Cruise & Tour Operators – Forfeiture of Fares

Cruises are becoming a popular way to holiday for many Australians but what happens to the money paid by you if the cruise operator cancels the cruise at short notice?  Do you lose your money?

This is exactly what happened to a number of passengers who purchased tickets and paid the full fair for a cruise in the Kimberley that was cancelled at short notice because of Tropical Cyclone Lau and the likelihood that the cruise would be unsafe and unpleasant.

A clause in the terms and conditions provided that the cruise company was permitted to cancel the cruise and forfeit all fares if it was considered necessary as a result of some ‘unexpected event’. The broad definition of ‘unexpected event’ in these circumstances included bad weather.

The passengers all held travel insurance and made claims on their insurance policies for the forfeited fares.  The insurance company subsequently commenced proceedings against the cruise company arguing that the term in the contract that allowed the cruise company to cancel the cruise and then forfeit the fare paid was void as an unfair term under section 23 of the Australian Consumer Law.

After considering whether the contract was a standard term contract and whether the term was unfair, Judge Jarrett of the Federal Circuit Court found that the forfeiture clause was an unfair term that was void and could be severed from the remainder of the contract.

The Judge found that the passengers were entitled to full repayment of the fares they had paid even though the cruise operator had put temporary arrangements in place for the passengers including accommodation and some meals.

As cruises and pre-booked tours continue to gain popularity this case serves as a reminder that passengers should review the terms & conditions carefully and consider obtaining legal advice in the event a decision by the operator causes them to suffer some detriment, such as the forfeiture of a fare.

It also highlights for cruise and tour operators, including those operating within the Whitsundays, the importance of having carefully drafted terms and conditions to assist in ensuring that they are not found to be unfair terms under the Australian Consumer Law.

If you would like any advice on terms and conditions or assistance in reviewing the terms and conditions presently in place for your own business please contact us.