Avoid!

Photo by Eiliv-Sonas Aceron on Unsplash

The above photograph conveys everything that is pleasant about staying in a nice hotel or boutique guesthouse.

Sadly, this was not the case for one couple, Mr and Mrs Jenkinson, who had booked into accommodation (the Broadway Hotel) in the English seaside resort of Blackpool in 2014. The couple were so disappointed by the lack of basic hygiene standards and facilities that they were motivated to leave a review on Tripadvisor – a very bad review, in fact, which did the establishment absolutely no favours.

How did the hotel respond?

Not in the way that you would think the management should have responded i.e. by issuing the couple with a grovelling apology and, possibly, a refund?

No, the couple were checking their credit card statement some days after their review had been posted and noticed that £100 had been charged to their account by the Broadway Hotel. Surely, this must have been some oversight or mistake? Following further enquiries by the couple, they discovered that the hotel had levied the charge because they had the nerve to leave a bad review on Tripadvisor about the very poor standards they had experienced while staying there.

When the couple objected to this, the establishment told them to check the small print in its booking documents – which Mrs Jenkinson had admittedly signed. True enough, buried somewhere in the small print was a statement to the effect:

Despite the fact that repeat customers and couples love our hotel, your friends and family may not. … For every bad review left on any website, the group organiser will be charged a maximum £100 per review.

Now, the Broadway Hotel was by no means luxury accommodation (the Jenkinsons had paid £36 for an overnight stay), but even budget hotels must meet basic standards such as adequate hygiene. The hotel failed miserably to meet these standards. More and more often, we do rely on the experiences of other people to guide us in our choices as consumers and the Jenkinsons were posting a fair comment review on Tripadvisor. The ability of businesses and traders to prevent consumers doing this would clearly be a retrograde development.

At the time, the story went viral and Mr and Mrs Jenkinson were invited on to the BBC Television’s Breakfast show to talk about their experiences. Needless to say, the hotel got more than it bargained for with the adverse media publicity and Blackpool Council’s Trading Standards Department taking a keen interest in its business practices.

A link to the story on the BBC website about the Jenkinsons’ experiences at the Broadway Hotel, Blackpool in 2014 can be found below:

https://www.bbc.co.uk/news/technology-30100973

Was this clause enforceable?

At the time of the story breaking, I fortuitously happened to be teaching Unfair Terms in Contract Law to two of my classes. I had never seen a clause like this before and informed my students that it was very unlikely to be capable of enforcement by the hotel given its blatant unfairness – let alone the implications for freedom of speech in the UK.

I’ve long wanted to write about the Jenkinsons’ experience and I was reminded of their story some weeks ago when teaching a group of students about unfair terms in contracts.

Normally, when I discuss this area of the law, I make students aware that businesses used to be extremely trigger happy when using all sorts of unfair terms in contracts in order to avoid their responsibilities to customers.

Prior to the introduction of the Unfair Contract Terms Act 1977 (about more later), businesses and other organisations could exclude or limit their liability for causing death and personal injury so long as adequate notice of the existence of the term was brought to the attention of the other party to the contract.

So, for example, if a garage owner wished to exclude his liability to a customer who put a vehicle in for repairs or a service, he could simply alert the customer to the existence of an exclusion or limitation clause in the contract. The customer leaves the car to have the brakes fixed; picks the car up later; the mechanic has been negligent and not carried out the work properly; the customer later suffers a terrible accident because the brakes haven’t been fixed. Hey presto, no need to worry because the garage owner could point to his standard terms of business which contained an exclusion clause. In effect, the exclusion clause was a get out of jail card.

Another tactic often deployed was where the business could argue that the customer had constructive notice of the existence of the unfair term e.g. the customer should have read the documents presented to him or her. Mrs Jenkinson had signed the booking documents presented to her by the Broadway Hotel. She later admitted that she did not read the terms because she did not have her spectacles with her.

On occasion, the courts might intervene and side with a party objecting to the enforcement of an unfair term under a number of judicial doctrines:

  • the repugnancy rule
  • fundamental breach
  • the contra proferentum rule

Despite judicial intervention, the odds were still stacked against parties who wished to challenge the inherent unfairness and abusive nature of attempts by traders and businesses to exclude or limit their liability.

Sensibly, the UK Parliament decided to tackle what was becoming the Wild West of contractual terms and passed the Unfair Contract Terms Act 1977 which made such attempts to evade liability automatically void.

Generally speaking, the Act made it much harder (but not impossible) for businesses to impose other unfair terms on consumers. Businesses, on the other hand, were still, advised to read the small print of any agreements that they were contemplating entering, although courts would be more sympathetic if a larger business tried to use its unequal bargaining power to impose unfair terms on a smaller business.

The European Union also passed legislation (European Council Directive 93/13 on Unfair Terms in Consumer Contracts and, for a while, the Unfair Terms in Consumer Contracts Regulations of 1994 and 1999 respectively were in force. These were later repealed and replaced by the Consumer Rights Act 2015, although the terms of the Directive live on in this legislation (remember: EU Law is hardwired into UK national laws).

Along the way, the Enterprise Act 2002 and the Consumer Protection from Unfair Trading Regulations 2008 severely restricted the ability of businesses and traders to impose very unfavourable terms on consumers.

The net effect of all of this legislation was that consumers were really protected against the imposition of unfair terms by traders and businesses. Consumers were often deemed to be the weaker party in a relationship with traders and businesses and, therefore, needed to be protected.

Returning to the Jenkinsons’ experience at the a Broadway Hotel, it is worth emphasising that the couple were being provided with accommodation services as consumers and, therefore, would have been entitled to the benefit of existing UK consumer protection laws on the statute books in 2014.

Had this incident occurred in 2020, the Jenkinsons would, of course, have been able to challenge the legality of the penalty clause primarily in terms of the Consumer Protection from Unfair Trading Regulations 2008 and the Consumer Rights Act 2015.

Conclusion

Happily, we have come a long way in consumer law where businesses could previously impose all sorts of unfair, not to say downright abusive, terms on customers.

We are now in a position, where UK consumers will be protected by legislative safeguards which should ensure that these types of terms will not be permitted to stand i.e. they will be automatically void or simply unenforceable. The penalty clause which the Jenkinsons experienced would doubtless have fallen foul of consumer protection legislation had the issue got anywhere near a court room. Nonetheless, it was an interesting example of the inventiveness of businesses regarding the creation of new types of unfair terms in contracts.

It remains the case, however, that in business to business contracts (or in private transactions), it will be highly advisable for parties to remain wary about the potential unfairness of contractual terms. Only the most outrageous and downright abusive terms (such as excluding or limiting liability for death or personal injury) will be automatically void – no matter how much notice of their existence has been given by the party seeking to rely on them. If a business is seeking to have a clause declared void or unenforceable, the debate to be had in terms of the Unfair Contract Terms Act 1977 will often centre around the perceived reasonableness (or otherwise) of the clause.

Copyright Seán J Crossan, 1 March 2020

Surf’s up?

Photo by Emiliano Cicero on Unsplash

We seem to be on a theme dealing with mishaps concerning products – this blog and the previous one.

In the previous blog (Just blew it! (Again!)), I examined accusations of racism and anti-semitism surrounding the launch of Nike’s latest version of the Airmax trainer.

Now, we turn to Samsung which also has been in hot water in relation to its advertising campaigns in Australia. It would seem that Samsung is being accused of misrepresentation by the Australian consumer watchdog – the Australian Competition and Consumer Commission (ACCC) – concerning false claims that were made as part of the marketing campaign to sell the company’s Galaxy S10 mobile phones.

Apparently, consumers were told that they could safely go swimming and surfing with the phone on their person without the product suffering water damage. This statement does not appear to be accurate and Samsung now has to deal with a lot of very unhappy customers – as well as the ACCC.

In Australia, swimming and surfing are very popular past times and many mobile phone users will understandably want reassurance that they can use their phones without them being damaged while participating in such activities.

In contract law, there are three types of misrepresentation:

  • Innocent
  • Negligent
  • Fraudulent

A misrepresentation potentially renders a contract voidable and there may also be the potential to claim damages – although a claim for damages involving innocent misrepresentation in Scotland is not competent (unlike the situation in England and Wales).

In the UK, of course, false claims about products or services by a trader can fall foul of the common law of contract principles dealing with misrepresentation. At statutory level, we now have the Consumer Rights Act 2015 – principally Section 10 – which covers situations where the consumer relies on the trader’s expertise regarding the product’s fitness for a particular purpose.

A very important issue to consider in cases of alleged misrepresentation: the victim must demonstrate that s/he relied on the misrepresentation. It will not be enough to show that a misrepresentation or false statement of fact has been uttered by the trader (either expressly or by implication); it must have influenced the victim to enter a contract with the trader.

Section 10 of the UK Consumer Rights Act 2015 has been largely inherited from Section 14 of the Sale of Goods Act 1979 (which previously governed consumer transactions). Interestingly, Australia – as a former colony and then self-governing Dominion of the British Empire – has very similar consumer protection laws which are a direct result of its historical relationship with the United Kingdom.

Furthermore, in the UK, false claims about goods and services by a trader can also represent a potential breach of criminal law (as per the Consumer Protection from Unfair Trading Regulations 2008).

It will be interesting to see how this situation develops.

A link to the story on the BBC News website can be found below:

Samsung sued over water-resistant phone claims

Australia’s consumer watchdog alleges the company made false claims about using its phones while swimming.

Copyright Seán J Crossan, 8 July 2019

Special Offers!

Photo by Artem Bali on Unsplash

My students are well aware that I like to use stories which appear in the media to illustrate legal points or issues. Today, I have been reviewing some old media stories which I have distributed to students over the past few years.

One such story which caught my eye, and is always a topical issue, concerns contract law. When I begin to teach students about the basics of contract law, we often spend a bit of time discussing the difference between genuine offers and invitations to treat.

Invitation to treat

The phrase “invitation to treat” often causes puzzled expressions to appear on the faces of the individuals attending the lecture. I’ll say to them that it’s probably an expression that they have not previously heard. Even if they work in a retail environment or a customer facing role, it’s not something that they are likely to have encountered.

After all, when was the last time you walked around a supermarket or department store and heard over the PA system something like this:

Hello shoppers, we’d like to make you aware that we have a great range of invitations to treat in the store today.”

I can just imagine the reaction from most of the customers: utter and total bemusement.

What you’re much more likely to hear is the disembodied voice saying something like this:

Hello shoppers, we’d like to make you aware that we have a great range of offers in the store today.”

Now, the content of the above announcement isn’t strictly correct. The store or the retailer isn’t making you (the potential customer) an offer; they are making you an invitation to treat.

What is an invitation to treat?

This area is especially relevant for retailers and their pricing policies. Customers might think that a price ticket or indication is a firm offer issued by the retailer.

Very simply, it’s a basic form of marketing or advertising by the retailer or the trader. They wish to alert you to the fact that they have goods or services available that might be of interest. It is then up to you to go and make the offer to the appropriate representative of the trader. This offer will be considered (perhaps extremely quickly and without much in the way of negotiation) and accepted leading to a contractual agreement between the parties. An invitation to treat is a willingness by the trader/retailer to enter into negotiations with a potential customer. The trader or retailer is effectively saying: ‘I’m open to offers or make me an offer‘.

It’s been well established law for some time that goods displayed on shelves or in shop windows are not offers to the general public capable of acceptance, but rather they should be seen for what they are: invitations to treat (see Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953) and Fisher v Bell (1961)) .

Misleading price indications

What if the retailer or trader applies the wrong prices to a product? Does the customer have the right to hold the seller to this price – even if it’s a mistake?

This can be a particularly acute problem for retailers and traders which use the internet or other digital platforms to advertise and sell goods. You only have to think about some of the big internet traders to realise that keeping track of the prices on every product sold by them must represent a really tough operational challenge.

  • What if prices are not kept up to date?
  • What about data input error where someone keys in the wrong price and is totally unaware of this?
  • What if the promotion (e.g. a discount) applies to only a small group of products or a particular geographical area?

These have all been known to happen to retailers and traders who use the internet or other digital media.

We’re now living in a more hi-tech age where lots of traders will advertise goods and services on the internet, but these platforms should be seen as the virtual equivalent of the high street trader’s shelves or shop window. Even if prices are affixed to certain products or services, the customer should always be wary. These are merely an indication of what the trader would like to achieve. There is nothing, in theory, to stop the customer haggling or negotiating over the goods or services.

In traditional retail or sales environments i.e. face to face situations, the customer sales representative could quickly deal with the problem of wrongly mispriced goods. The customer might huff and puff and threaten legal action, but usually to no avail. Quite simply, the goods which were on display were invitations to treat (not offers). The customer was, in fact, making the offer which the customer sales representative was refusing to accept.

True, many retailers might choose to go ahead and sell the goods at the wrongly marked price as a gesture of goodwill because this was seen as a sensible customer relations tactic, but legally the store was not obliged to do this. Obviously, if there was a really big price discrepancy, even the most customer centred business might choose to draw the line somewhere (I suppose all organisations have their bottom line).

In sales generated using the internet or other digital media, there is a lack of a traditional gate-keeper (a sales assistant). Transactions are processed electronically and remotely and contracts for wrongly (i.e. lower) priced goods may slip through.

Usually, but not always, the virtual retailer or trader will have an explicit term in their general contractual conditions which states that the transaction will not be binding until such time as the customer receives a confirmatory email or other form of message.

Legal consequences

Although a store might not be liable to a customer for misleading price indications or statements under the law of contract, there are potential criminal consequences. The store could be prosecuted under criminal law and fined for misleading consumers. These laws are now contained in the Consumer Protection from Unfair Trading Regulations 2008.

Please see link to the story about the Co-op getting its pricing policy wrong:

Co-op chain accidentally introduces 20% discount at stores

A supermarket chain accidentally introduces a 20% discount at 140 stores instead of just at one branch – costing it thousands in lost revenue.

Conclusion

Contrary to popular opinion, advertisements displayed in newspapers, magazines, trade journals and on the internet are not offers, but are regarded as invitations to treat. The offer is to be made by the consumer in response to the advertisement. The advertiser is at liberty to accept or decline any offers potential customers might choose to make.

An invitation to treat can take the following forms: goods in a shop window display, on a shop shelf or in a catalogue, goods exposed for sale at an auction or via the internet. The offer can be made by taking goods to the checkout (real or virtual) or requesting them from the shop assistant, it is then up to the advertiser or the shop assistant to decide whether to accept or refuse the offer. A shop assistant does not have to give a customer a reason for refusing to accept an offer and is not bound by the marked price on the goods. If, for instance, you happen to be under 18 years of age and you attempt to purchase alcohol from your local supermarket, the assistant will be well within her rights to refuse to accept your offer to purchase these goods.

Copyright Seán J Crossan, 27 March 2019

No more heartbreak hotel?

Photo by KEEM IBARRA on Unsplash

In Chapter 1 of Introductory Scots Law, I discussed alternative methods of resolving issues or disputes which may have legal consequences.

In particular, I focused on the role of regulatory bodies which can assist members of the public e.g. consumers to lodge complaints and have these disputes resolved relatively inexpensively.

One of these regulatory bodies with an important role to play in consumer law is the Competition and Markets Authority (CMA) . This organisation aims to ensure that there is a level playing field for consumers and that businesses do not exploit an often dominant position in the market place.

A recent story which threw some light on the work of the CMA concerned misleading pricing and marketing policies which were being used by some hotel booking websites. In particular, the CMA found that some booking companies were using high pressure tactics to get consumers to finalise a booking. A favourite tactic being used by the booking sites was to give consumers the impression that demand for rooms at certain hotels was far greater than was actually the case.

Consumers do have recourse to the law – the Consumer Protection from Unfair Trading Practices Regulations 2008 is one such example (see Chapter 4 of Introductory Scots Law). That said, taking individual legal action can be fraught with risk for consumers. It is often better if a regulator, such as the CMA, is willing to go to the barricades on behalf of consumers generally in an attempt to get businesses to play fair – either by means of (gentle) persuasion or by threats of legal action.

As a result of the intervention by the CMA, hotel booking sites will now have to behave more transparently in their interactions with actual and potential customers.

A link to a CMA press release concerning hotel booking websites can be found below:

https://www.gov.uk/government/news/hotel-booking-sites-to-make-major-changes-after-cma-probe

A link to a BBC report about the CMA investigation can be found below:

I saw this on the BBC News App and thought you should see it:

Hotel booking sites to end ‘misleading’ sales

Hotels agree to be clearer about discount claims and stop high-pressure selling tactics.

Copyright – Seán J Crossan, 14 March 2019