Featured Client

Mohammed Aziz Hasani - Sterling Souvenirs Limited

Everyone Deserves A Break

Gyms are often criticised for practices which, at one end of the scale, are

unfair and, at the other, undermine consumer rights, for example, a unilateral increase in monthly fees.

If you have ever tried to cancel a gym membership midway through its term, you may know how difficult some providers can be, despite offering a service which is supposedly good for your health.

No doubt you have been making the most of your membership in the run up to summer, toning up in Pilates classes or curling and pressing dumbbells for that beach body, but what happens when winter arrives and you want to cancel your contract?  One company was recently sanctioned for operating unfair contracts.  From a business perspective, this case also highlights the danger of relying too heavily on standard terms in consumer contracts.

Office of Fair Trading v Ashbourne Management Services Ltd and others [2011] EWHC 1237

The High Court has ruled on an action brought by the OFT against Ashbourne, a company providing services for over 700 UK gyms including membership sales, collection of fees and provision of standard form membership agreements.  The Court found that certain standard terms in its membership contracts were unfair and contravened consumer protection legislation.

The Ashbourne contracts in their varying forms:

1.    Imposed a minimum membership period of between 1 and 3 years on members;

2.    Required members wishing to cancel before the end of that period to pay immediately all membership fees for the whole minimum period; and

3.    Allowed the gym to terminate the agreement for a minor breach by a member and claim all fees payable in respect of the whole minimum period.

Fairness is fundamental in standard B2C contracts

The court in passing its judgement said that Ashbourne was fully aware of the average member's usage patterns, and had deliberately created a business model that was designed and calculated to take advantage of the naivety and inexperience of the average gym user at the lower end of the market.

Furthermore, all 2 and 3 year minimum membership periods in the Ashbourne contracts created a significant imbalance between the parties' rights and obligations and were unfair.   The fairness of 1 year minimum term agreements turned on whether the gym member could terminate in certain circumstances (for example, illness, injury, loss of livelihood, change of principal place of work or home). 

In respect of the full fees payable on termination, it was held that no allowance was made for the benefit of accelerated payment, which was therefore unfair and amounted to a penalty.   The ability of Ashbourne to terminate for a minor breach and claim all membership fees for the minimum period was also unfair as under common law, non-repudiatory breaches permit a party only to terminate the agreement and claim for loss up to the date of the breach, not for future losses.

Comment  

If you use standard form consumer contracts, the terms must be fair to be binding against the consumer.   In relation to the above case, perhaps consider in particular:

Parties: Clearly identify the contracting party, the supplier of services (if different) and any agent.

Minimum contract terms: Consider the average consumer and ensure the contract does not force them into a minimum term which is excessive without explaining to them the risks involved and the possibility of alternative and more beneficial options.  Further, consider if a consumer should be able to terminate the contract early without incurring financial consequences.

Automatic renewal terms: Ensure you provide reasonable means for consumers to exit automatic renewal terms fairly, and clearly communicate the exit options in plain and intelligible language.

Early termination charges:  Ensure that charges for early termination include an appropriate discount for accelerated receipt of payment.

If you would like further advice on consumer protection legislation, a review of your standard terms and conditions, or indeed new terms and conditions drawn up for a new business, please do not hesitate to get in touch by e-mail at enquiries@fortunelaw.com or by telephone on

020 7440 2540

Whilst hotels and nightclubs on islands all over Europe fill up with young holidaymakers and partygoers, those owners of licensed premises in the UK should also take a moment to consider their duties.

Earlier this year, the Court of Appeal held that there is a duty of care on the management of hotels or nightclubs generally in respect of the actions of third parties on their premises (Everett and another v Comojo (UK) Ltd T/A The Metropolitan and others [2011] EWCA Civ 13).

Facts

Those of you, like us, who are based in the West End may know The Met Bar, part of the Metropolitan Hotel on Old Park Lane. You may have visited once, walked past or are regulars. You are unlikely however to have been a victim of violence there. 

The appellants in this case were guests at the nightclub who were seriously injured in a knife attack by another guest.  The attacker was convicted of intent to cause GBH and convicted to life imprisonment. In addition, however the victims claimed against the management on the basis that it had failed to take appropriate steps to protect its guests.

Their argument was that the management had been negligent in failing to instruct its doormen to search guests. This was however rejected by the trial judge and not appealed further.  Instead, it was appealed that the nightclub was vicariously liable (responsible) for a bar waitress' negligence in reporting her concerns about the attacker to a bar manager rather than the door supervisor, who would have immediately come into the bar, preventing the situation or being on hand to control it. 

Decision

As reported in our last newsletter, to establish a duty of care (the first step in proving a negligence case), it must be shown that the damage which occurs is foreseeable, there is a sufficiently proximate relationship between the parties, and it is fair, just and reasonable in all the circumstances to impose a duty of care.

The Court of Appeal found that a nightclub's management controlled the premises and there was an economic relationship with its guests; it was foreseeable that a guest might harm another, although risk may vary depending on the establishment; and it was fair, just and reasonable in the circumstances to impose the duty of care, given that an injury caused by, say, a trip on worn carpet, could give rise to liability under the Occupier's Liability Act 1957.

However the Court dismissed the appeal and concluded that although there is a duty on the management of a nightclub in respect of the actions of third parties on their premises, the standard of care imposed (the second step in a negligence claim), or the scope of the duty, must be fair, just and reasonable.  Applying the law to the facts, the Court also concluded that The Metropolitan had not been in breach of duty in this case.

Comment

Owners and/or managers of licensed premises should consider this case a fair warning of their duty of care in respect of the actions of third parties on their premises.  Although the scope of that duty need be fair, just and reasonable based on the particular circumstances, ensuring that you have adequate procedures in place to deal with situations involving third parties are crucial to avoid unnecessary liability and financial loss.

If you would like further advice on business policies and procedures, steps to avoid or minimise liability or negligence claims in general, please contact us by e-mail at enquiries@fortunelaw.com or by telephone on 020 7440 2540.