Two recent and separate judgements given by the First Hall, Civil Court confirmed the principle that contracts entered into shall have the force of law for the contracting parties. Such agreements cannot be changed by unilateral declaration of one of the parties.
This principle was examined in the case ‘Mallard Co. Ltd vs Edrichton Holidays Limited’ decided on the 28th January 2022 and in the case ‘Sun Route Hotels Limited et vs Edrichton Holidays Limited’ decided on the 3rd February 2022.
The operators of the Hotel Santana, the Grand Hotel Excelsior, the Sunflower Hotel, the Gillieru Harbour Hotel, the Golden Tulip Vivaldi Hotel, the Ramla Bay Resort, and the Hotel Valentina, sued the company Edrichton Holidays Limited for outstanding amounts of €213,226.98 owed to them collectively whilst the operator of the Qawra Palace Hotel sued Edrichton Holidays Limited for the sum of €193,219.16.
The hotel operators had entered into agreements with the defendant tour operator company, titled ‘Agreement for the marketing and use of tourist accommodation’, which established the juridical relationship and the terms of the agreement between them. The arrangement was that a number of hotel rooms would be booked by the defendant company, which would in turn sell the room bookings to tourists or tour operators. The agreements established, inter alia, that “the Tour Operator will pay the Owner/Manager for the arrangements in accordance with the terms set out herein and only for those services shown on the booking voucher”.
The defendant company argued, amongst other defences, that a substantial amount of the sums claimed by the plaintiff companies were not due, as the sums represented bookings of a foreign Tour Operator ‘Lowcostbeds.com Limited’ which had been placed into administration. It argued that the plaintiff companies themselves had accepted, due to the booking vouchers provided as well as the scope of the Marketing and Use agreement, that these bookings should never have been paid by the defendant company.
It, however, emerged that the booking voucher or ‘Confirmation Voucher’ which was sent to each hotel following any tourist booking included a condition which had been unilaterally inserted by the defendant company contrary to the terms and conditions of the original agreements concluded with the plaintiffs.
Our courts held that it is a principle crystallised by law and jurisprudence that the agreement signed between the parties should have the effect of law between them (Pacta sunt servanda) and cannot be changed or amended unilaterally.
It was noted that in the contract, there was a clear agreement that the defendant company had to pay the plaintiff companies, and aside from this, the contract also established the time period within which such payment had to be made. The conditions made it clear that the parties were to be bound by those conditions and that the contract constituted the entire agreement between the parties, and that there are no separate written or oral agreements. With reference to Article 1002 of the Civil Code, the court concluded that such inequivocal conditions left no room for doubt. It was also clear that the arrangements made by the defendant company with foreign or external tour operators were completely res inter alios acta to the plaintiff companies.
Our courts held that the fact that the plaintiffs never objected to what was written on the confirmation vouchers did not mean that the plaintiffs were accepting any change in the conditions agreed to between the parties or in any way renouncing to their rights. The disclaimer in question was nothing more than a unilateral declaration inserted by the defendant company.
It was noted further that until the foreign Tour Operator ‘Lowcostbeds.com Limited’ was operating, the sales and payments were being carried out in a regular manner by the defendant company which had never questioned the payments effected and who had to be making them. This position changed drastically once the defendant company was faced with the situation that the third-party company had ended up in administration in the UK.
It was clear that the arguments raised by the defendant company could not be upheld as the defendant company was trying to escape its contractual obligations. Such a defence should never have been raised by the defendant company which enjoyed a relationship of commercial trust (fiducja kummercjali) with the plaintiffs, which trust was clearly violated by the defendant company when trying to avoid paying what was due.
In both cases, the defendant company was declared a debtor of all the plaintiff companies for the entire amounts claimed together with interest and costs.
Lawyers Dr. Antoine Naudi and Dr. Tyrone Grech represented the plaintiffs in both cases.
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