IFTTA
THE INTERNATIONAL FORUM OF TRAVEL AND TOURISM ADVOCATES
Sodalem esse societatis quae dedicetur ad
Exercitatio legis ut produceat iter peregrationemque

travel contract Hungary

 

17^th  Conference of International Forum of Travel and Tourism Advocates

Vienna, Austria

26-30 August

The regulation of the travel contract and judicial practice in Hungary

Dr. András Salamon

Advocate, lecturer in Tourism Department of Veszprém University, Hungary

asalamon@mail.datanet.hu

Dr. Salamon András ügyvéd · advocate

I. Consumer friendly regulation

The legal situation of organized travel in Hungary can be best compared to a love triangle. The regulatory authority, that is, the Ministry of Commerce, is being allured and attacked, on one the one hand, by the tour operators and their association, and on the other hand, by consumer protection organizations. This affair – neither with nor without – generates a continuous conflict of varying intensity among the actors. The core of the argument is that the regulators want to maximize the rights of the traveler, that is, the consumer, if possible, without impinging on the rights of the entrepreneurs, whereas the vast majority of the travel agencies wish to give the bare minimum, even if this results in the breach of law. Nearly constantly, the regulatory authority finds itself between a rock and a hard place: to what extent should it be consumer friendly and entrepreneur-friendly, then again, when should it limit the rights of the entrepreneurs in favor of the consumer? The fundamental areas of confrontation are: traveler services, the notice obligation of the organizer, damage liability, particularly for non-material damages, and the interpretation of laws and regulations.

From the beginning, starting in 1976, in Hungarian legal concept, the legal nature of the travel contract is evident: the traveler pays everything in advance, and only later does he/she become aware of whether he/she had received the services contracted for. If not, his/her opportunities for legal redress are limited: he/she can request a reduced fee and damages, but the unpleasant memories, the bitter taste in his/her mouth remains. This is why I call the travel contract as a trade of dreams. The traveler and the travel agency both have a dream; if these meet, there is no problem; if they do not, then... Replacement, correction is available only in a very limited sense.

To better understand the situation, I have to give a brief overview; in Hungary, the chapter on “Undertaking” of the Civil Code (Ptk.) governs travel contracts by a mere two sections (415 and 416); however, Section 416 also authorizes another law to work out more detailed regulations. With the exception of differences stated in those, the general and entrepreneurial rules and regulations of the Civil Code are applicable. According to the Civil Code, the travel contract is a contract for professional services.

According to the civil law, the enterprise has the obligation to perform; therefore, the entrepreneur performs pursuant to the contract if he/she produces the results stated therein. In case of organized travel, if he/she performs the obligations, both in terms of quality and quantity, as stipulated in the travel contract – in plain talk: if the travelers come back from the trip satisfied.

It is also a legal characteristic of the undertaking that the ordering party has to pay the fee after the fact, and the entrepreneur has the obligation to perform the subject matter of the agreement at his/her own expense. The governmental decree, however, unilaterally states that the traveler has to pay the tour price in advance, to top it off, the entrepreneur may even request an advance.

In Hungary, payment in advance and limited legal redress justify strongly protected rights for the traveler “versus” the tour operator. In the end, this consumer friendly regulatory process can be evinced at the legislating authority, with judicial practice demonstrating the same.

Dr. Salamon András ügyvéd · advocate

II. The regulation of organized travel

In Hungary, the legal regulation of organized travel contracts and structure is undertaken on two levels. The first level is the Civil Code, which had been augmented in 1976 with the two sections concerning travel. One of them, Section 415, defines the legal concept of organized travel: this is identical, letter by letter, to the contents of Section 2 of Directive 90/314/EEC, with the exception that the Hungarian definition does not contain a duration limit, thus, trips that had been organized under 24 hours are also considered travel agreements. (Last year’s amendment of Government Decree No. 214/1996 (XII. 23.) followed this limitation of the Directive, thus, the travel must go on for at least 24 hours [or overnight] to be covered by the regulation.)

Section 416 gives authorization for a separate regulation to determine regulations that are more detailed and varying from the norm.

It was these decrees, born on the basis the above authorization, that had been replaced by the two government decrees, compatible with Directive 90/314/EEC, designated: Government Decree No. 213/1996 (XII. 23.) concerning travel organizing and travel intermediary activity, and Government Decree No. 214/1996 (XII. 23) concerning travel and travel intermediary contracts.

Both decrees (particularly 214/1996) have been amended repeatedly, with greater frequency as we approached the date of accessing the EU. The last amendment became effective in the first half of this year.

III. Travel cancellation due to rescission by the traveler

Regulation of this issue has not changed from 1978 to 2004: If the traveler cancelled the trip within the statutorily defined 30 days of departure, the travel organizer could only request a reimbursement of those costs that had arisen up to that point. He/she could demand neither lost profits nor damages from the traveler.

Despite the clear regulations, cancellation fees have been determined by every single tour operator on a percentage basis, which became an ever increasing ratio of the fee for participation. According to Section 6 of the Civil Code, this solution is null and void, since it is contrary to law, yet this fact does not bother any of the tour operators. Only once did it occur that the Consumer Protection Agency filed an action against a tour operator, which had since then stopped operation. In its opinion, the court stated that the cancellation fee determined as a percentage of the fee for participating was unlawful, therefore it was null and void. Still, the situation failed to change, everything has remained the same. It is true, however, that neither a government agency nor a traveler filed a new suit due to this reason.

In the end, the Ministry of Economy, in 2004, under pressure from the Hungarian Association of Tour Operators and Travel Agents (MUISz), by amending the decree, sanctified the previously unlawful practice: the travel agent may request damages due to traveler cancellation, but such amount may not exceed the amount of fee paid to that point. Therefore, if the traveler only paid the advance at the time of cancellation, the tour operator may not request more than the amount paid in, even if the damage sustained is greater. Tour operators were so leery of this that in the end they had achieved the passage of an additional amendment. Pursuant to this, the entrepreneur may demand reimbursement of his/her damages, the amount of which may not exceed the contractually specified fee for participating.

Dr. Salamon András ügyvéd · advocate

Over this issue, sharp arguments have broken out between the operators and the legislating authority. The fight of the travel agency association was inexplicable here, as a traveler had not filed a suit due to the cancellation fee as of this day. If a case comes before a court, then on the basis of the Civil Code (Ptk. 340.§) the agency must prove that it had performed its duty to mitigate damages, with such action being ineffective: for example, that it had attempted to resell the cancelled seat, if necessary, at a discounted rate.

IV. Claims for non-material damages

Even before the Leitner case and the amending of the regulation that had become effective in 2004, the courts have applied damages for non-material damages in a consistent and unambiguous manner, independent of the fact that the first time the government decree mentions this legal institution was in its 2004 amendment. The practice is that tour operators – with a few exceptions – refuse claims for the non-material damages of the traveler.

Having studied the justifications of the decisions, it is apparent that pursuant to judicial practice the objective of a holiday (of travel) is resting, having a good time, recreation, acquiring new experiences, active relaxation. Quality of life is protected by the law (Ptk. 75.§, 84.§) of individual rights. Physical and mental health are part of the quality of life. This objective is jeopardized by the nuisance, annoyance and difficulties caused by faulty performance, faulty services; thus, the right to rest, to health, is degraded. The decisions reveal that the non-material damage claims are justified as a result of rest that did not occur, the absence of the hoped for experience, entertainment or relaxation, recreation, disappointment, irritation, insecurity, vulnerability, humiliation, or shock as a result of an unexpected situation. Judicial practice defines these occurrences – the failure to maintain one’s health, to relax so one can return ready for work - as harm to one’s individual right to an unclouded, care-free holiday.

The courts’ views are uniform in that the cleanliness of the accommodation is not a function of evaluating the quality of services, rather it is a minimum level of contractually mandated service.

It is notable that a change in accommodation reported either at the time of or after departure are defined as a breach of contract by the court, on the basis that this is a substantive modification of the terms of the travel agreement, and an amendment of the agreement is only valid in writing.

It can be distilled from the decisions that at the time of determining the extent of the fee discount or damages, the courts make their decisions on a case by case basis; they do not apply a method similar to the “Frankfurter” table. At the time of determining the extent of damages or fee discounts, the size of the participation fee does not play a role; there is no comparison thereto.

1) The traveler learned at the airport on the day of departure that he was not going to reside in the particular apartment that he had selected from the prospectus. He only received accommodation equivalent to the originally selected one during the second week of the holiday. He also complained about the cleanliness of the first week’s accommodation.

The court held that the defendant travel agency did not amend the travel agreement in writing, therefore it had breached the contract, violating its notification and cooperation obligations. “The change of accommodation is considered such a significant modification of the contract, which must be put in writing. By violating the notification and cooperation obligations, the defendant had deprived plaintiff of his ability to choose.”

Dr. Salamon András ügyvéd · advocate

The defendant did not perform pursuant to the contract because it had failed to place the traveler in an accommodation of proper cleanliness. The court stated that “the cleanliness of the kitchen, as well as kitchen equipment, in the context of apartments, was a requirement that must be met, at a minimum, to perform the contract.”

The entire cost of the accommodation, for two weeks, was HUF 85,050. The court awarded HUF 40,000 as a discount, and HUF 50,000 as non-material damages. The court held that: “…the harm to the traveler occurred when he was subjected to disappointment, shock as a result of the unexpected situation, the comfort that failed to materialize, the absence of cleanliness and ease; due to the move after the first week, the hoped for and expected experience, entertainment, relaxation, rest needed to recharge failed to materialize.”

“Judicial practice, referring to Section 75 of the Civil Code, evaluates harm of this nature in that the individual right to maintain health, to recharge for work, to a cloudless, care-free holiday providing relaxation is harmed.”

(Decision of Capital Court, 47. Pf. 28632/2002/4.)

2) The travel entrepreneur, 15 days prior to departure, raised the fee for participating from HUF 358,000 to HUF 389,000, an increase which had been accepted by the travelers.  The plaintiff travelers objected to the fact that the three star Cuban hotel in which they had been given accommodation (as stated in the prospectus) was an apartment hotel, thus they had to share an apartment with strangers, and the bathroom was also not clean enough.

The court held that the defendant could not have increased the price 15 days prior to the departure, even if the Cuban partner had raised the price of the accommodation as a result of the loss of the group discount. “The defendant did not perform pursuant to the contract by placing the plaintiffs within accommodation in Cuba, that were not clean enough.”

“Defendant cannot refer to the fact that the Plaintiffs should have known that a Cuban 3 star hotel is the same as the ones anywhere in the Mediterranean region – this leads straight to the particular misfeasance of the defendant, in the context of his notification obligation. The 3 star designation refers to the category of the rooms, and/or hotel facilities, and the nature of the service provided, whereas the cleanliness of the rooms in any category hotel, or even apartment, is a minimum requirement that can be expected to perform pursuant to the contract.”

“It can be expected from a well known travel agency which conducts the organization of trips as a business, that it should select accommodation with appropriate care, and not select proper accommodation simply on the basis of the hotel’s designation, but rather pay attention to the hygienic and esthetic aspects as well. It is not a defense that the employees of the travel agency had not yet been to visit the given accommodation.“

The court, on the basis of faulty performance, decreed a fee discount of HUF 50,000 per head, as well as HUF 50,000, per head, for non-material damages. “The failure of the expected rest to materialize, and earlier, the unpleasantness of using the apartment jointly with strangers, harmed the individual rights of the plaintiffs (to emotional health and rest). In the given case the individual rights of the plaintiffs were impinged upon.”

(Decision of Capital Court, 47. Pf. 25365/2002/6.)

Dr. Salamon András ügyvéd · advocate

3) The travelers went on their honeymoon to the Caribbean, organized by the tour operator. Their itinerary included a one week holiday in the Dominican Republic, and a one week luxury cruise in the Caribbean. The travel agency informed them that a visa is not required, only a valid passport. On the second day of the cruise it turned out that a visa was required after all. Plaintiffs were taken off the ship; they had to return to the hotel by taxi. Defendant travel agency paid HUF 368,975 in damages to the travelers. Plaintiffs also demanded HUF 500,000 for non-material damages. (Total price of the trip was 880 000 HUF)

“Defendants proximately caused Plaintiffs to suffer a loss as a result of the breach of contract by the defendant. The purpose of a holiday is resting, spending time in a pleasant fashion, recharging, acquiring new experiences. In the given case, the island cruise was going to be an important, integral part of the holiday, which did not take place. From the point of view of the entire holiday, it can be a defining aspect if one part of the holiday occurs amidst such unpleasant circumstances that its tiresome characteristics, unpleasant experiences cannot be erased by earlier, pleasant impressions. It must be noted within this context that Plaintiffs were affected by these unpleasant occurrences during their honeymoon, where the negative effects were understandably magnified to a greater degree than otherwise, thus seriously, negatively impacting their emotional state. All in all, the personal situation that had arisen due to the unlawful behavior of the Defendant, or otherwise stated, the life situation that had come to pass, caused a loss to the quality of life of the Plaintiffs; it had detracted from it. This must be considered such a harm to individual rights (Section 75 of the Civil Code) which had to be compensated by non-financial damages.”

The court ordered the payment of HUF 500,000 as damages for non-material loss.

(Decision of Capital Court, 47. Pf. 20909/2003/8.)

4) The plaintiff participated in a three day long, “carnival non-stop” bus tour, organized by the Defendant of the first degree; Defendant to the second degree provided the bus to the trip. According to the catalogue, the autobus was modern, equipped with video, buffet and toilet. The tour price was HUF 22,000. At the time of returning, the tour guide informed the travelers that the bus will stop every three hours to allow for bathroom breaks, as the toilet on the bus is not useable. In between two stops, the Plaintiff traveler was seized by stomach cramps; he repeatedly requested the bus to stop or to have the toilet reopened. Both the driver and the tour guide refused: They cannot stop in a tunnel or on the highway, and the toilet on-board the bus may not be used. Due to the worsening cramps of the traveler, he was forced to perform the necessaries on the seat. The bus stopped in a parking lot where the Plaintiff changed clothes, cleaned himself up. Thereafter, they opened the on-board toilet. The traveler spent the remainder of the trip on the toilet.

The court of the first instance refused the Plaintiff’s claim for damages. It has justified this decision by reasoning that Plaintiff could have gone to the bathroom at the last stop, and in addition, under normal circumstances, an adult can be expected to maintain control for at least half an hour. If he is unable to do so, the resulting situation deviates from normal, “events of this nature, specifically due to their extraordinary nature, are practically impossible to ward off, thus, from the point of view of the Defendants, are to be considered force majeure events.”

The court of the second instance (Capital Court) reversed the decision of the court of the first instance. The Defendant of the first degree (the tour operator) breached the contract, thereby causing personal injury.

Dr. Salamon András ügyvéd · advocate

Since entering into the agreement, the travelers did not receive notification concerning the non-usability of the toilet on-board the bus. Even if there had been such a notification, “neither party could have construed it in such a way as to assume that the toilet cannot be used in case of an emergency situation, where the urge cannot be controlled. An interpretation of this nature is completely absurd. If such interpretation must be attributed to the indicated provision regardless, a situation contrary to the fundamental principles of the travel agreement would have resulted.”

“A specific mandate of the on-board tour guide is to be of assistance to the traveler; when a traveler finds himself in an emergency, he is to handle matters on the traveler’s behalf. Obviously, if the on-board travel representative does not abide by the above referenced mandate, the consequences of his behavior must be construed as a breach of contract.”

The liability of the Defendant of the first degree is based on breach of contract, whereas the liability of the Defendant of the second degree is based on liability for damages caused outside of contract.

The court ordered each of the defendants to pay HUF 160,000 for non-material loss.

(Decision of Capital Court, 47. Pf. 27173/2004/3.)

I have to state that Hungarian tour operators cannot take advantage of the opportunities afforded by the EU Directive which permits the “reasonable” limitation of liability. The association of tour operators and travel agencies, as the professional-societal partner of the legislature, did not request the ministry to address this issue within the law. As a result, courts may order damages of any amount; they are not constrained by any law to do so.

V. Impossibility of performance

Due to the December 2004 southeast-Asian tsunami, quite a number of travelers who had already paid their fees to participate remained at home; the operators canceled many trips. This event brought to the surface serious issues of legal interpretation with the tour operators, as they did not return the participation fees already paid, claiming that as a force majeure event, it must be governed by Section 312 of the Civil Code: if performance becomes impossible as a result of an event for which neither party is responsible, the agreement becomes null and void. Thus, the agreement seizes to exist, the entitled party cannot demand performance. Every Civil Code commentator is of the opinion that the contract seizes to exist with regard to the future, and it does not result in the restoration of the original status quo. Having said that, services already provided must be accounted for by all parties.

If the entitled party, that is, the traveler, paid an advance, he is due to be reimbursed; if the service can be subdivided, and partial performance had occurred, service that had already been provided cannot be reclaimed. For example, in the case of a traveler who has already journeyed to his destination, the price of the airline ticket – as a service that had already been utilized – can no longer be demanded back; however, if the hotel had collapsed, a reimbursement of the price of the service that had not yet been utilized may be requested. It was on this point that the agencies misinterpreted not just the law, but their own activities as well. They claimed: by reserving (and paid for) the accommodation, meals, programs, etc, they had already performed the travel agreement, therefore, as a performed service, the traveler is owed no reimbursement.

Dr. Salamon András ügyvéd · advocate

As I have written above, the travel contract is to be construed as a business contract. This also means that the entrepreneur (the tour operator) only performs if he produces the results stated in the agreement, that is, if the travelers get the services that had been agreed upon in the agreement, with the ordering party (the traveler) obliged to pay the fee.

Government Decree No. 214/1996, in many places (Sections 1, 12, 13) refers back to the Civil Code.

            Paragraph (6) of Section 12 of the decree excludes entrepreneur liability in case of damages resulting from the non-performance or faulty performance of the agreement in case of a force majeure event. Thus, when a force majeure event occurs, the entrepreneur is not liable for the resulting damages: for material damages, such as a traveler’s injuries, death, disease, harm to property; non-material damages, such as the loss of joy over the trip.

            In connection with the tour price, paragraph (4) of this same Section must be applied, which refers back to the Civil Code (the impossibility of the agreement, of course, refers to the impossibility of performance). Thus, on the one hand, the rules concerning the impossibility of performance as stipulated in the general provisions of the Civil Code must be applied, and on the other hand, the rules detailed under the part on specific agreements concerning the contract for professional services that have become impossible to perform.

The travel agreement is entered into by and between the traveler and the tour operator, therefore its performance commences at the moment of departure. Contracts with collaborator of the tour operator are outside the bounds of this relationship. These already in-force collaborator contracts (for hotels, transport agencies, etc.) can be construed at most as preparation for the travel agreement, but under no circumstances as partial performance of the travel agreement. (Since Section 391 of the Civil Code states that the entrepreneur performs the work at his own expense).

The Ministry of Economy and the travel advocates have consistently represented this point of view, and in the end, they have managed to persuade the errant travel agencies without having to resort to legal action.

And finally: the legislative authority felt the need to unambiguously settle this question within the law. According to the amendment that came into force this year, if the traveler cancels because “the destination or the route that leads to it involves an area where travel is not recommended by the Foreign Ministry”, then the cancellation cannot be attributable to the traveler, and the already paid advances, fees for participation are to be reimbursed to the traveler.

VI. Operator’s duty of information

The government decree, similar to the EU guideline, lists, in an exemplary fashion, what the traveler must be informed of. The language of the Civil Code is much more comprehensive: the contract comes into force when the parties agree over every issue that had been designated as significant by either party [Paragraph (2) Section 205].

Numerous legal disputes have arisen from the fact that a foreign “X” star hotel had provided less service than the similar Hungarian one. The tour operators defended themselves by stating: their brochures have contained the warning that the number of stars given was pursuant to local standards. However, courts have not appreciated this, and condemned those offices which did not provide precise information concerning what a traveler could expect in foreign hotels.

Dr. Salamon András ügyvéd · advocate

The Ministry of Economy has recognized this, and the amendment that has come into force already binds the agencies that if the rules relating to comfort that are in place at the foreign accommodation are different from those of the Hungarian ones, they have to inform the travelers of this, including what the domestic equivalent of the different comfort level would be.

VII. The future: strict state monitoring or the free bargain of the parties concerning contractual terms?

As I have briefly summarized in the introduction, the dilemma of the legislative authority remains unchanged: should the state step up with even greater strength on behalf of the consumer, or should it entrust the matter to the interested parties?

I feel that in Hungary, there is still a need for government authority on behalf of the consumers; on the one hand, because the consumer protection advocacy organizations are not exactly on top of the situation, on the other hand, the agencies are still inclined to interpret the law in a unique manner. As a result of this, even today, the traveler can be still considered vulnerable. One great lack of the Hungarian regulatory framework is that operators’ ability to levy legal sanctions is limited: in case of a serious offence, they can suspend or cancel the company, but they cannot levy a monetary fine.

The protection of the law shall remain necessary for travelers, and the coercive power by the agencies shall also remain, as long as travelers fail to learn their rights completely (and obligations, of course), and consumer protection advocacy organizations are not securely on their feet, both financially as well as professionally.

All in all, with regard to trip cancellations, my opinion is that this is the area where the sanction of cancellation should be entrusted to the parties.