It has been widely debated in Germany whether an air carrier is legally allowed to claim full payment of the ticket price from a passenger as early as at the time of the flight booking. Some legal experts have argued that an airline would be limited to request a percentage of the ticket price as down payment at the time of booking.
On February 16 2016 the Federal Court of Justice had to decide on three similar cases brought by a consumer association against two domestic carriers – Condor (X ZR 98/14) and Lufthansa (X ZR 97/14), and one web portal selling flights operated by a company-owned airline, TuiFly, or other airlines (X ZR 5/15).
Invariably, the lower courts had subjected the respective pre-payment clauses contained in the air carriers' conditions of carriage to a control of general terms and conditions (ie, a test of reasonableness). However, the interpretation of 'reasonableness' varied tremendously and the lower courts have handed down contradicting judgments on this matter in recent years.
The plaintiff argued that clauses in the conditions of carriage demanding full payment at the time of booking are ineffective, as they unreasonably disadvantage the passenger. Under law a contract of carriage would qualify as a contract to produce a work entailing obligations for the contractor to perform its work and services in advance. The plaintiff put forward two main arguments:
- the insolvency risk would be passed on to consumers if an airline would cease operations due to insolvency after payment, but before the operation of the booked flight; and
- the consumer would lose his or her leverage to withhold payment to enforce the promised performance.
However, the court held that a pre-payment clause would not present an unreasonable disadvantage to the passenger and would not be contrary to the fundamental principles of German law. Although the contract of carriage would be generally considered to be a contract to produce a work, the respective statutory provisions and guiding principles for this type of contract can be applied only with considerable restrictions to a contract of carriage.
In contrast, back in 2012 the court had decided that tour operators can ask for a certain down payment from travellers only at the time of the booking. However, the court emphasised that there are major differences between contracts of carriage and travel contracts, which would allow for the two kinds of contract to be treated differently. Moreover, the possible disadvantages for passengers are not so important as to justify a reorganisation or changeover of worldwide standards established by the International Air Transport Association.
Although the decision has not yet been published in full, the court's understanding, as laid down in the press release, reveals that the court provides a convincing solution confirming that the common practice of air carriers to demand the full ticket price at the time of booking is in full compliance with German law. Pre-payment clauses in conditions of carriage are generally valid and the rights of passengers are adequately protected.
According to the law, the provisions for a contract to produce a work were primarily drafted to govern building and construction contracts. The guiding principles for this type of contract cannot therefore be applied readily to a contract of carriage. It is to be hoped that the court will continue to extend and transfer this argument to other related areas such as the refund of ticket prices under German law.
For further information on this topic please contact Katja Helen Brecke at Arnecke Sibeth Rechtsanwaelte by telephone (+49 69 97 98 85 0) or email (email@example.com). The Arnecke Sibeth website can be accessed at www.arneckesibeth.com.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.