Commercial contracts: key issues for hotels and hospitality post-lockdown

As we approach the end of yet another lockdown, leading industry figures are predicting a staycation boom and a surge in the number of people going out. What are the key contractual considerations for hotels and hospitality businesses preparing for the post-lockdown world?

Limiting liability

Whilst it is tempting to have a clause in your contract which aims to disclaim and limit all liability, in reality this will be unenforceable. Firstly, there are various heads of loss which legally cannot be excluded; for example, a seller cannot limit its liability for losses arising out of death or personal injury caused by its negligence, or for fraudulent activities.

Secondly, in consumer contracts, clauses of this nature are subject to the test of “reasonableness” and this is a question which sellers should ask themselves when reviewing such clauses. For example, a hotel (subject to the exclusions outlined above) seeking to limit liability to £10 where it has double booked a £5,000 a night penthouse suite is likely to be deemed unreasonable.

A more reasonable limitation of liability clause is one which seeks to limit liability for losses which are foreseeable. Using the above example, if, before booking online, the consumer was told by the hotel manager that the penthouse suite was fully booked, the consumer should have foreseen that his/her activities could result in losing monies, whether through a deposit or a cancellation fee.

Implied terms

Depending on the nature of the contract, specific terms may be implied in a contract for goods or services. In consumer contracts, a seller is unable to wholly exclude or limit liability for breach of these implied terms. Where a business supplies services, the key implied obligation is to perform the services with reasonable skill and care.

For businesses supplying goods, the following key conditions are implied:

• Title – the seller has the right to sell the goods
• Description – the goods supplied correspond to the description given to them
• Fitness for purpose – the good are fit for the purpose for which they are sold
• Satisfactory quality – they are of a standard that a reasonable person would deem to be satisfactory, taking into account the age of the items, price and other factors
• Samples – any sample given before purchase are the same as the goods sold.

Remedies

This has recently been an issue for events management companies and the airline industry with the Competition & Markets Authority (CMA) launching investigations into consumers not receiving refunds. The CMA has issued strict guidance on what it deems to be acceptable and unacceptable.

Sellers who supply goods should be aware of the following:

• Rejection – consumers can reject goods and request monies back provided they do this within a reasonable timeframe.
• Damages – a consumer can claim damages where they have accepted the goods.
• Repair or replacement – sellers must carry these out repairs or replacements within a reasonable time but can refuse to repair if the cost is higher than the repair.
• Refund – where repair or replacement is not an option, the consumer may request a full or partial refund.

Other key considerations

• Avoid legalese – All contracts should include terms in plain English and in language which has consumers in mind. A clause can be deemed unreasonable and unenforceable against consumers where it is too complex to understand.
• Highlight terms at the outset – Sellers must ensure that any terms they decide to apply are brought to the consumers’ attention at the earliest opportunity. This could mean printing them on the back of a booking form or providing consumers with a link to the terms on a seller’s website.
• Consider the Equality Act 2010 – When supplying goods or services to consumers, businesses should consider the rules against discriminating against a consumer for their age, disability, gender reassignment, race, religion or belief, sex, sexual orientation, marriage and civil partnership and pregnancy and maternity.
• Think about data protection – When collecting personal data (names, addresses, email addresses and so on), ensure that you are complying with data protection laws.

Prepare your contract

It is clear that there is a considerable amount of consumer protection law in place. The importance of having an up to date contract appropriately drafted is vital. We often see businesses use templates taken from the internet, but every business and every supply of goods or service is unique. Inevitably, when issues arise, these templates are worth no more than the paper which they are written on.
Now is the time for businesses to act, update their contracts, adapt to the new normal and thrive in the years ahead.