Consumers and the Law - Case Study Example

Consumers and the Law Introduction Subsequent to perusing a brochure produced by the Seaside Holidays Ltd, in March George booked a holiday with the former, on their standard form contract. The hotel selected by George, namely, Ocean Retreat Hotel, from the list in the brochure, was declared to incorporate heated swimming pools, babysitting service and was stated to be located in immediate contiguity with the beach. On arrival at the hotel with his family, George discovered that the Ocean Retreat Hotel was not situated near the beach. Moreover, the bar in the hotel was chiefly frequented by the local populace, who were given to boisterous behaviour that lasted almost till daybreak. In addition, the babysitting service had been discontinued in the year 2009. Furthermore, the swimming pools were not functioning. At the time of paying his bill to the hotel, George found that he had been charged for holiday insurance to the tune of £75. In the brochure it had been stated that holiday insurance would be provided free of charge. To this objection the hotel management drew George’s attention to the clause that prices were subject to revision at the discretion of the tour operator. George’s wife Jan, conducted some shopping in the hotel and purchased a travel bag, which labelled as being superior quality leather. The bag has a tiny sticker, which stated that the bag’s clasp had a small scratch on it. Subsequently, Jan realised that the bag was made of synthetic material and not leather. Moreover, the bag’s shoulder strap was also broken. The hotel management, on being approached, offered to take back the bag and give Jan a credit note. Issues In order to advise George and Jan in respect of their rights against the Seaside Holiday Ltd hotel management for the losses sustained by them in respect of their stay in the hotel; and the defective shoulder bag, the principal issues to be considered are as follows; Whether there is any valid contract between Seaside Holiday Ltd and George. Whether Seaside Holiday Ltd is liable for misrepresentation under the provisions of contract law. Whether Seaside Ltd can rely on an exclusion clause, in order to evade liability. Whether any criminal liability arises, with regard to the misdeeds committed by the Seaside Holiday Ltd. Rule of Law A person acting in the course of a business or trade is precluded by the Trade Descriptions Act 1968 from employing certain false trade descriptions. The principal offences under this Act are first, using a false trade description to goods. Second, deliberately or negligently providing a false representation about services, accommodation or facilities. Moreover, a service provider has to possess sufficient expertise and take reasonable care, while providing a service to a consumer this is the requirement under the Supply of Goods and Services Act 1982.1 In addition, the provision of such service has to be concluded within a reasonable period of time.2 In accordance with the provisions of the Sale of Goods Act 1979, goods sold in the normal course of business, are to be of satisfactory quality.3 Moreover, this act requires goods sold by description, to conform to their description. In the absence of such conformity, goods can be rejected.4 As such, the three important implied terms that provide protection to consumers, with regard to sub – standard goods are; first, the stipulation that goods sold should comply with their description.5 Second, the quality of the goods sold should be of satisfactory quality. 6 Third, the goods sold should be appropriate for the specified purpose.7 In the Carbolic Smoke Ball case, it was held that an advertisement can be considered as an offer, in instances, wherein, a party had relied on the advertisement and complied with all its conditions. The Unfair Contract Terms Act (UCTA) 1977 and the Unfair Terms in Consumer Contract Regulations (UTCCR) 1999 gives protection to consumers in respect of their business dealings. Hence, it is to be examined whether George and Jane are consumers, according to the provisions of the law. A consumer has been described in the Consumer Contracts Regulations as a natural person who acts for purposes that are external to his business or trade.8 The misuse of exclusion clauses and terms is prevented by the provisions of the Unfair Contract Terms Act (UCTA) 1977 and the Unfair Terms in Consumer Contract Regulations (UTCCR) 1999. The UTCCR addresses all the terms in a contract, whereas, the UCTA pertains only to the exclusion clauses of a contract. It is essential to realise that no contractual term or notice can restrict liability for physical injury or death. An exemption clause is valid, if it forms a part of the contract; it covers the liability in an explicit manner; it has been made known to the other party by means of reasonable notice; 9 and it is not been preclude by statute or other legislation, like the UCTA or the UTCCR. 10 A contractual term or notice cannot exclude liability for negligence. As such, it cannot be assumed that a party to the contract had intended to undertake risk, if the contract contains a term or if there is a notice that attempts to exclude liability for negligence.11 Application to Facts If an individual relies on an advertisement and fulfils its requirements, then that advertisement could constitute an offer. This was the decision in the Carbolic Smoke Ball case.12 George had booked accommodation in the hotel, impressed by the offers made on the brochure of the company. He had complied with all the conditions specified in the advertisement. Hence, the brochure with its offers and provisions, supplied by the hotel constitutes an offer. Since, George had complied with all the conditions specified in the advertisement; it constitutes an acceptance. Thus, a valid contract had been formed, as per the decision in Carbolic Smoke Ball case. It is indispensable to establish that George and Jan are consumers, in order to procure the protection provided by the UCTA and the UTCCR. An individual is a consumer, if he does not enter the contract in the course of his business and the seller forms the contract, in the normal course of his business. This is in accordance with the provisions of section 3 of the UTCCR 1999. In our problem, George and his family booked a place in the hotel, in order to enjoy a vacation. Thus, their objective behind forming the contract with the hotel was personal and not related to any profession or business. On the other hand the hotel formed the contract with George, in the course of their business. Consequently, George is a consumer, in accordance with the provisions of the UTCCR. Moreover, George was induced by the Seaside Holidays Ltd brochure, with respect to the location of the hotel, as well as the services offered by it. However, it was discovered subsequently that all the assertions made by Seaside Holiday Ltd were false. George booked the hotel induced by the false assertions made by the Seaside Holidays Ltd . A false statement provided at the time of forming a contract, by one of the parties to the contract, constitutes a misrepresentation. A party that undergoes loss due to misrepresentation by the other party can claim revocation of the contract or damages. In the ruling provided in Derry v Peek, their Lordships held that misrepresentation would be established, if the plaintiff could prove that the defendant knew or believed his statement to be false or misleading.13 The fraudulent misrepresentation made by the hotel induced George to book accommodation with the former. In addition, his wife Jan purchased the shoulder bag, after being duly impressed by the fraudulent misrepresentation made by the hotel. George and Jan were both made to undergo significant financial loss due to the fraudulent misrepresentation made by the hotel. Moreover, they had been charged holiday insurance during their stay at the hotel which was specified by the Seaside Holiday Ltd Hotel as being offered free in the brochure. The Seaside Holiday Ltd had not complied with its contractual obligations. This constitutes a violation of the provisions of contract law, which makes the latter liable for breach of contract. Hence, George and his family can make a claim against the Seaside Holiday Ltd, with regard to damages for breach of contract and the psychological trauma experienced by them, due to the low quality of the services provided to them, by the hotel management during their stay at hotel. . In accordance with the provisions of the Misrepresentation Act 1967, the courts are required to explore the possibility of awarding damages, instead of annulling a contract, in instances where a party to the contract claims dissolution of the contract.14 Under the provisions of this act, an innocent party can recover damages from the party that had made a false statement. Hence Seaside Holidays Ltd is liable for misrepresentation, as per the provisions of contract law. Moreover, they can claim damages for the losses caused in this context, under section 2 of the Misrepresentation Act, 1967. Jan Goods that are purchased must be of satisfactory quality. This is enjoined by the Sale of Goods Act 1979. This requirement is limited to goods that are sold in the due course of business. Furthermore, the implied terms of a contract, stipulate that goods sold should match their description, be of acceptable quality and should serve the purpose of the buyer from a reasonable perspective. This requirement is of great significance to a party that wishes to take legal action for breach of contract. This effectively renders the supplier of goods liable. What is of cardinal importance is that the goods sold should be of satisfactory quality. 15 As such, it is essential that goods sold should be of the quality that can be reasonably anticipated, with regard to their appearance, durability, finish, safety and freedom from defects. If the goods sold are unsuited for their purpose or defective, then the purchaser has the choice of rejecting them or claiming compensation. This is in accordance with the provisions of the Sale and Supply of Goods to Consumers Regulations 2002. 16 With respect to Jan, she had purchased the shoulder bag, after viewing the details provided in the shop display window. In addition, she had relied on the statements provided by the shop, regarding the quality and nature of the shoulder bag. Since, she had relied on the statement made by the shop personnel regarding the quality of the leather, and their assertions having being proved to be false, Jan can make a claim against the Seaside Holidays Ltd for fraudulent misrepresentation under the provisions of Contract law. In respect of the above issue, the Seaside Holidays Ltd had infringed the implied terms of the contract, specifically the provisions of section 14(2) of the Sale of Goods Act 1979. This renders it liable to make good the loss caused to Jan. The court had ruled in Parker v South Eastern Railway that reasonable notice has to be provided to a party, regarding an exclusion clause in the contract. 17 The provisions of the UCTA empower the courts to ascertain the reasonableness of exclusion clauses in a contract. As such, any party that includes an exclusion clause in a contract is required to establish its reasonableness.18 In our problem, the exclusion clause was located inside the brochure, and not displayed prominently. In accordance with the case law discussed above, this renders the exclusion clause invalid. As per the case law decided in the context of exclusion clauses, the notice of exclusion clause should be visible prominently. In our problem, no such reasonable notice was given to the consumer. It was held in Spurling v Bradshaw that some exclusion clauses had to be shown in a noticeable manner and that they should be printed in red ink on the pertinent document. 19 The courts attach considerable significance to exclusion clauses. Therefore, the Seaside Holidays Ltd cannot take recourse to the exclusion clause in order to evade liability. Moreover, the travel bag purchased by Jan was not of durable quality. It was unsuitable for the purpose for which it had been purchased. Hence, it is clear that Seaside Holidays Ltd. had violated the provisions of Sale of Goods Act as well as provisions of Sale and Supply of Goods to Consumers Regulations 2002.20 Conclusion As per the case law and legislation discussed above, Seaside Holidays Ltd is liable for fraudulent misrepresentation under the provisions of the Misrepresentation Act 1967. The remedies in respect of fraudulent misrepresentation are termination of contract and damages for the losses sustained. Hence, George can claim damages from Seaside Holidays Ltd, for the losses sustained by them. In our problem, the Seaside Holidays Ltd had stated in their brochure that there was an outdoor swimming pool and a babysitting service. Both these facilities were not available at the time of the contract. This constitutes fraudulent misrepresentation and a criminal offence under the provisions of the Trade Descriptions Act 1968. Hence, the Seaside Holiday Ltd will be criminally liable for the false statements made by it. The Seaside Holidays Ltd cannot rely on exclusion clauses, since no significant notice had been provided by them in respect of such terms to Jan while purchasing the shoulder bag. Moreover, liability for negligence cannot be excluded, in cases of damage to person or property. George and Jan can initiate criminal action against the Seaside Hotel Ltd for false description of products and services under the Trade Description Act. In instances of misrepresentation, the consumer can repudiate the contract and claim damages. This is in accordance with the provisions of the contract law.21 Moreover, the buyer of a product that is faulty can initiate action for fraudulent misrepresentation. In addition, the buyer has the option of initiating action for infringement of implied contractual conditions, in accordance with the provisions of the Sale of Goods Act 1979. Bibliography Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1. Consumer Contracts Regulations 1999. Derry v Peek (1889) 14 App Cas 337. Lawson, Richard, 2005, Exclusion Clauses and Unfair Contract Terms, Sweet & Maxwell Misrepresentation Act 1967. Parker v South Eastern Railway (1877) 2 CPD 416. Scott, Colin, Black, Julia and Cranston, Ross, 2000, Cranstons consumers and the law, Cambridge University Press Sale and Supply of Goods to Consumers Regulations 2002. Sale of Goods Act 1979. Supply of Goods and Services Act 1982. Spurling Ltd v Bradshaw (1956) 1 WLR 461. Trade Descriptions Act 1968. Taylor, Richard, 2007, Contract Law Directions, Oxford University Press. Unfair Contract Terms Act 1977. Read More