Publications - COVID-19
Unforeseeable Circumstances and Terms of Trade - Part 1
4 March 2020
Snapshot
In light of the bushfire crisis and the COVID-19 problems, cancellations of travel commitments are occurring.
It is important for travel and experience providers to understand the law in relation to this.
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A travel arrangement comes into existence when it is made unconditional as a contract. If there is ever any dispute the courts will decide.
Your terms of trade and the incorporating of them into your travel contracts is critical. This means, you must tell customers that when they accept your offer of travel and pay (if that is the arrangement), that they are entering into a binding contract incorporating certain terms of trade, eg by reference to a web link.
We now look particularly at cancellations and refunds. Hopefully your terms will make this clear. Make sure they have been clearly incorporated into your contract with your customers. Sometimes, you may find major booking agent customers requiring you to adopt their terms. These need to be checked (and negotiated if necessary) before accepting them.
If you simply have your terms of trade available to read but do not make it clear that these are incorporated, or do not record it, you will have difficulty proving that those terms have been incorporated in the contract.
There are other legal principles. These include the principle of “frustration of contracts”, “force majeure” clauses, and “unforeseeable circumstances”.
“Frustration” of a contract arises where, without fault of either party, the terms are incapable of being performed due to unforeseeable circumstances. The legal consequence is that the contract is terminated and future obligations are no longer able to be enforced.
If you have a contract for accommodation or other travel experience that cannot be performed due to no fault by either party, then those parties will not be able to enforce that contract because it will be frustrated and be of no further effect. This may occur if a customer is prevented from travelling to Australia by Government intervention. This will likely constitute a frustration of contract and will pose a commercial problem for an individual supplier expecting to rely upon the obligations in a cancellation provision because the provision will most likely no longer be effective if the contract has been frustrated.
Some terms of trade include “force majeure” clauses to exclude a party from obligations under the contract when an unforeseeable circumstance occurs outside the control of either party. These terms can be used to set out what circumstances will cause this to apply. What constitutes frustration in the eyes of one person unfortunately might be different to what constitutes frustration in the eyes of another.
Partial frustration might not give rise to an ability to completely ignore the contract and steps will frequently be able to be taken to provide substitutes. If you are faced with these sorts of issues, then you need to work with your customers to try to reach a consensus and try to provide alternatives which might be equally as good or better before either party starts to think that the contract should be considered to be at an end unless the circumstances are absolutely clear.
Where can I find more information?
The Department of Fair Trading and the Australian Competition and Consumer Commission have some helpful literature on this available on their websites below:
This underscores the importance of making clear in your contracts what happens if there are unforeseen circumstances, when a cancellation has to occur, and what alternatives may be offered to a customer before it can exercise its rights to cancel. Reviewing your travel contracts in this way and bringing these terms and conditions to the attention of your customers will help you avoid potential disputes later.
If you would like assistance reviewing and updating your business' terms of trade or need advice in relation to your own personal circumstances, please contact us.
In light of the bushfire crisis and the COVID-19 problems, cancellations of travel commitments are occurring.
It is important for travel and experience providers to understand the law in relation to this.
___________________________________________________________________________________________________________________________________________
A travel arrangement comes into existence when it is made unconditional as a contract. If there is ever any dispute the courts will decide.
Your terms of trade and the incorporating of them into your travel contracts is critical. This means, you must tell customers that when they accept your offer of travel and pay (if that is the arrangement), that they are entering into a binding contract incorporating certain terms of trade, eg by reference to a web link.
We now look particularly at cancellations and refunds. Hopefully your terms will make this clear. Make sure they have been clearly incorporated into your contract with your customers. Sometimes, you may find major booking agent customers requiring you to adopt their terms. These need to be checked (and negotiated if necessary) before accepting them.
If you simply have your terms of trade available to read but do not make it clear that these are incorporated, or do not record it, you will have difficulty proving that those terms have been incorporated in the contract.
There are other legal principles. These include the principle of “frustration of contracts”, “force majeure” clauses, and “unforeseeable circumstances”.
“Frustration” of a contract arises where, without fault of either party, the terms are incapable of being performed due to unforeseeable circumstances. The legal consequence is that the contract is terminated and future obligations are no longer able to be enforced.
If you have a contract for accommodation or other travel experience that cannot be performed due to no fault by either party, then those parties will not be able to enforce that contract because it will be frustrated and be of no further effect. This may occur if a customer is prevented from travelling to Australia by Government intervention. This will likely constitute a frustration of contract and will pose a commercial problem for an individual supplier expecting to rely upon the obligations in a cancellation provision because the provision will most likely no longer be effective if the contract has been frustrated.
Some terms of trade include “force majeure” clauses to exclude a party from obligations under the contract when an unforeseeable circumstance occurs outside the control of either party. These terms can be used to set out what circumstances will cause this to apply. What constitutes frustration in the eyes of one person unfortunately might be different to what constitutes frustration in the eyes of another.
Partial frustration might not give rise to an ability to completely ignore the contract and steps will frequently be able to be taken to provide substitutes. If you are faced with these sorts of issues, then you need to work with your customers to try to reach a consensus and try to provide alternatives which might be equally as good or better before either party starts to think that the contract should be considered to be at an end unless the circumstances are absolutely clear.
Where can I find more information?
The Department of Fair Trading and the Australian Competition and Consumer Commission have some helpful literature on this available on their websites below:
- Fair Trading NSW Guarantees, Contracts and Warranties - Contracts
- Aus Consumer Law - Travel and Accommodation Guide (PDF)
This underscores the importance of making clear in your contracts what happens if there are unforeseen circumstances, when a cancellation has to occur, and what alternatives may be offered to a customer before it can exercise its rights to cancel. Reviewing your travel contracts in this way and bringing these terms and conditions to the attention of your customers will help you avoid potential disputes later.
If you would like assistance reviewing and updating your business' terms of trade or need advice in relation to your own personal circumstances, please contact us.
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Emma Davies
Senior Associate Bradfield & Scott Lawyers Telephone: 9233 7299 Email: edavies@bradscott.com.au |
