carried out. ABTA’s revised Code of Conduct in 1990 is the benchmark for the law as it stands today. The Code clearly imposed strict liability to those who subscribed to it. However, as not all tour operators followed the guidelines, a gap was left in ensuring sufficient protection to all consumers. The Regulations simply fulfilled that gap and enshrined into domestic law the obligations upon all package holiday contracts. Whilst it is submitted that the consumer has been afforded no more protection than was already available this is clearly not the case. The Regulations impose strict liability for matters directly attributable to the negligence of the tour operator and his suppliers and its application can be observed in Wong Mee Wan v Kwan Kin Travel Services Ltd.[18]

[1] S.I. 1992 No. 3288

[2] Regulation 2(1)

[3] Viking Grain Storage v TH White Installations Ltd [1985] 3 B.L.R 103

[4] High Court (Unreported)

[5] Usher v Intasun (1987); Toubi v Intasun (1988); Kaye v Intasun (1987)

[6] per Hodgson J

[7] Jarvis v Swans Tours (1973) per Edmund Davies LJ; Aldock v Blue Sky (1980) per Cumming-Bruce LJ; Spencer v Cosmos (1989) per Mustill LJ

[8] The Times, 6th February 1960

[9] 2.8 Tour Operators Liability (ABTA Code of Conduct)

[10] [1993] 1 All ER 353

[11] Cook v Spanish Holiday Tours 1990

[12] Section 13

[13] Regulation 5 (Schedule 1)

[14] Regulation 6

[15] [1996] 1 W.L.R 38 (PC)

[16] Reference made to Craven v Strand Holidays (Canada) Ltd (1982) 40 O.R. (2d) 186

[17] Wilson v. Best Travel [1993] 1 All E.R. 353

[18] (1982) 40 O.R. (2d) 186

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