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Law of Contracts – Part 9

In Part 1 (August 2014), I categorised risk into five categories, namely; 1. PEOPLE, 2. MONEY, 3. LAW, 4. SERVICE and 5. ECOLOGY. In this series, I deal with the risk profile of each, i.e. broadly speaking the areas of risk that any business is exposed to can been allocated under these five categories.
In Part 2, (September 2014), I covered the category of ‘People’ under four sub-categories: Staff (discussed in Part 1); Third party service providers (‘TPSP’); and Business Associates.
Part 3 (October 2014), continued with ‘PEOPLE’ as Customers.
Part 4 (November 2014), started the discussion on the 2nd category, namely ‘MONEY’ in terms of CASH and CHEQUES.
Part 5 (December 2014), looked at CREDIT and CREDIT CARDS.
Part 6 (January 2015), looked at LAW and CONTRACTS, with an introduction and Requisite #1: Offer & Acceptance.
Part 7 (February 2015), continued with Requisite #1 covering telephone enquiries, e-mails, websites and advertising.
Part 8 (March 2015), covered Requisites #2: Legally Binding Obligation, and #3: Consensus in contracts.

REQUISITE #4: PERFORMANCE MUST BE POSSIBLE

Something that is often glossed over is whether or not the deliverable you have offered, be it a service, performance or goods/products, can be delivered i.e. is possible or quantifiable!

It is a requirement for a valid contract that the performance or goods/products envisaged by the parties and as provided for in the agreement, must be possible.

So, if the passenger can no longer visit the Pacific island of his or her dreams because, unbeknown to either party, there is a coup d’etat and no visitors are allowed, or if the airline on which he/she has been booked has gone into liquidation, or the specific goods/product promised/reserved e.g. a car hired or cruise booked (again unbeknown to either party) is no longer available, then the performance envisaged is not possible and no contract will come into existence and no rights or obligations will arise from the communications between the parties (subject to the wording of the contract/T&C). However, again if the seller owed a duty of care to the customer e.g. to obtain the latest information, and it is found that that duty has been breached, then the customer could sue you for misrepresentation (delict or tort) on the basis that you owed him a duty of care, i.e. not breach of contract.

The relevant time for determining whether the performance is possible, is the time when the parties enter into the agreement. If the performance is possible at that time, but becomes impossible later, then a legally binding agreement was established at the time of signature, but the issue may be addressed on various possible bases: (1) misrepresentation; (2) breach of contract, unless of course the cause of the impossibility is beyond the control and not due to the negligence of the party concerned; (3) force majeure. As always the parties will have to take cognizance of the contractual terms of the travel agent and the tour operator that were applicable at the time. Conversely it is important for the passenger to ensure that adequate insurance arrangements have been made.

Given the nature of force majeure and the different types of insurance cover available, it is imperative that the passenger discussed the nature and extent of the cover with the insurance company as in this context there are from time to time events that the passenger thinks are covered, but are not.

The situation would of course be different is the agreement is conditional upon a certain event taking place/something being done or if it contains a guarantee or warranty. The guarantee could specifically address the event in question or be general enough to cover it. A well-known guarantee or warranty is one where the quality or existence of snow on a skiing holiday is guaranteed. On the other hand, some agreements may specifically state that performance may not be possible e.g. “We cannot guarantee that you will see the Big 5”.

I recently had a case where the passengers arrived at the hotel and lo and behold: the hotel was busy with substantial renovations! It was of such a pervasive nature that performance was simply not possible and was addressed by the passengers on the basis of breach and/or negligence i.e. the travel agent knew, or should have known about the state of affairs. However it was resolved amicably as the passengers could fortunately be accommodated in a nearby hotel of like standing (although there was an unresolved issue about the standard of the meals!).

The Consumer Protection Act has specific provisions regarding unavailability and therefore impossibility of performance – the one pertaining to over-booking (which is of course not limited to airlines) (Section 47) as well as so-called ‘bait marketing’ (Section 30) where certain products used as ‘loss leaders’ are often out of stock, or sometimes well before the period of the ‘special’ has expired. Regarding ‘bait marketing’ limitations may be expressed but if the goods are not available, similar goods at the same price must be offered to the consumer. The over-booking applies to taking a reservation and then not honouring it, unless it is beyond the control of the supplier and the supplier has advised the consumer timeously, or if due to the fault of the supplier if the supplier has offered the consumer comparable goods or services.

Disclaimer: This article is intended to provide a brief overview of legal matters pertaining to the travel and tourism industry and is not intended as legal advice. © Adv Louis Nel, ‘Louis The Lawyer’, April 2015.

From-The-Bench  Law of Contracts - Part 9 From The Bench