The Court of Milan has handed down a judgment which opens new perspectives in case of cancellation of a non-refundable hotel booking, a matter which until recently seemed to be an “open and short” case against customers.
A customer of Baglioni Hotels, a well-known chain of hotels, made on 1 October 2016 a non-refundable booking for four luxury rooms at their Rome hotel for the nights from 23 December to 2 January 2017 at a special discounted rate, for which a substantial down payment was simultaneously made.
Four days after the booking, the customer cancelled his booking and requested the return of his payment.
The hotel has refused it and the customer issued proceedings against it, claiming the return of his payment.
The Court Decision
The Court has first excluded that the payment in issue be treated as a penalty. It has then also excluded that it could be treated as non-refundable earnest.
The Court has treated the customer’s termination as a proposal for a consensual termination accepted by the hotel.
The Court has eventually held that the creditor (the hotel) has a duty to behave fairly and in good faith, using the diligence which is needed to avoid or limit the negative effect to his debtor.
On this basis, the Court has found that the hotel, by not even trying to prove that the hotel had tried to rebook the rooms to other customers, was not entitled to keep this amount paid to it by its customer.
Was the payment a penalty?
The Court decision that the payment in issue was not a penalty seems to have to be shared, since it was paid only under the heading of “down payment”.
Was the payment an earnest?
The Court decision seems convincing also when it has affirmed that it was not even an earnest, what would in fact have had a purpose similar to liquidated damages, what does not result from a mere down payment.
Was it then a consensual termination?
The Court decision is not convincing as to its finding that the cancellation of the booking was a proposal for a consensual termination, accepted by the hotel.
In fact, one of the terms of the customer’s proposal was the return of his payment, what the hotel has refused to do.
No consensual termination seems then to follow from such a conduct.
A Duty of the Creditor to Act in Order also not to Affect the Legitimate Interest of the Debtor
The Court’s decision was based on a duty which has rather recently created by case law based on the basic principles of contract law and of the constitutional duty of social solidarity.
Contrary to a very old and well-established practice, the creditor’s conduct must now comply, under Italian law, with the duty to act, while exercising its rights, fairly, in good faith and not affecting the legitimate interest of its debtor.