Over the past few years, freak weather and geopolitical developments have triggered a wave of adjustments to overseas travel plans, or even outright cancellations. For example, the current war in Gaza has prompted several cruise lines to cancel visits to and from the Middle East. In what seems to be an increasingly volatile world, both geopolitically and meteorologically, operators would do well to take note of the recent Court of Appeal judgment in Sherman v Reader Offers Ltd and, where necessary, review their contracts, procedures and marketing materials.
The case highlighted the obligations on tour operators and travel companies in circumstances where events or conditions beyond their control mean that travel itineraries must be changed. In line with the general direction of travel for consumer protection cases, the Court of Appeal emphasised the importance of providing the customer with adequate and timely information. This includes information about their rights, giving them the opportunity to consider their options and, where appropriate, claim a full refund. The case also highlighted that force majeure provisions will not assist operators where adverse events or conditions are reasonably foreseeable or communications with the customer are lacking.
In this article, Antonia Lyne, Charlie Fursdon and Ethan Ezra examine the key learning points for the travel industry.
What was the case about?
The case concerned the Shermans, who booked a 16-night luxury cruise around the legendary Northwest Passage in Arctic Canada. The travel company, Reader Offers Limited (ROL) had advertised the trip as being “in the wake of the great explorers” but changed the itinerary at the last minute due to adverse weather conditions.
In particular, a buildup of sea ice meant the cruise could not follow the intended itinerary. A few days before the cruise set sail, ROL informed the Shermans of some limited changes to the itinerary and warned that more may follow. Then, during the voyage itself, the decision was taken to sail down the west coast of Greenland instead. This substitute voyage barely entered the Northwest Passage and therefore eliminated the main purpose of the cruise for the Shermans.
ROL’s terms drew a distinction between “minor” and “major” changes to the contract. Minor changes did not need to be notified to the customer in advance and were not eligible for compensation. For major changes, however, ROL accepted an obligation to inform the customer as soon as reasonably possible and provide them with the choice of a refund or of continuing (plus compensation for any difference in the value of the altered trip). A separate clause stipulated that ROL’s obligation to pay compensation would not apply in the event of force majeure (defined as “unusual or unforeseeable circumstances”).
The Shermans sued ROL for compensation. The Court of Appeal has recently upheld a decision of the High Court that the Shermans are entitled to compensation. The Court of Appeal found that ROL were in breach of their own terms and, relatedly, the Package Travel, Package Holidays and Package Tours Regulations 1992 (Regulations). These Regulations govern traditional style consumer package holidays and imply various consumer protection measures into the contracts involved.
What were the key findings?
The Court of Appeal found that:
- Contrary to ROL’s claim that the detailed itinerary was no more than an “aspirational” document, the detailed Northwest Passage itinerary was incorporated into the contract (pursuant to Regulation 9).
- ROL breached Regulation 12 and its own terms by failing to notify the Shermans about the new itinerary in a timely manner. The revised route was undoubtedly a “major” change which triggered this obligation as it was drastically different from the planned route and what the Shermans understood they had contracted for.
- ROL also breached Regulation 14 by failing to provide a significant proportion of the services contracted for. In particular, the cruise had only visited one location within the Northwest Passage.
- ROL could not rely on Regulation 15 (limitation of liability due to unusual and unforeseeable circumstances beyond the control of the operator) or their own contractual force majeure clause since: (i) the breach in failing to notify the Shermans about the itinerary change was entirely within ROL’s control; and (ii) the icy conditions, whilst uncommon (a once-in-a-decade occurrence) and clearly outside of anyone’s control, were not unforeseeable. Males LJ found that: “it was the very unforeseeability of ice conditions which was itself foreseeable … [and] it is entirely fair that ROL should bear that risk”.
What are the learning points for the travel industry?
There are a number of key points to consider for those in the industry, particularly companies contracting directly with consumers. The Regulations cited in this case will not be appliable to all consumer holidays, but the broader (and more recent) Package Travel and Linked Travel Arrangements Regulations 2018 are more likely to be. The recent regulations reflect the way in which holidays are more regularly bought and sold today, often online, giving “package” a wide definition and including linked travel arrangements. However, many of the same consumer protection principles apply across both sets of regulations:
- For package holidays, an itinerary must be included in the contract: This is a key part of the suite of information which the operator is obliged to provide to the customer before the booking is made.
- When liaising with customers be alert to precisely when a contract is formed: This will depend on the particular circumstances of each case. In this case, ROL’s assertions that a series of incidental and anticipatory interactions across various dates with the Shermans comprised a binding contract were dismissed.
- Operator bears the risk of changes to the itinerary and must warn of reasonably foreseeable risks: Operators are expected to give a sufficiently clear and prominent warning prior to a customer booking where, exceptionally, the special nature of a cruise or expedition is such that a detailed itinerary is inherently uncertain. This obligation could be satisfied by stating the general area to be visited and identifying particular locations on the express basis that they will be visited only if conditions permit.
- Notify the customer as soon as possible of material changes: Where material changes are required to arrangements and itineraries after the customer has booked, the customer should be informed quickly. They should be informed of their right to cancel and receive a full refund, or reaffirm with compensation for any loss of value.
- Misplaced reliance on a force majeure clause can prove highly problematic and lead to costly disputes: These clauses are not straightforward and may not provide the level of protection you expect. For example, legal questions surrounding foreseeability, a party’s control (including whether this is subject to reasonableness), defined terms, whether a list is exhaustive, and the rights afforded if such an event occurs could all prove critical.
- Audit your contracts: It is good practice to regularly review your standard terms and company policies, particularly in relation to last minute changes to itineraries or travel details. These should be living, breathing documents which evolve over time to reflect industry standards, shifts in the legal/regulatory landscape, and your current business practices. It is also worth considering how your marketing materials overlap with your contracts, to avoid overpromising and underdelivering.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, June 2024
