Contract Law Assignment: Analysis of Rose vs. Sunny Hols Ltd - UK Law

This report provides a comprehensive analysis of the contract law case involving Rose and Sunny Hols Ltd. The study begins with an introduction to contract law, emphasizing the role of UK legislation in ensuring fair performance and outlining standard norms. The case of Rose and Sunny Hols Ltd is examined, focusing on the issue of unsatisfactory services and the hotel's exclusion clause. The report applies the ILAC approach, evaluating legal provisions such as contractual obligations, including payment, delivery, and quality of goods, and the concept of exclusion of contractual obligations under the Unfair Terms in Consumer Contracts Regulations 1999. It explores remedies for breach of contract, differentiating between conditions, warranties, and innominate terms. The application of legal provisions to the case reveals that the exclusion clause is invalid due to its contradiction with the Supply of Goods and Services Act 1982 and the hotel's unfair advantage over the customers. The conclusion states that Rose is entitled to compensation for the breach of warranty, with the exclusion clause deemed invalid. The report concludes by summarizing the key findings on contractual obligations and the validity of expressed terms and exclusion clauses in consumer contracts.

Contract law
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TABLE OF CONTENTS
Introduction......................................................................................................................................3
Case of Rose and Sunny Hols Ltd...................................................................................................3
Issue.............................................................................................................................................3
Legal provisions...........................................................................................................................3
Application of legal provisions....................................................................................................6
Conclusion...................................................................................................................................7
Conclusion.......................................................................................................................................7
References........................................................................................................................................8
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INTRODUCTION
Contract law is developed by the parliament of UK to assure fair and standard
performance by parties. For this aspect, standard norms are described by legislation which is
mandatory for compliance for all parties. In addition to this, contracting parties are not in the
position to contradict these terms by insertion of expressed terms1. Present study is based on
evaluation of provisions of contractual obligations within their social, practical and economic
contexts to determine their impact on consumer and commercial transactions. By considering these
legal provisions, case issue of Rose and Sunny Hols Ltd will be answered. For this aspect, ILAC
approach will be applied. For justifying recommendations in given situations previous cases will be
considered.
CASE OF ROSE AND SUNNY HOLS LTD
Issue
In accordance with the described case situation, Sunny Hold Ltd had not provided
satisfactory services to Rose as there were lot of dissimilarities between actual services and
description in the brochure. Rose has following complaints from the management of hotel:
 There was not private pool and children paddling pool
 24 hours attendant for the disabled guests
 Guest room did not have air conditioning
On her complaint, management of hotel had pointed out the exclusion clause in brochure
that “Company or their employees will not be obliged in any case for dissimilarities contained
through information, representation or description provided in brochure”.
Legal provisions
Contractual obligations
Contractual obligations can be defined as duties and responsibilities which are required to
be fulfilled by each party to discharge contract by the performance. These obligations vary as per
the subject matter of the contract. For example contractual obligations for sale of services will be
different from the rental contract. Generally, following contractual obligations are satisfied in all
type of contract:
1 Clarkson, K.W., 2010. Business law. Text and Cases: Legal. Cengage learning.
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 Payment: Buyer is obliged for providing payment for the goods and services rendered by
the seller. This obligation will be clarified by the terms of contract as it will state
payment amount and deadline for the same2. Delivery: Seller is required to provide satisfactory services as per the description in the
deed of the contract. Description of delivery will be considered as per the expressed
terms inserted by the parties.
 Quality of goods: In accordance with the Supply of Goods and Services Act 1982, seller
is required to provide qualitative delivery to the customers. Further, it must resemble the
description provided by them.
In accordance with the provisions of Supply of Goods and Services Act 1982, traders are
required to provide services as per the proper standard of the workmanship. In addition to this, if
there is absence of specific date then it must be completed in a reasonable time and charges. In
addition to this, material goods used to provide services should be of satisfactory quality. Failure
of compliance of these contractual obligations will be considered as a breach of contract.
Consequently, customers will be entitled to redress in necessary situations in civil courts.
Exclusion of contractual obligation
Contracting parties are in the position to reduce their obligation by inserting exclusion
clause. These terms are considered as a part of the contract if it is incorporated in a proper
manner and loss to the party must be covered in the description of clause. However, all exclusion
clauses are not considered as fair and valid as per the provisions described under Unfair Terms in
Consumer Contracts Regulations 1999. It is because; in various situations rights of customers are
violated by the applicability of the exclusion clauses. On the basis of this aspect, contractual term
is said to be unfair if it satisfies any one of the following criteria:
 Individual negotiation of contractual term is not done
 Inserted term contradict the requirements of good faith 3
 Inserted term by the parties had caused significant imbalance between rights and
obligation to the impairment of consumer
2 Lando, O., 2003. Principles of European contract law. Kulwer law international.
3 Whittaker, S. and Zimmermann, R., 2000. Good Faith in European Contract Law. Cambridge University
Press.
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 Indicative described under schedule 2 of Unfair Contract Terms Act 1977 (however, it is
not an exhaustive list regarding description of unfairness of term).
In accordance with the case decision of Director General of Fair Trading v First National
Bank [2001] UKHL 52 House of Lords, good faith is not an artificial or technical concept. It is
because; this approach considers merely commercial morality and practice4. This case lays down
only a composite test by considering substance and formation of the contract. Furthermore,
concept of fair dealing states that supplier must not (whether unconsciously or deliberately) take
advantage of customer's lack of experience, indigence, necessity, weak bargaining position and
unfamiliarity with the subject matter of the contract. In any of such situation exclusion will not
be considered valid5.
Regulation of this UTCCR 1998 states that if an exclusion clause is said to be unfair then
it will not be considered as a part of the contract. Further, the rest of the contract will be valid
and effective for the contractual obligation6. By considering this aspect, it can be said that the
invalidity of exclusion clause is not equivalent to the invalidity of the entire contract. Henceforth,
contracting parties will be required to accomplish their performance without considering unfair
terms.
Remedies for the breach of contractual obligations
Contractual law had described provisions for remedy for the innocent party to
compensate their injury if satisfactory performance is not provided by the contracting party.
Remedies for the breach of contractual obligations are described on the basis of bifurcation of
contractual terms.
Contractual terms are statements that describe obligations of parties which are required to
be satisfied by their performance. Mainly there are two types of terms i.e. expressed terms and
implied terms. Expressed terms are inserted by the mutual will of parties to describe their
4 McKendrick, E., 2012. Contract Law; Text, Cases, and Materials. Oxford University Press.
5 Elaw resources. 2016. Statutory implied terms - The Sale of Goods Act 1979 and the Supply of Goods and
Services Act 1982. [Online]. Available through <http://e-lawresources.co.uk/Statutory-implied-
terms.php>. [Accessed on 1st March 2016].
6 Nystén-Haarala, S., Lee, N., and Lehto, J., 2010. Flexibility in contract terms and contracting processes.
International Journal of Managing Projects in Business. 3(3). pp.462 – 478.
5

promise. Further, bifurcation of expressed terms is done in conditions, warranties and innominate
terms. Description of these terms along with its impact of breach is as follows: Conditions: Conditions are the most important terms of the contract to be performed by
the parties. If conditions of the contract are not satisfied, then innocent party are in the
position to repudiate entire contract and further they can sue faulty party for the claim of
damages. In the case of Poussard v Spiers (1876)7, employee had breached the conditions
of the contract due to which she was replaced as employer had terminated his contract. In
this case, court had held that conduct of employer is justified because breach of condition
is referred to the breach of contract. Warranties: Warranties are the minor terms of the contract as it does not link to its
central existence. If contracting party is not able to satisfy warranties of the contract, then
aggrieved party can only claim damages but they are not in the position to terminate the
entire contract8. According to the case precedent of Bettini v Gye 18769, employee had
breach the warranty of contract and her employer had terminated the contract. In this
case, court of law had stated that breach of warranties do not provide entitlement to the
innocent party to end the contract as they have only right to make claim damages.
 Innominate terms: Approach of innominate term has been developed from the case of
Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962]10. In accordance with this
case, innominate approach should be considered for breach instead of classification of
terms in conditions and warranties11. In accordance with this approach, innocent party
will be entitled for the breach of entire contract only if they are substantially deprived
from the entire benefit.
7 1 QBD 410
8 Torgans, K. and Bushaw, A. 2001. Some Comparative Aspects of Contract Law in Civil and Common
Law Systems. Int'l Legal Persp. 12.pp. 37.
9 QBD 183
10 2 QB 26
11 Riley, J., 2012. Contract - Express & Implied Terms. [ONLINE]. Available Through:<
http://www.tutor2u.net/law/notes/contract-express-implied-terms.html>. [Accessed on 1st March 2016].
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Application of legal provisions
In accordance with the given case scenario, it can be said that contractual obligations of
hotel has provided satisfactory services to the customers in accordance with the description
provided in brochure. In addition to this, they are not entitled to exclude their liability regarding
the terms which will contradict the fundamental rights of the customers. Provisions of Supply of
Goods and Service Act 1982 states that seller is required to deliver the services in accordance
with the description provided at the time of sale.
By the applicability of above described provisions it can be said that exclusion clause
inserted by hotel management is not valid. It is because, it is contradictory to implied terms
described under SGSA. This aspect is also supported by case decision of Director General of Fair
Trading v First National Bank [2001]12. It is because; management of hotel had taken benefit of
weak bargaining position of the customers. Justification of this statement is obligation in
dissimilarities in actual services and standard services in brochure is excluded by the insertion of
exclusion clause which is completely unfair to the customers13. Insertion of such terms reduces
their right to claim damages in situation where they are not satisfied with the provided services
of the organization. On the basis of this aspect, exclusion clause inserted by hotel will not be
considered as a part of the contract.
In accordance with the regulation 8 of Unfair Terms in Consumer Contracts Regulations
1999 contract between parties will be continued for completing the performance. Case facts of
the provided scenario show that there is a breach of warranty on the part of management of hotel
as they fail to provide services in accordance with the description given in brochure. However,
Rose is not entitled to terminate entire contract on the basis of breach of warranties.
Conclusion
As per the described legal provisions, it can be said that Rose is entitled to claim for the
compensation for the non-satisfactory performance on the part of management of hotel.
However, compensation of entire return is not justified as ancillary terms were not satisfied. On
the basis of provisions of Unfair Terms in Consumer Contracts Regulations 1999 exclusion
12 UKHL 52 House of Lords
13 Zoll, F., 2012. The binding power of the contract: Protection of performance in the system of the
Common European Sales Law. Journal of International Trade Law and Policy. 11(3). pp.259 – 265.
7

clause inserted by hotel in contractual deed will not be considered valid because it is in
contradiction with the legal provisions. Thus, management of hotel is not in the position to take
benefit of that clause for reducing their contractual obligation.
CONCLUSION
Present study is based on evaluation of contractual obligations and effectiveness of terms
inserted by contracting parties. In accordance with the project report, conclusion can be drawn
that contradictory expressed terms will not be considered as a part of the contract in consumer
contracts. Further, claimant cannot claim for remedy of breach of contract in situation where
merely warranties are not satisfied by the faulty party. However, they are entitled for
compensation for damages occurred due to breach of warranties. Exclusion clauses are
considered to be valid if it is incorporated in an appropriable manner and loss to the party is
covered in the clause. Further, these clauses must be in accordance with the provisions of Unfair
Contract Terms Act 1977.
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BIBLIOGRAPHY
Books and journals
Clarkson, K.W., 2010. Business law. Text and Cases: Legal. Cengage learning.
Lando, O., 2003. Principles of European contract law. Kulwer law international.
McKendrick, E., 2012. Contract Law; Text, Cases, and Materials. Oxford University Press.
Nystén-Haarala, S., Lee, N., and Lehto, J., 2010. Flexibility in contract terms and contracting
processes. International Journal of Managing Projects in Business. 3(3). pp.462 – 478.
Torgans, K. and Bushaw, A. 2001. Some Comparative Aspects of Contract Law in Civil and
Common Law Systems. Int'l Legal Persp. 12.pp. 37.
Whittaker, S. and Zimmermann, R., 2000. Good Faith in European Contract Law. Cambridge
University Press.
Zoll, F., 2012. The binding power of the contract: Protection of performance in the system of the
Common European Sales Law. Journal of International Trade Law and Policy. 11(3).
pp.259 – 265.
Online
Elaw resources. 2016. Statutory implied terms - The Sale of Goods Act 1979 and the Supply of
Goods and Services Act 1982. [Online]. Available through <http://e-
lawresources.co.uk/Statutory-implied-terms.php>. [Accessed on 1st March 2016].
Riley, J., 2012. Contract - Express & Implied Terms. [ONLINE]. Available Through:<
http://www.tutor2u.net/law/notes/contract-express-implied-terms.html>. [Accessed on
1st March 2016].
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