Argh! Possible CCJ pending - help please! UPDATE

arcon5

It court could class it as a 'disguised penalty' as they did with a recent case involving Ashbourne (?) gym

Crazy_Jamie

arcon5 wrote: »

It court could class it as a 'disguised penalty' as they did with a recent case involving Ashbourne (?) gym

Again, how? It is a contract for services. The price being claimed is the price agreed for those services, and nothing more. It was a term of the contract originally was that the fees were payable in advance, and therefore is entirely distinct from the case you're referring to because in that case the fees were payable in instalments and became payable in a lump sum only when there was a late payment or the contract was terminated early. Hence why they were held as being penalty clauses. That's not the situation here; the price claimed was always the price to be paid in advance, and there is no term or payment that is a 'penalty'.

unholyangel

Crazy_Jamie wrote: »

Again, how? It is a contract for services. The price being claimed is the price agreed for those services, and nothing more. It was a term of the contract originally was that the fees were payable in advance, and therefore is entirely distinct from the case you're referring to because in that case the fees were payable in instalments and became payable in a lump sum only when there was a late payment or the contract was terminated early. Hence why they were held as being penalty clauses. That's not the situation here; the price claimed was always the price to be paid in advance, and there is no term or payment that is a 'penalty'.

Unfair Contract Terms Act. If the amount payable is not a genuine pre-estimate of loss that results from a breach of contract by the consumer, then it is likely to be found as a penalty and as such, would be unenforceable. http://www.oft.gov.uk/shared_oft/reports/unfair_contract_terms/oft311.pdf - Group 5 in particular and also particularly from Group 6:

Schedule 2, paragraph 1, states that terms may be unfair if
they have the object or effect of:
(f) … permitting the seller or supplier to retain the sums paid for
services not yet supplied by him where it is the seller or
supplier himself who dissolves the contract.

The other party must also make efforts to mitigate their losses. They cannot simply say you broke the contract, you're responsible for the whole value of the contract - unless that is what their losses are genuinely.

If the company in question have taken on another child in the place the OP's kid would have had, they cannot claim for the full value of the remainder of the contract! Oh and generally, they would have needed to make the consumer aware under what grounds they may cancel the contract - if they have not, again it goes into unfair contract terms.

We're not saying the OP doesn't owe them anything. We're just saying to double check that it is a genuine loss and that they havent simply charged the full amount without taking the appropriate steps necessary when a breach of contract occurs.

Also, if the OP has anything post dated (especially before the court summons) saying that they had made an offer to the childcare group, they could use this as evidence that they have been reasonable but the supplier has not and could effectively lead to the childcare group being responsible for any consequential loss suffered by the consumer.

A breach of contract does not necessarily invalidate the whole contract which is why it is important to make clear to the consumer what would be grounds for termination and - if possible - give them notice of termination.

Unless the OP isn't telling us the full story and has a history of being late with payments?

Crazy_Jamie

unholyangel wrote: »

Unfair Contract Terms Act. If the amount payable is not a genuine pre-estimate of loss that results from a breach of contract by the consumer, then it is likely to be found as a penalty and as such, would be unenforceable. http://www.oft.gov.uk/shared_oft/reports/unfair_contract_terms/oft311.pdf - Group 5 in particular and also particularly from Group 6

You're misunderstanding what a penalty clause is. Taking your link, this is what it says at the start of Group 5:

Schedule 2, paragraph 1, states that terms may be unfair if they have the object or effect of:
(e) requiring any consumer who fails to fulfill his obligation to pay a disproportionately high sum in compensation.

This is not the case here. The company isn't saying 'you've failed to pay up front, so you owe us an extra £100'. That could potentially be a penalty clause. But they are only pursuing the amount originally agreed for the services. There are not imposing any extra amount or obligation due to the breach, and therefore there cannot be a penalty clause.

Your subsequent points about mitigation of loss are entirely correct, and that ultimately is the real issue. I'm entirely behind you on that point. I'm just challenging the assertion that there is a penalty clause in this situation, because there quite clearly is not.

unholyangel

Crazy_Jamie wrote: »

You're misunderstanding what a penalty clause is. Taking your link, this is what it says at the start of Group 5:
This is not the case here. The company isn't saying 'you've failed to pay up front, so you owe us an extra £100'. That could potentially be a penalty clause. But they are only pursuing the amount originally agreed for the services. There are not imposing any extra amount or obligation due to the breach, and therefore there cannot be a penalty clause.

Your subsequent points about mitigation of loss are entirely correct, and that ultimately is the real issue. I'm entirely behind you on that point. I'm just challenging the assertion that there is a penalty clause in this situation, because there quite clearly is not.

I think perhaps you misunderstand. The gym case someone referred to earlier concluded that requiring someone to pay the entire balance remaining when it was not a true reflection of actual loss was a penalty and as such, unenforceable. The court ruled on 1 month membership to be paid.

We're not referring to the OP's case in particular (well i'm not anyway) more that in any contract, where there is a term that makes you liable for the remainder of the contract when it is not a genuine pre-estimate of your actual loss, the term will likely be found to be unfair. That doesn't mean you don't have to pay anything necessarily, just that you will only be liable for losses that have occurred as a result of your breach and no more. And what courts look at when deciding if a term is unfair or not is not if it is unfair in one particular example, but if it has the potential to be unfair.

As you say, the real question is......what actual loss have they incurred as a result of the OP's breach and what have they done to mitigate that loss?

OP may well benefit from getting a copy of the contract she had with the childcare group and calling solicitors in her area, enquiring as to whether any of them offer free half hour consultations.

If the contract is in jargon......well it might be the OP's lucky day.

arcon5

This isn't the case i'm referring to, however this is a case between the OFT and Ashbourne Management Services Ltd, relating to early termination of contracts of varying length.

http://www.hendersonchambers.co.uk/__data/assets/pdf_file/0019/2296/OFT-v-Ashbourne.pdf

The relevant point in particular being this:

It was also held that a term requiring the immediate payment of all future monthly instalments upon early termination without a discount for accelerated receipt was unfair and a penalty at common law. Similar terms which provided for future instalments to become payable immediately with a 1% or 5% discount for accelerated receipt were also held to be unfair and penalties.

In this case however it is the consumer terminating the agreement. In ops case it is the company terminating the contract.

As already said, a penalty isn't necessary a value of contracted price + an amount, but can be insisting on full and immediate payment of services that are not or will not be provided.

There case I originally referred to was involving a woman who fell pregnant and the gym in which the gym was awarded an amount equal to the notice period + costs, with the judge stating costs was only being awarded because no offers or attempts to make payment of any sum was made by the member. Had a fair offer been made costs probably would not have been awarded.

unholyangel

Summary of the case arcon quoted above (ashbourne) can be found on OFT's site here:

And interestingly (to the OP anyway) is this:

The party in breach must be given a reasonable time to remedy the breach, before being required to pay liquidated damages. The judge ruled that contracts 1 to 10 contained penalties, and not liquidated damages clauses, for example because they allowed the gym to end the contract for relatively trivial breaches by the consumer (such as being late with a payment), or did not give any discount for the benefit to the gym of receiving the payment early.

Did they give the OP the time to remedy the breach? And again going back to what I said earlier.....did they make the OP aware on what grounds they could terminate a contract? Even so, the high court says a late payment is a trivial breach.

Crazy_Jamie

unholyangel wrote: »

I think perhaps you misunderstand. The gym case someone referred to earlier concluded that requiring someone to pay the entire balance remaining when it was not a true reflection of actual loss was a penalty and as such, unenforceable. The court ruled on 1 month membership to be paid.

I know what the gym case said; I paraphrased what it said in a previous post. The vital point that seems to be missed by everyone suggesting that there could be a penalty clause in this case is this;

OP wrote:

Last summer I owed my childcare provider £400 (fees payable in advance)

The £400 being payable in advance was a standard term of the contract. A penalty clause is something that comes in to effect once there has been a breach. To use the gym example, the membership fee was payable monthly, but once there had been a breach it became payable in one lump sum. That is not what has happened here, because the OP had to pay the amount up front before they had breached the contract. Therefore that particular term is not a penalty clause.

unholyangel wrote:

We're not referring to the OP's case in particular (well i'm not anyway)

Well, you did, because you initially responded to my question as to how the term in this case can be a penalty clause with a link relating to penalty clauses. But nevertheless, it has never been my intention to get into a general discussion about penalty clauses. I was simply making the point that there isn't a penalty clause in this case. That's all.

On a side note, I'm not talking about the fees added on to the by the debt collection agency. They're obviously a separate issue to the amount due under the contract, though to be fair I don't think anyone has mixed the two up. I'm just mentioning it for clarity's sake.

arcon5 wrote:

As already said, a penalty isn't necessary a value of contracted price + an amount, but can be insisting on full and immediate payment of services that are not or will not be provided.

You're right, but only if that full and immediate payment is demanded as a result of the breach, as opposed to a previous arrangement paying the fees in instalments or similar (which normally happens in a gym contract). That's the whole point; the full amount hasn't been demanded here in one go because of the breach. It's been demanded in one go because that was the original arrangement for payment of the contract. Hence why this is a mitigation of loss point, and not a penalty clause point.