Opinion on Car Hire Agreement:

1. INSTRUCTIONS

1.1. I am asked to advise Mr S. Ling of his legal position concerning the problems he encountered after hiring a car from Car-U-Like Rental ("the Company") whilst on holiday. On the facts of the matter, as described in his letter of 14th September 2003, Mr Ling contracted to hire a car from the Company which did not meet his prior express specifications. Furthermore, owing to the breakdown of the rented car on the second day of his holiday and his attempts to have the car repaired by the Company, he lost a day of enjoyment of his holiday. Lastly, upon returning the rental car to the Company, he lost a £50.00 fuel deposit that he had paid in respect of the Company's requirement that he return the car with a full tank of petrol.

1.2. Mr Ling therefore seeks firstly, compensation for the Company's failure to supply him with a Ford Mondeo ("Mondeo") that he contracted for. Secondly, he is also seeking recompense for the part of his holiday that was ruined and lastly, for a refund of the £50.00 fuel deposit that he forfeited to the Company.


2. COMPENSATION FOR FAILURE TO SUPPLY FORD MONDEO

2.1. In dealing with the compensation sought for the loss of the Mondeo it is notable that it is the usual practice for such hire contracts to use a standard form hire contract and for the employee just to fill in the details regarding the price paid and the type of car requested. If this occurred with Mr Ling then his specific request for a Mondeo would have been written down and incorporated into the written contract and this would form an express term of the agreement.

2.2. If however, this was not the case for any reason, it is essential to determine whether or not Mr Ling's specific request for a Mondeo was merely a representation or was a term and was thus duly incorporated into the contract made with the Company. If it was a representation then it would be actionable under the Misrepresentation Act 1967 , however for the purposes of this advice it is submitted that it would not fall to be dealt with a representation for the reasons given below.

2.3. The courts are usually very reluctant to accept oral evidence that add to the terms of a written signed contract and they would therefore usually require that the term be considered to be fundamentally important before they allow its incorporation as part of the overall contract. In determining this fact the courts would usually approach this question by aiming to determine the intentions of the parties involved from an objective (reasonable third party) point of view, thus asking whether, from an objective view, the statement was intended to form part of the contract.

2.4. Mr Ling clearly attached considerably importance to being supplied with a Mondeo and it might be the case that if he had been told that there were no Mondeos available at Oldcastle Airport then he might not have continued to negotiate a contract with the Company and sought one from another hire company. In the case of Bannerman v. White a buyer specifically stated that he wanted to buy hops that had not had sulphur used in their production and that he would not buy them if they had. Although he was assured that this was the case sulphur was in fact used and it was held by the courts that this statement as to sulphur was a 'preliminary stipulation' without which the buyer would not have formed the contract.

2.5. This therefore supports the assertion that Mr Ling intended his specific request to form part of the contract because of the importance attached to it by Mr Ling. However, the courts have also stated that even where the matter is regarded as important this will not mean that any statement made as to the truth of a matter will form part of the contract if it would be expected or it is clear that it should be checked or verified independently. However, in the present case it is submitted that this would not be applicable since checking the availability of a car would fall under the duties of the Company and not Mr Ling and it is highly unlikely that Mr Ling would have been able to verify the matter independently.

2.6. In addition, the fact that the oral statement was made concurrently or nearly at the same time as the signing of the contract, that that the written contract was of a standard form, and that the Company was in a much better position to adduce whether or not there were any Mondeos available, all strongly support the assertion that Mr Ling's statement would be considered by the courts to form part of the contract.

2.7. Thus, if Mr Ling's specific request formed part of the contract then the Company would be in prima facie breach of the contract by their failure to supply him with a Mondeo.

2.8. However, Clause 11 of the Company's Conditions of Hire states:
"Whilst the company will use its best endeavours to supply the type of car requested, the company reserves the right to supply a car of different type or size of engine at its discretion."

Since this term was incorporated into the written contract that Mr Ling signed, this would apparently operate to exclude any liability to Mr Ling that might arise on the part of the Company for failing to supply a Mondeo.

2.9. However, under section 3 of the Unfair Contract Terms Act 1977 ("UCTA") where between contracting parties one of them deals as a consumer or on the other's written standard terms of business then the other cannot by reference to any term contained in the contract "claim to be entitled to render a contractual performance substantially different from that which was reasonably expected of him… except in so far as the contract term satisfies the requirement of reasonableness".

2.10. Thus, it is clear on the facts that Mr Ling would fall within the category of a consumer (since he was renting the car for the purposes of a holiday tour and not "in the course of a business" ) or on the Company's written standard terms of business (since it is evident that the conditions of hire were contained in the Company's standard hire form). The test of reasonableness, which Mr Ling must prove, is defined under section 11(1) UCTA is whether the clause is:
"… a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made".

2.11. This test is very broad and in practice the courts have relied on 'Guidelines' as to the application of reasonableness listed in UCTA. These include the relative strength of the bargaining position of the parties, whether an inducement was offered and/or taken up, and whether the existence and extent of the term was known about at the time of contracting. Given the fact that Mr Ling was not informed about the exclusion clause, that he made an explicit request for a Mondeo and that if he would have known that the Company could not supply a Mondeo he might not consented to signing a contract and gone elsewhere, it is submitted that the court would find this clause unreasonable since the very purpose of a hire contract is to hire a car of your choosing.

2.12. Alternatively, under section 7 of UCTA there can be no exclusion of liability for breach of statutorily implied (into the contract) terms as to correspondence with description or sample of goods supplied, quality of goods, fitness for purpose, (as detailed under the Supply of Goods and Services Act 1982 ("SGSA") ) against a person dealing as a consumer. Contracts for the hire of goods are covered by section 6 SGSA. Under section 8(2) SGSA there is "an implied condition that the goods will correspond with the description" where a hire is by description.

2.13. In an analogous case it was held that for a sale to be by description, the description had to be influential in the sale to the extent that it became an essential term or condition of the contract. It is therefore submitted that since Mr Ling expressly stated his requirement for a Mondeo (hire by description) then the Company would prima facie be prevented from excluding liability for breach of this implied term since Mr Ling hired the car by its description ie a Ford Mondeo.

2.14. In addition under section 9(2) SGSA there is an implied term that the goods supplied are of satisfactory quality and in determining this the description of goods, and all other relevant circumstances should be taken into account. All other circumstances include any public statements made on the specific characteristics of the goods by the Company and its representatives. Thus, if it could be shown that the Company acknowledged that they would be able to supply a Ford Mondeo in any way this condition would apply and the Company would have breached its contractual obligation. Given the factual scenario and the current protestations of Mr Ling, it is highly likely that the Company did indeed make such a public statement or it would seem to be the case on the facts that he would not have entered into the contract, (although this would have to be confirmed with Mr Ling).

2.15. For the present purposes it is submitted that it has been sufficiently determined that the contract has been breached by the Company and Mr Ling is entitled to damages as a matter of right. The difficulty Mr Ling may face in this respect is proving what 'loss' he has suffered. It might be that Mr Ling considered that Ford Mondeo cars were very reliable or that he had a particular attachment to Mondeo cars just like other individuals have a penchant for only sports cars. However, these factors serve to highlight the fact that any loss 'suffered' by Mr Ling would primarily be related to personal enjoyment and would not directly fall under the recognised 'heads of loss', namely expectation loss (or loss of bargain), reliance loss (or wasted expenditure) or restitution. The possibility of claiming for damages for loss of enjoyment and/or distress and disappointment also fall to be considered in relation to Mr Ling's 'ruined holiday' and will therefore be considered together in section 3.

2.16. However, even if no loss could be actually proved Mr Ling would still be entitled to nominal damages. Moreover, in one case the court awarded damages for 'loss of amenity' even where there was no difference in value between what was contracted for and that which was specified in the contract, as in the current situation. The nature of this award has been likened to that of being based on a 'consumer surplus' so that it would compensate Mr Ling for the value above which that he had contracted for.

2.17. Accordingly, it is submitted that nominal damages and/or loss of amenity could be claimed on the above basis. Mr Ling would however, have to submit further evidence as to what exactly he believed to have lost from not having the Mondeo, as well as the exact costs of the holiday, the hire of the car, and the amount that he possibly might have forfeited from his employment by taking a week off from work (if applicable) in order to be able to quantify any such claim more accurately.


3. COMPENSATION FOR RUINED HOLIDAY

3.1. In supplying a hire car the Company were under an implied obligation at law under section 9(2) SGSA that the goods supplied are of satisfactory quality. In determining this section 9(2A) SGSA states that this will be the case if "they meet the standard a reasonable person would regard as satisfactory" taking into account "any description" and "all other relevant circumstances". Moreover, Mr Ling should be able to enjoy "quiet possession" of the goods under the contract.

3.2. In the present case it would seem likely that the fact that a hire car supplied for the purpose of a holiday broke down on the second day of the holiday as not meeting such a satisfactory standard. In hiring cars a customer would expect the car to be in working order and fit for the purpose of driving and although it is highly likely that breakdown cover was expressly provided for in the contract, if this was not the case it would be implied into the contract by reason of the car being of a satisfactory standard.

3.3. The Company would be in prima facie breach of its obligations and this would entitle Mr Ling to compensation. However, Clause 10 of the Company's Conditions of Hire aims to limit "any consequential losses arising from any breach of contract however caused" and not such implied terms directly and thus as mentioned previously, this clause would fall to be considered under the terms of UCTA. Since its scope is so wide it might potentially be considered to include negligence and under section 2 UCTA it would be effective in the case of "other loss or damage" only to the extent that it was reasonable. On application of the principles outlined in detail at paragraphs 2.11 to 2.13 it is submitted that the clause would be considered to be unreasonable as it could not have been both the parties intentions to exclude any form of redress for Mr Ling if anything were to go wrong. Moreover, the clause purports to prevent the operation of any common law duty of care owed in tort and would thus be deemed unreasonable on this ground. Since the offending part of the clause is the whole clause, it would be unenforceable.

3.4. Thus, in both cases of breach by the Company Mr Ling has suffered loss which is not definable in economic terms but which arose naturally from such breaches and were within the parties' reasonable contemplation. Thus, in relation to claiming for any mental distress, annoyance or anguish felt by Mr Ling as a consequence of the breach of the contract, the legal position is that courts have generally held, as a matter of policy, damages will not be awarded to compensate for any injured feelings or mental distress.

3.5. Nevertheless, there are two distinct exceptions to this rule and those are firstly, "where the very object of the contract is to provide pleasure, relaxation, peace of mind or freedom from molestation" or secondly, where "physical inconvenience and discomfort by the breach and mental suffering directly related to that inconvenience and discomfort." It is therefore arguable that in relation to the supply of a Mondeo this was an "important object of the contract" and was aimed at providing Mr Ling with pleasure, relaxation and peace of mind which was "of value" to Mr Ling.

3.6. This could arguably also apply to the breaking down of the car and the loss of enjoyment of Mr Ling's holiday owing to the physical discomfort he endured walking for three miles and waiting for hours for his car to be fixed. An example of such a relevant scenario was given in Jarvis v. Swan Tours Ltd,
"… He put the case of a man who has a ticket for Glyndbourne. It is the only night on which he can get there. He hires a car to take him. The car does not turn up… He is entitled to general damages for the disappointment he has suffered and the loss of the entertainment which he should have had."

It is therefore submitted that Mr Ling would be entitled to compensation for the loss of enjoyment of that part of the holiday he lost although he would need to supply further information regarding the holiday in order to be able to quantify any such loss more precisely.

REFUND OF £50.00 DEPOSIT

4.1 In respect of the return of Mr Ling's £50.00 fuel deposit, Clause 14 of the Company's Conditions of Hire requires the return of a full tank of petrol and might not be considered an exclusion clause. It would however fall under the scope of the Unfair Terms in Consumer Contracts Regulations 1999 ("UTCCR"). Under regulation 8(1) of UTCCR, a consumer shall not be bound to any "unfair" term in a consumer contract. The test of 'unfairness is stated in Regulation 5(1) as:
"…any term which contrary to the requirement of good faith … causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer."

4.2. The duty of 'good faith' was considered in Director General of Fair Trading v. National Bank plc. There it was found that
"Fair dealing requires that a supplier should not, whether deliberately or unconsciously take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position, or any other factors listed in or analogous to those listed in Sched[ule] 2 of the Regulations."

4.3. Thus, In the case of Mr Ling in respect of clause 14 of the Company's Conditions of Hire, it could be argued that it would be almost impossible to return the car to the airport with a full tank of fuel as the journey from the petrol station to the airport would ensure that nobody could return with a completely full tank of fuel. Therefore it is out of 'necessity' that the consumer returns the hire car with a petrol tank slightly less than full especially since Mr Ling was unfamiliar with the surroundings. Moreover, it is arguable that £50.00 is a "disproportionately high compensation" for a relatively small breach of a few pounds worth of petrol. It is therefore submitted that a court would find this term unfair and would award Mr Ling the return of his deposit.

BIBLIOGRAPHY

STATUTES AND REGULATIONS

Sale of Goods Act 1979

Sale and Supply of Goods Act 1994

http://www.hmso.gov.uk/acts/acts1994/Ukpga_19940035_en_1.htm#end

Sale and Supply of Goods to Consumers Regulations 2002 (came into force on 31 March 2003)

http://www.hmso.gov.uk/si/si2002/20023045.htm

Supply of Goods and Services Act 1982

The Unfair Contract Terms Act 1977

The Unfair Terms in Consumer Contracts Regulations 1999 (came into force on 1 October 1999)

http://www.hmso.gov.uk/si/si1999/19992083.htm

CASES

Addis v. Gramaphone Company Ltd [1909] AC 488

Bannerman v. White (1861) 10 CBNS 844; 142 ER 685

Bernstein v. Pamson Motors (Golders Green) Ltd [1987] 2 All ER 220

Blis v. South East Thames RHA [1987] ICR 700 (CA); [1985] IRLR 308

Couchman v. Hill [1947] KB 554

Dick Bentley Productions Ltd v. Harold Smith (Motors) Ltd [1965] 2 All ER 65

Ecay v. Godfrey (1947) 80 Lloyd's LR 286

Esso Petroleum Co Ltd v. Mardon [1976] QB 801; [1976] 2 All ER

Evans & Son Ltd v. Andrea Merzario Ltd [1976] 2 All ER 930; [1976] 1 WLR 1078

Farley v. Skinner [2001] UKHL 49; [2001] 4 All ER 801

Hedley Byrne v. Heller [1964] AC 465; [1963] 2 All ER 575

Hotel Services Ltd v. Hilton International Hotels (UK) Ltd [2000] 1 All ER Comm 750, CA

Hutton v. Warren (1836) 1 M & W 466; 150 ER 517

Jackson v. Chrysler Acceptances Ltd [1978] 2 All ER 220

L'Estrange v. Groucob [1934] 2 KB 394

Les Affreteurs Reunis SA v. Leopold Walford (London) Ltd [1919] AC 801

Oscar Chess Ltd v. Williams [1957] 1 All ER 325; [1957] 1 WLR 370

Overseas Medical Supplies Ltd v. Orient Transport Services Ltd [1999] 2 Lloyd's Rep 273

Routledge v. McKay [1954] 1 All ER 855; [9154] 1 WLR 615

Ruxley Electronics and Construction Ltd v. Forsyth [1996] AC 344; [1995] 3 All ER 268

Shell v. Lostock Garage [1977] 1 All ER 481

Smith v. Eric S. Bush [1990] 1 AC 831; [1989] 2 All ER 514

BOOKS, ARTICLES AND JOURNALS

Atiyah, P.S., "An Introduction to the Law of Contract", 5th edn, (1995), Oxford: Clarendon Press

Atiyah , Patrick S.; Adams, John M. (University of Sheffield); MacQueen, Hector L., (University of Edinburgh), "The Sale of Goods" (10th Ed) Longman, (September 2000)

Beale, Hugh, "Chitty on Contracts, Vol. 1", Sweet & Maxwell, 28th Edition, (2000).

(Case Comment), "Exclusion clause ineffective", Cons. L. Today 2001, 24(1), 2

Dean, Meryll, "Defining Unfair Terms in Consumer Contracts - Crystal Ball Gazing?Director General of Fair Trading v First National Bank plc", 65 MLR 773

Dobson, Paul, "Exclusion of implied terms - hire purchase", S.L. Rev. 1997, 22 (Aut), 12

Grant, David, "Damages for distress", Trad. L. 1986, 5(7), 293-298

Longshaw, Alexis; Sewell, Tim; Spencer, Chris, "Commercial Law and Practice", Jordans (2000)

Macdonald (1994) JBL 441

Macdonald, Elizabeth, "Scope and Fairness of the Unfair Terms in Consumer Contracts Regulations: Director General of Fair Trading v First National Bank", 65 MLR 763

Poole, Jill, "Casebook on Contracts", Oxford University Press, 6th Edition, (2003).

Stone, Richard, "The Modern Law of Contract", 5th Edition, (2003).

OTHER SOURCES

Butterworths Direct, All England Law Reports online,

http://www.butterworths.co.uk/aller/index.htm

Department of Trade and Industry, Consumer and Competition Policy Directorate
Guide to the Sale and Supply of Goods to Consumers Regulations 2002

http://www.dti.gov.uk/ccp/topics1/guide/saleshort.pdf

Department of Trade and Industry, Consumer and Competition Policy Directorate
Sale and Supply of Goods

http://www.dti.gov.uk/ccp/topics1/saleandsupply.htm

Westlaw UK online

http://uk.westlaw.com

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