Contract Law Case Study of Hotel

Contract law involving a hotel and client A.

In this scenario, the first significant point is the nature of the parties’ respective first dealings with one another. From the hotel’s point of view, their first contact with A was through their advertisement on their website. This advertised the price of accommodation at the Scarborough Palms Hotel as being £300. From A’s point of view, his first contact with the hotel is through an initial emailed enquiry. Although we are not told exactly what A’s initial enquiry was concerned with, it is probable that it was simply asking for details of the offer.

In order to establish what the nature of the ultimate contract is, between the hotel and A, it is first necessary to find the ‘offer’ and ‘acceptance’; the constituent parts of any contract. An offer has been held to be a statement which objectively (I.e. to a reasonable observer) indicates that the person making the ‘offer’ is prepared to contract on the terms specified in that offer (Gibson v Manchester City Council). It would at first sight, appear that the hotel’s website and advert for the accommodation at the specified price was an offer. This, however, is not the case, as it has been held by the courts that advertisements are usually ‘invitations to treat’ rather than offers, as the advert usually lacks the other essential ingredient of a contract; an intention to be legally bound (Partridge v Crittenden). This principle is in place in order to protect the advertiser from incurring liability in contract to everyone who is willing to purchase the goods (in this case, the holiday), at the advertised price. An ‘invitation to treat’ is an invitation to the other party to negotiate the terms of a potential contract. A responds to this invitation by making his initial email enquiry, which can similarly be classed as an invitation to treat, or perhaps simply an enquiry. No offer has yet been made by either party (Fisher v Bell).

The hotel then respond to A’s initial enquiry informing A of a special promotion that will entitle him to the accommodation at the price of £200. This communication will certainly be counted as an offer, as it displays an intention to be bound by the terms it mentions (a requirement that was first set out in the seminal case, Carlill v Carbolic Smoke Ball Co). A then ‘accepts’ the offer by filling in the online booking form. The hotel have stipulated a means of acceptance, by providing the online booking form which A is required to complete. This is, then, the hotel’s prescribed method of acceptance. A, through no fault of his own, is unable to complete this prescribed method of acceptance, despite his attempt. It is uncertain whether this will affect his ‘acceptance’. In Manchester Diocesan Council for Education v Commercial and General Investments Ltd, it was held that the prescribed method of acceptance was not the only possible one, provided the other method was no less advantageous to the offeror. Unless the hotel specifically stated that the online booking form was the only method of acceptance, A’s posting of a hard copy would be valid.

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We come to the issue of communication of the acceptance to the offeror. Upon A’s arrival at the hotel, he is informed that his booking form did not arrive, and that there are no available rooms. It is an established principle that an acceptance must be communicated to the offeror in order for their to be a contract (Holwell Securities Ltd v Hughes). In the present instance, however, the acceptance has been posted by A. Following Household Fire Insurance v Grant, the acceptance is effectively communicated on posting (the so called ‘postal rule‘). In order for this rule to apply, however, it must have been reasonable for A to use the post to accept the offer (Quenerduaine v Cole). In this instance, since the online booking form was not working, it seems likely that it would be found to have been a reasonable method of acceptance.

As of this point, then, the contract exists between A and the hotel. The terms of the contract specify that A will have accommodation at the hotel for the price of £200. He will later be able to claim damages for breach of contract from the hotel when they cannot furnish him with a room at that rate. Before that arises, however, there is a further contract which requires clarification. Upon A’s arrival, and discovery that his booking form has not arrived, he threatens to sue the hotel. The manager’s response is to make an offer of accommodation for £250. It is possible that subsequently, the hotel could claim the offer was made under undue influence. It is an established principle of contract law that where a contract is induced by undue pressure, it is voidable (Williams v Bayley). This means that if the hotel can establish that the manager made the offer under pressure, the agreement could be cancelled. A agrees to these terms, and a second contract exists between the parties. A then spend his holiday at the hotel and completes the second contract.

A subsequently claims for damages in the amount of £50. The hotel counter-claims for damages because A has breached the contractual term not to pursue an action against the hotel. These two claims, however, refer to two distinct contracts, and both, it would seem, are legitimate claims. It is possible that through forming the second contract, the equitable principle of waiver came into play. That is, by making the second contract, the parties (and A in particular), waived the right to claim damages (Hughes v Metropolitan Railway). There is also the possibility that by forming the second contract, the initial contract was frustrated, as it became impossible to carry out because the parties had subsequently contracted to the same agreement on different terms (Nickoll & Knight v Ashton Edridge & Co).

With regard to the second contract, the hotel are within their rights to claim damages for A’s breach. He has clearly broken his contractual promise not to pursue an action against the hotel. There is a contract rule that a claimant cannot recover damages in respect of a loss which is too remote a consequence of the defendant’s breach of contract. If the losses flow naturally from the breach, which in this case they would appear to, the losses are recoverable (Hadley v Baxendale). The hotel, then, will be able to recover damages for A’s breach of the contract term subject, of course, to proving that this agreement was a term incorporated into the second contract.

BIBLIOGRAPHY

Statutes

Cases
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, CA
Fisher v Bell [1961] 1 QB 394
Gibson v Manchester City Council [1979] 1 WLR 294
Hadley v Baxendale [1854] 9 Exch 341
Holwell Securities Ltd v Hughes [1974] 1 WLR 155
Household Fire Insurance v Grant [1879] LR 4 Ex. D. 216, CA
Hughes v Metropolitan Railway [1876-77] LR 2 App Cas 439, HL
Manchester Diocesan Council for Education v Commercial and General Investments Ltd [1970] 1 WLR 242
Nickoll & Knight v Ashton Edridge & Co [1901] 2 KB 126, CA
Partridge v Crittenden [1968] 1 WLR 1204
Quenerduaine v Cole [1883] 32 WR 185
Williams v Bayley [1866] LR 1 HL 200, HL

Secondary Sources
McKendrick, E., Contract Law (Oxford, 2003)