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Introduction To Business Law: An Advertising Company Add in library

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Questions:

Assignment

You work for an advertising company and are asked to review a holiday package from a brochure before it goes to print. You are asked to provide advice to the advertising company on the legal effect of the representations in the brochure. You are asked to produce a report for management outlining the issues relating to the brochure.

Select a package holiday brochure.  Read it and analyse it, looking to answer the following questions in your report;

1. Identify the key information about the holiday as set out in brochure.

2. Critically analyse the package using the principles of contract law found in case law and categorise the statements into representations, terms, conditions and warranties.

3. Critically analyse and identify any material in the brochure which is potentially;

• unconscionable
• misleading or deceptive
• false representation
• bait advertising
• offers gifts or prizes

In your report explain the effect of these representations having regard to the consumer and consumer protection laws.  You should outline the law relating to advertising including improper business practices, any legislation regulating advertising, unlawful sales techniques and the powers of enforcement.

4. Critically examine the brochure and identify any exclusion or limitation clauses and explain using the principles of contract law whether the clauses would be valid.
 
 

Answers:

1. Identification of key information about holiday in the sample brochure

Section 5 of the Package Travel Regulations suggests that the following components should be present within a holiday brochure:

  • The description of destination
  • Type of transportation to be used
  • The description meals and delicacy included in the package
  • General information about the passport visa requirements
  • The route map of the tour (Ben-Shahar, 2010)
  • The legal obligations pertaining to the cancellation, rescheduling and delay of the tour package (Ukecc.net, 2015)

The selected brochure includes the following key information to help the consumers in making a choice about their desired holiday package.

  • Summarized description of the scenic beauty of Croatia and Montenegro
  • The plan of visit including the names and landmarks included in the travel package like free excursions to Dubrovnik, Konvale valley, Montenegro and resorts like Budva and Sveti Stefan.
  • The brochure also includes information about the entertainment activities like availability of bar for 12 hours
  • The information about the transportation offered by the travel company is also mentioned in the brochure. The coordinator informs the travelers that the holiday package will be scheduled though British Airways flights
  • The package details the additional information in relation to the availability of food packages and the availability of travel insurance benefits and single room’s availability at no extra cost.
  • To increase the attractiveness of the package the graphical picture of the resorts in Croatia and Montenegro are also printed on the top of the brochure.
 

2. Critical analysis of the brochure using principles of contract law

As per the norms of the Package Travel, Package holidays and Package Tours Regulations 1992 (PTRs), every supplier of holiday packages must abide by the general terms and conditions of a holiday contract (Brömmelmeyer, 2011).  The tour operators design the travel packages keeping in mind the terms of contract. In the sample brochure, the operator includes legal liability for travel insurance and cancellation compensation. These terms shows representation of care, comfort and safety provided by the operator to the travelers. Hence if the travelers encounter any accident in the process of journey then on the grounds of intentional misrepresentation they can claim compensation from the operator.

Case law: Stevenson V Four Winds travel: The case showed that representations in a tour operator’s brochure could create a sense of duty or warranty concerning the guest’s safety while on tour (Ryan, 1991).

According to the UK contract act 1999, every holiday operator should include both express and implied terms within the brochure. The express terms are to be clearly mentioned in a written form in the brochure (Hall, Howells and Watson, 2012). However, the implied terms are nor directly stated in the brochure but implied to be included in the contract. The following brochure includes express terms like:

  • Breakfast, lunch and dinner packages
  • Free bar open for 12 hours a day
  • Single rooms at no cost

However as per regulation 15 (1) of the PTRs 1992 the major implied term of the operator is to deliver all express terms with proper care and skill and provide a blissful travel experience (Furmston, Chuah and Willett, 2010). In this brochure, it is implied that the operator will provide high standard food and beverages as per the Food Standards Act 1999, premium hotel service as per the regulations of Association of travel Agents (ABTA) and take proper care of the physical health of the consumers (Schulte-Nölke and Tichý, 2010). As per section 5 of the PRTs the sample brochure does not contain the some of the major express terms like the route map of the travel package, the meals description and delicacy that will be served and the standard if accommodation that will be provided (Tradingstandards.gov.uk, 2015).

The consumers availing the holiday packages are required to sign a terms and conditions mentioned along with the travel brochure to agree to the conditions and warranties of the travel as regulated by the Office of Fair Trading (OFT). A condition is the major term of the contract, the breach of which gives the innocent party the power to claim compensation and even end the contract. The major condition in the sample brochure is the mention about the limited price offer of the package until October 2012 (Tradingstandards.gov.uk, 2015). However, the brochure fails to mention the prices that will be charged by the operator for additional services. Warranties on the contrary are the minor terms in a contract the breach of which will not entitle the party to end the contract. To maintain the legal safety the operator should also include the following conditions and warranties in the brochure

  • Permissible age limit of the consumers who can avail the travel package
  • Data Protection and privacy maintenance acts
  • Deposits and balances for the holiday package
  • Conditions on non refund of money if the consumer returns early from the tour (Ben-Shahar, 2010)
 

3. Critical analysis and identification of legal material in the brochure

The consumer protection laws 1999 sets out the regulations under the Package and travel Regulations that will help the customer to chose a protected holiday. Regulation 2(1) of the PTRs provides that the holiday package offered should be a combination of transport and accommodation (Furmston, Chuah and Willett, 2010). Section 4 of the PTRs suggests that the holiday must be described in the brochure without any exaggerated statements and any false representations which are not present in reality. Further regulations 12 and 13 of the PTRs provide the customers the opportunity to withdraw from the package if the operator does some last minute cancellations or alterations in the package. In this regard, the customers are legally liable to opt for another substitute package within the same price range.

Unconscionable terms

As per section 2- 302 of the Uniform Commercial Code the contract is termed to be unconscionable when the terms in the contract do not give choice or bargaining power to one party. It is a one sided contract.  The potentially unconscionable term in the sample brochure is the additional inclusion of the excursion to the charming resorts of Budva and Sveti Stefan. The condition in the brochure states that Sveti Stefan peninsula is inaccessible for the public however, the excursions to the resorts at that destination are compulsory. This shows that the travelers get no opportunity of bargaining the excursion (Thomas, 2010).

Misleading or deceptive

 Section 14 of the Trade description Act 1986 provides regulations for the consumer’s protection from Unfair Trading Regulations. As per the regulations the tour operators should abide by the following rules in relation to brochure information

  • The brochure should not include false or deceptive messages
  • The operator should not leave out any important information about the package from the brochure
  • The operator should prevent using aggressive sales techniques (Hall, Howells and Watson, 2012).

In the brochure, the tour operator may face potential legal issues due to exaggerated and false presentation of picture graphics showing a lavish accommodation of the island. Since the actual location and the details about the hotel facilities are not mentioned in the brochure hence under directive 84/450/EC the parties are legally liable to demand for compensation if the accommodation and the location do not comply with the picture on the brochure. Hence, to avoid legality it is advisable to give details about the hotel and resorts facilities in the brochure (Grant, 2012).

 

False representation

As per the Fraud act, 2006 a representation is termed to be false if it is untrue and misleading and if the person making the term is aware of the fact. In the brochure, the highly exaggerated description of the destination may arise as a potential falsely represented clause (Suharnoko, 2012).

Case law:  Yugotours Limited -v- Wadsley (1988) 153 JP 345

In this case the Yugotours holiday brochure advertised a holiday with the tagline “Adriatic Island Adventure.” The holiday description included the key words like excitement, majestic schooner, sail on board etc with pictures of high quality sailing boards. However, the customers complained that the vessel for sailing did not match the picture in the brochure (Hall, Howells and Watson, 2012). The company was charged under section 14 of the Trade Descriptions Act for making false representations (Seguí-Llinás and Capellà-Cervera, 2006).

Bait advertising

Section 19 of the Fair Trading Act 1973 states that the operators of a travelling industry are legally prohibited to offer any travel package or goods for sale to the consumers without being able to satisfy the likely demand of the offer. The act is known as bait advertising. The brochure here is offering the travel package of 14 nights at a discounted rate of £899(Legislation.gov.uk, 2015).  However, the potential legal obligations arising out of bait advertising shows that the standard of accommodation, which the operator can offer within this price, is not mentioned. Moreover, the non-optional extra charges like the single room charge for an extra single room is also not referred in the brochure. The price of the package after the stipulated period of the special offer is also missing in the brochure.

Offers, gifts and prizes

The Consumer Protection Act 1987 and the Unfair Trading Practices Regulations 2008 provides the regulations for special offers, gifts and prizes offered by the sellers to the buyers. The regulations state that the seller of the travel packages is legally prohibited to make false limited offer claims for increasing their sales. The limited price offer in the brochure may create a legal obligation for the operator as per the norms of UTP (Legislation.gov.uk, 2015).

 

4. Identification of exclusion and limitation clause

As per the Unfair Contract Terms Act 1999 the term that gives restriction on the rights of the contracting parties are known as exclusion clause. There are three types of exclusion clause namely true exclusion clause, limitation clause and time limitation clause. The limitation cluse that is a part of the exclusion clause provides terms that limits the amount of compensation that parties can claim on breach of the contract. In order to reduce the legal liability the tour operator must include the standard exclusion clause within the travel package brochure. Although the exclusion clause is restricting the right of the consumers, however it is also beneficial for the operators in order to avoid false and irrelevant complaints. The sample brochure do not include any exclusion clause. However, the website of Saga shows the booking conditions which includes the following exclusion clauses:

  • The travel operator is not liable for any ocean injuries outside mainland Britain and is not liable to cover any medical expense in this regard
  • One of the potential clause also mentions that the potential age qualification for the travelers of Saga holidays are above 50 years and any if any child or individual below the age level are included in the tour than the company is not liable for their responsibility (Legislation.gov.uk, 2015).

The potential legal obligation that may arise due to limitation clause is the clause relating to travel insurance and additional cover. As per the norms of the Travel Insurance, the operators can sell travel insurance in the following three manners

  • Policy covering a single trip
  • A yearly policy covering multiple trips within a specific period
  • An ongoing policy that is connected to bank account of the party
  • Insurance which covers worldwide travel or a limited travel (Tradingstandards.gov.uk, 2015)

The operator in the brochure has mentioned the option of providing travel insurance without mentioning the limitation clause. The operator in this respect should also mention the exclusion of any pre- existing medical conditions within the insurance terms so that the parties become knowledgeable about their rights and claims. The limitation clause in a travel brochure also includes limits to the compensation claim of the parties in case of any environmental hazards (Mawrey and Riley-Smith, 2012). The brochure here puts a limitation clause on curtailment issue of a holiday due to unavoidable occurrences. Hence, if the operator curtails the time limit of the holiday package then the parties can claim for 50% of the compensation only. Moreover, the avoidance of any responsibility of the children makes it difficult for the parties to avail the tour package because of an uncertainty of the medical assurance. The brochure also has limitation clause on the compensation or responsibility regarding the loss of baggage or property from the hotel or departure positions.

 

Reference list

Bellantuono, G. (2010). The Limits of Contract Law in the Regulatory State. European Review of Contract Law, 6(2).

Ben-Shahar, O. (2010). One-Way Contracts: Consumer Protection without Law. European Review of Contract Law, 6(3).

Bentley, T. A. and Page, S. J. (2001), ‘Scoping the extent of adventure tourism accidents’, Annals of Tourism Research, vol. 28, pp. 705-726

Brömmelmeyer, C. (2011). Principles of European Insurance Contract Law. European Review of Contract Law, 7(3).

Buckley, R., Witting, M. and Guest, M. (2001), Managing people in Australian parks – 3, Risk management & public liability, Sustainable Tourism CRC, Gold Coast, QLD

Carter and Harland, (2004) ‘Contract Law in Australia,’ 4th ed., Butterworths Lexis Nexis,

Chen-Wishart, M. (2012). Contract law. Oxford: Oxford University Press.

Contract: Performance: Legal Holiday. (1902). Michigan Law Review, 1(3), p.227.

Evans, M., Shickle, D. and Morgan, M. (2001). Travel Illness in British Package Holiday Tourists: Prospective Cohort Study. Journal of Infection, 43(2), pp.140-147.

Furmston, M., Chuah, J. and Willett, C. (2010). Commercial and consumer law. Harlow, England: Pearson Longman.

Grant, D. (2012). Holiday law. London: Sweet & maxwell.

Hall, E., Howells, G. and Watson, J. (2012). The Consumer Rights Directive – An Assessment of its Contribution to the Development of European Consumer Contract Law. European Review of Contract Law, 8(2).

Health preparation for travel and travellers' diarrhoea in British package holiday tourists. (1998).Journal of Infection, 36(2), p.A11.

Johnson, P. and B. Thomas, (1992), Choice and Demand in Tourism. London: Mansell Publishing Limited.

Khoury and Yamouni, (2006) ‘Understanding Contract Law,’ 7th ed., Butterworths Lexis Nexis,

Legislation.gov.uk, (2015). Fraud Act 2006. [online] Available at: https://www.legislation.gov.uk/ukpga/2006/35/section/2 [Accessed 20 Feb. 2015].

Mawrey, R. and Riley-Smith, T. (2012). Butterworths commercial and consumer law handbook. London: LexisNexis.

Ryan, C. (1991). UK package holiday industry. Tourism Management, 12(1), pp.76-77.

Schulte-Nölke, H. and Tichý, L. (2010). Perspectives for European consumer law. Munich: Sellier. European Law Pub.

Seguí-Llinás, M. and Capellà-Cervera, J. (2006). Spanish Package Holiday Tourism to China: Spatial Patterns and Tourist Attractions. Tourism Geographies, 8(3), pp.233-252.

Suharnoko, (2012). Contract Law in a Comparative Perspective. ILREV, 2(2), p.117.

Thomas, J. (2010). Insurance Law Between Business Law and Consumer Law. American Journal of Comparative Law, 58(0), pp.353-367.

Tradingstandards.gov.uk, (2015). Gloucestershire Trading Standards - Business Advice - Package tours & holidays. [online] Available at: https://www.tradingstandards.gov.uk/cgi-bin/glos/bus1item.cgi?file=*BADV015-1111.txt [Accessed 20 Feb. 2015].

Ukecc.net, (2015). Package travel - UK European Consumer Centre. [online] Available at: https://www.ukecc.net/popular/package-travel.cfm [Accessed 20 Feb. 2015].

Wilks, J. and Corry, M. (2002), ‘Overseas visitor injuries in Queensland hospitals: 1996-2000’, Journal of Tourism Studies, vol. 13, pp. 2-8

Wilks, J., Pendergast, D. and Wood, M. (2002), ‘Overseas visitor deaths in Australia: 1997-2000’, Current Issues in Tourism, vol. 5, pp. 550-557

Bibliography

Bellantuono, G. (2010). The Limits of Contract Law in the Regulatory State. European Review of Contract Law, 6(2).

Ben-Shahar, O. (2010). One-Way Contracts: Consumer Protection without Law. European Review of Contract Law, 6(3).

Brömmelmeyer, C. (2011). Principles of European Insurance Contract Law. European Review of Contract Law, 7(3).

Chen-Wishart, M. (2012). Contract law. Oxford: Oxford University Press.

Contract: Performance: Legal Holiday. (1902). Michigan Law Review, 1(3), p.227.

Evans, M., Shickle, D. and Morgan, M. (2001). Travel Illness in British Package Holiday Tourists: Prospective Cohort Study. Journal of Infection, 43(2), pp.140-147.

Furmston, M., Chuah, J. and Willett, C. (2010). Commercial and consumer law. Harlow, England: Pearson Longman.

Grant, D. (2012). Holiday law. London: Sweet & maxwell.

Hall, E., Howells, G. and Watson, J. (2012). The Consumer Rights Directive – An Assessment of its Contribution to the Development of European Consumer Contract Law. European Review of Contract Law, 8(2)..

Legislation.gov.uk, (2015). Fraud Act 2006. [online] Available at: https://www.legislation.gov.uk/ukpga/2006/35/section/2 [Accessed 20 Feb. 2015].

Mawrey, R. and Riley-Smith, T. (2012). Butterworths commercial and consumer law handbook. London: LexisNexis.

Ryan, C. (1991). UK package holiday industry. Tourism Management, 12(1), pp.76-77.

Schulte-Nölke, H. and Tichý, L. (2010). Perspectives for European consumer law. Munich: Sellier. European Law Pub.

Seguí-Llinás, M. and Capellà-Cervera, J. (2006). Spanish Package Holiday Tourism to China: Spatial Patterns and Tourist Attractions. Tourism Geographies, 8(3), pp.233-252.

Suharnoko, (2012). Contract Law in a Comparative Perspective. ILREV, 2(2), p.117.

Thomas, J. (2010). Insurance Law Between Business Law and Consumer Law. American Journal of Comparative Law, 58(0), pp.353-367.

Tradingstandards.gov.uk, (2015). Gloucestershire Trading Standards - Business Advice - Package tours & holidays. [online] Available at: https://www.tradingstandards.gov.uk/cgi-bin/glos/bus1item.cgi?file=*BADV015-1111.txt [Accessed 20 Feb. 2015].

Ukecc.net, (2015). Package travel - UK European Consumer Centre. [online] Available at: https://www.ukecc.net/popular/package-travel.cfm [Accessed 20 Feb. 2015].

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