Managing unavoidable and extraordinary circumstances

This article was originally published in ABTA Travel Law Today, May 2022

In the wake of COVID-19, what is considered as unavoidable and extraordinary circumstances (UECs) has become simultaneously more relevant and less clear.

On the one hand, UECs have become more relevant, due to the fact that customers and travel companies alike have sought to rely on them as a way to get out of their package holiday contract without consequence. On the other hand, UECs have also become less clear as what counts as unavoidable and extraordinary is harder to determine in unprecedented times.

In this article, we delve into what situations are likely to meet the threshold of UECs in the context of COVID-19, what customers’ rights are in these circumstances and what travel companies can do to help.

What are unavoidable and extraordinary circumstances?

Regulation 2 of the Package Travel and Linked Travel Arrangements Regulations 2018 (PTRs), define UECs as: “a situation which is beyond the control of the party seeking to rely on it for the purposes of the regulation... the consequences of which could not have been avoided even if all reasonable measures had been taken”.                             

When are circumstances unavoidable and extraordinary?

When the European Commission was drafting the Package Travel Directive, it considered that official advice, from bodies such as the Foreign and Commonwealth Office in the UK, should not automatically trigger customers’ free cancellation rights. Instead, its advice to the member states was “[d]ifferent sources of information, including official travel advice, may be relevant when establishing whether there were unavoidable and extraordinary circumstances and might be taken into account by judges when deciding on such matters”.

In other words, there is no definitive threshold by design. Whether or not there are UECs depends on context and how a situation is subjectively interpreted by multiple sources. This interpretation is endorsed by the most relevant threshold test set out in Lambert v Travelsphere Limited [2005]. Here, relating to the SARS pandemic, the judge found that whilst a travel company cannot shut its eyes to obvious danger, it can confirm that the holiday can go ahead as intended until there is not a “flicker of hope” that the holiday can be performed.

Customers should be made aware that they cannot expect travel warnings issued by the FCO to equate to free cancellation rights. Arguably, the UK Government’s quasi-legal framing of all their advice at present has not been helpful in assisting customers in understanding their rights. Consider this statement from the CMA:

If contracts cannot go ahead because of lockdown laws then, for most consumer contracts, the CMA would expect a consumer to be offered a full refund.

The phrase ‘lockdown laws’ is vague, sure to be interpreted widely, and ultimately misleading to customers.

What are customers’ rights in these situations?

A second reason why the statement from the CMA is misleading is because it oversimplifies what a customer’s rights will be, even if UECs are deemed to have arisen. The situations considered below tease out the complexity of a refund/compensation claim relating to a package travel contract, a complexity that a customer may not have anticipated.

Cancellation prior to holiday

If a package is cancelled due to UECs, a customer may be entitled to a refund of “any payments made”. However, for this right to arise, it is also necessary that the UECs are in the place of destination, or its vicinity, and that the UECs prevent either (a) carriage to the destination or (b) performance of the package.

In Dennison v Loveholidays, unreported, Lincoln County Court [15.10.21] the customer cancelled her holiday because the government had imposed a requirement for travellers to quarantine upon their return. The court ruled against the customer, stating that there was no reason why the quarantine rule would affect either carriage to the destination or performance of the package.

This ruling indicates that it is important for the UECs to actually have a clear impact on the performance of the package holiday, in order for refund rights to arise.

Cancellation due to changes to the package

If a package is significantly changed due to UECs, and the customer then decides to cancel the package, they may be entitled to the same refund rights set out above. However, the change to the package has to be considered significant.

In Kirk v We Love Holidays, unreported, Wrexham County Court [22.03.22] the hotel which the customers were meant to be staying at was closed due to circumstances relating to COVID-19. The tour operator offered a like-for-like substitute but the customers decided to cancel their trip. On appeal, the court found that the substitution of the hotel did not constitute a significant change. This interpretation was supported by the fact that the specific point, regarding the permissibility of like-for-like hotel substitution, was dealt with in their contract. Therefore, the customers were not entitled to a refund in this instance.

Curtailed holidays

Finally, and perhaps most controversially, what are the customer’s rights if a holiday is cut short due to UECs? In these situations, the customer has not received their full benefit from the contract, yet the burden has often already been borne by the suppliers, and their expenses are not recoverable.

There are several steps a travel company must take including arranging transport for the customer’s return home. However, the customer does not have a right to recover compensation for damages. This is clearly stated in Regulation 16 of the PTRs, and is also a basic tenet of contract law; where a contract is frustrated due to unforeseen events, the contract terminates and the parties are released from their obligations.

Both of these points were made in the case of Tanner v TUI [2005], albeit relating to the similarly worded 1992 Regulations. Here, the court found that passengers on a cruise, which was curtailed due to gale force winds, were not entitled to a refund as the travel company had already incurred the expense, and it was through no fault of theirs that the cruise had been cut short.

ABTA has also repeated this advice, stating that customers may be entitled to a price reduction where travel companies are able to seek a refund from their suppliers, but that in other cases the customer should turn to their travel insurer, not the package holiday provider.

How can travel companies help their customers?

Head of the CMA’s COVID-19 task force, Will Haytor, has said:

If complying with government guidance adversely impacts consumers, our message to businesses is that they should treat their customers fairly and responsibly - including trying to find a mutually acceptable solution.

Travel companies should be flexible with destinations/hotels and offering reasonable alternatives rather than cancellations where possible. Further, care should be taken when re-iterating insurance requirements. More case law from the higher courts considering what this means for the travel industry would be useful. However, as it stands, the message emerging from the county courts is the need for clarity. Ultimately, package holidays are contracts, and as per Lord Steyn, “A thread runs through our contract law that effect must be given to the reasonable expectations of honest men”.

Ultimately, travel companies can best manage UECs by being proactive in managing the expectations of their customers.

Related content