Xmas Day Lunch cancellation. Refund rights?

Money_Grabber13579

Maybe it’s just me but I don’t understand the argument that the hotel should either be reimbursed the costs or its profit, not both. In this case, all of the costs will likely have been incurred, whether the OP turned up to dine or not - food will have been bought, prepared, probably cooked, an appropriate number of staff will have been retained etc.

To illustrate why I don’t understand this argument, the hotel charges £125 per person. Let’s say all its costs in providing that meal are £80. That leaves it with a £45 profit.  What I can’t understand is the argument which then seems to say that the hotel should either be compensated its costs (£80) or its profit (£45). That argument would make sense if some/all of the costs could be avoided by the cancellation but the reality here is that cancelling so late leaves the hotel no option to avoid any of the costs (maybe they need slightly less hot water to wash unused dishes). 

When contracts are broken, the idea is to put the parties back in the position they would have been in had the contract not been breached. For the hotel, that means providing them with revenue of £125 (because that is what they would have earned), but that should be adjusted down if the hotel was able to make cost savings as a result i.e. the hotel should not be able to make additional profit from the cancellation. But the timing of the cancellation means that it is extremely likely that there will have been no opportunity for cost savings and so the OP is on the hook for £125 per head. At least, that’s how I would see it.

the_lunatic_is_in_my_head

Money_Grabber13579 said:

When contracts are broken, the idea is to put the parties back in the position they would have been in had the contract not been breached.

That's my understanding also and I agree with this general principle, the CMA says (it's easier to copy/paste than explain in my own words, with apologies for the poor formatting)

5.13.3 Where customers bring the contract to an end without any justification, and

the trader suffers loss as a result, they cannot expect a full refund of all prepayments.

But a term under which they always lose everything they

have paid in advance, regardless of the amount of any costs and losses

caused by the termination, is at risk of being considered an unfair financial

sanction – see paragraph 6 of the Grey List, discussed in paragraphs

5.14.1 of the guidance onwards.

5.13.4 The Grey List term quoted above may be read as indicating there is no

objection to a substantial financial sanction for pulling out of the contract

that applies equally to both parties. However, in practice such an ostensibly

‘balanced solution’ is unlikely to achieve fairness. Whether or not such a

provision is fair depends on a number of factors, and in particular on

whether it confers any real benefit on the consumer, comparable to that

enjoyed by the trader. A ‘balanced’ solution is likely to be acceptable only

where there is a roughly equal risk to each party of losing out as a result of

the other’s cancelling. In many forms of contract, the business has no

particular interest in being able to end the contract, and therefore its

agreeing to accept a severe financial sanction for doing so does not

‘balance’ fairly a term imposing a heavy sanction on the consumer for

cancelling.

5.13.5 Fairness is more likely to be achieved for such a term by ensuring that it

does not go beyond the ordinary legal position. Generally, where the

contract comes to an end because of the fault of the consumer, the

business is entitled to hold back from any refund of prepayments what is

likely to be reasonably needed to cover either its net costs or the net loss of

profit resulting directly from the default (see paragraph 5.14.3 below on the

need to avoid double counting). There is no entitlement to any sum that

could reasonably be saved by, for example, finding another customer.

5.13.6 Alternatively, there may be no objection to a prepayment which is set low

enough that it merely reflects the ordinary expenses necessarily entailed

for the trader. A genuine ‘deposit’– which is a reservation fee not an

advance payment – may legitimately be kept in full, as payment for the

reservation. But such a deposit will not normally be more than a small

percentage of the price. A larger prepayment is necessarily more likely to

give rise to fairness issues, for instance being seen as a disguised penalty.

My understand of it is they can either claim their cost or their loss of profit but loss of profit comes with the caveat that it must be mitigated by finding another customer (obviously not possible in this instance). 

Always happy to be corrected if I'm misunderstanding something.  

PHK

I think you've misunderstood. 

This is about contract terms and whether a party ALWAYS loses out (eg when cancelling) which would be unfair.  Not whether in a specific case that particular consumer is entitled to a partial refund. There's a difference. 

The quote you've posted has been mentioned before and the interpretation has always been  controversial. It's something that ought to be tested in the courts. 

These sort of discussions and speculations don't really help the OP.They were given useful advice early on. 

born_again

the_lunatic_is_in_my_head said:

Money_Grabber13579 said:

When contracts are broken, the idea is to put the parties back in the position they would have been in had the contract not been breached.

That's my understanding also and I agree with this general principle, the CMA says (it's easier to copy/paste than explain in my own words, with apologies for the poor formatting)

5.13.3 Where customers bring the contract to an end without any justification, and

the trader suffers loss as a result, they cannot expect a full refund of all prepayments.

But a term under which they always lose everything they

have paid in advance, regardless of the amount of any costs and losses

caused by the termination, is at risk of being considered an unfair financial

sanction – see paragraph 6 of the Grey List, discussed in paragraphs

5.14.1 of the guidance onwards.

5.13.4 The Grey List term quoted above may be read as indicating there is no

objection to a substantial financial sanction for pulling out of the contract

that applies equally to both parties. However, in practice such an ostensibly

‘balanced solution’ is unlikely to achieve fairness. Whether or not such a

provision is fair depends on a number of factors, and in particular on

whether it confers any real benefit on the consumer, comparable to that

enjoyed by the trader. A ‘balanced’ solution is likely to be acceptable only

where there is a roughly equal risk to each party of losing out as a result of

the other’s cancelling. In many forms of contract, the business has no

particular interest in being able to end the contract, and therefore its

agreeing to accept a severe financial sanction for doing so does not

‘balance’ fairly a term imposing a heavy sanction on the consumer for

cancelling.

5.13.5 Fairness is more likely to be achieved for such a term by ensuring that it

does not go beyond the ordinary legal position. Generally, where the

contract comes to an end because of the fault of the consumer, the

business is entitled to hold back from any refund of prepayments what is

likely to be reasonably needed to cover either its net costs or the net loss of

profit resulting directly from the default (see paragraph 5.14.3 below on the

need to avoid double counting). There is no entitlement to any sum that

could reasonably be saved by, for example, finding another customer.

5.13.6 Alternatively, there may be no objection to a prepayment which is set low

enough that it merely reflects the ordinary expenses necessarily entailed

for the trader. A genuine ‘deposit’– which is a reservation fee not an

advance payment – may legitimately be kept in full, as payment for the

reservation. But such a deposit will not normally be more than a small

percentage of the price. A larger prepayment is necessarily more likely to

give rise to fairness issues, for instance being seen as a disguised penalty.

My understand of it is they can either claim their cost or their loss of profit but loss of profit comes with the caveat that it must be mitigated by finding another customer (obviously not possible in this instance). 

Always happy to be corrected if I'm misunderstanding something.  

I think you just grasped the point other people are making.

End of the day, the party breaking the contract should stand the loss. Some times the law is going to far & not protecting the party that has the actual loss.
Seems to me far to many people are simply out to avoid having to pay for something they agreed to simply because they think they have the right & the retailer should no matter what stand the loss.

A sliding scale such as many holidays have, would be a good place to start with a rewrite of the law. 

What is sad is the OP was last seen on 01-01, with the thread 4 pages long & yet never posted a answer to the questions posed, or simply added a post. 🤷‍♀️

Pollycat

born_again said:

What is sad is the OP was last seen on 01-01, with the thread 4 pages long & yet never posted a answer to the questions posed, or simply added a post. 🤷‍♀️

I think it's very sad too.

The OP's request for a refund had already been rejected by the hotel when he posted this thread and he just wanted advice on how he 'might change the hotel’s mind'.
Instead he got pages and pages of disagreement about legal and moral situations.

Does anyone think they helped the OP?
I wish I could have helped with the sort of advice the OP clearly wanted.
But I couldn't.
So I just read all these posts... 
Heaven knows what the OP thought.

Hoenir

the_lunatic_is_in_my_head said:

The endless rabbit hole of hypotheticals only comes from odd comments being made about restaurants not making money on food or waiting to see if Sally breaks a plate before the end of the year to determine whether a profit was made. 

Rabbit holes?  

the_lunatic_is_in_my_head

born_again said:

End of the day, the party breaking the contract should stand the loss. 

I agree but the above says "or" rather than "and".

PHK said:

I think you've misunderstood. 

This is about contract terms and whether a party ALWAYS loses out (eg when cancelling) which would be unfair.  Not whether in a specific case that particular consumer is entitled to a partial refund. There's a difference. 

The quote you've posted has been mentioned before and the interpretation has always been  controversial. It's something that ought to be tested in the courts. 

These sort of discussions and speculations don't really help the OP.They were given useful advice early on. 

I understand what it is I don't think it's possible to give guidance on every specific issue that may occur. 

I'm not sure by which measure you refer to controversial? If you mean on here I don't think that means much (us regular posters on here are a very small group of people), if you mean another credible body has stated the CMA's interpretation is controversial fair enough. 

MeteredOut

I’m late to this, and perhaps this was already mentioned (and lost in the noise), but did the OP find out if the event was completely sold out on the day? If, not, then the “they could have sold the table to another party” holds less weight.

But, IMO, they shouldn’t expect any refund.

ArbitraryRandom

the_lunatic_is_in_my_head said:

RefluentBeans said:

Apparently the manager should get out his Excel sheet and work out how much each patty, fry, gherkin, and drink would cost and then take that off and refund the difference. <sarcasm>

I agree - the whole debate is rather silly. 

The only thing silly here is a lack of understanding of how businesses work, a member of staff will have drawn up a menu whilst looking at what offers their suppliers are running for Dec. 

The menu will have been costed and then a margin applied. 

Simplistically speaking, gross profit is how much you have left after cost of sales (in this case food), net profit is how much you have after all overheads (staff, rent, energy, advertising, etc, etc), you apply a high enough gross profit to ensure you cover all the non-direct overheads, typically 65% for restaurants (you can Google it if you don't believe me). 

For set menus it will be averaged, obviously some items are more expensive to provide which is why you often see a supplement charge on set menus for dishes such as steak. 

What are you expecting, them to pluck a figure out of thin air to charge for lunch? 

I've been reading this thread in fascination - I have no experience in hospitality and rarely eat out so don't feel like I have much to contribute... but I do have a question. 

With the above, assuming it is as you say, would that not be calculated based on an assumed number of customers (especially for an event like Christmas where they can assume a certain level of demand and with staffing etc based on confirmed bookings close to the day). 

If they have maybe 20 people booked in for lunch, planned overheads accordingly, and had 5 cancel with no notice, then that could be 1/4 of their estimated 'gross profits' gone with no significant change to their net costs, so how do they calculate the refund - Based on the rate of profit they 'should' have earned for the day, or the rate that they earned without those sales? IYSWIM

the_lunatic_is_in_my_head

ArbitraryRandom said:

the_lunatic_is_in_my_head said:

RefluentBeans said:

Apparently the manager should get out his Excel sheet and work out how much each patty, fry, gherkin, and drink would cost and then take that off and refund the difference. <sarcasm>

I agree - the whole debate is rather silly. 

The only thing silly here is a lack of understanding of how businesses work, a member of staff will have drawn up a menu whilst looking at what offers their suppliers are running for Dec. 

The menu will have been costed and then a margin applied. 

Simplistically speaking, gross profit is how much you have left after cost of sales (in this case food), net profit is how much you have after all overheads (staff, rent, energy, advertising, etc, etc), you apply a high enough gross profit to ensure you cover all the non-direct overheads, typically 65% for restaurants (you can Google it if you don't believe me). 

For set menus it will be averaged, obviously some items are more expensive to provide which is why you often see a supplement charge on set menus for dishes such as steak. 

What are you expecting, them to pluck a figure out of thin air to charge for lunch? 

I've been reading this thread in fascination - I have no experience in hospitality and rarely eat out so don't feel like I have much to contribute... but I do have a question. 

With the above, assuming it is as you say, would that not be calculated based on an assumed number of customers (especially for an event like Christmas where they can assume a certain level of demand and with staffing etc based on confirmed bookings close to the day). 

If they have maybe 20 people booked in for lunch, planned overheads accordingly, and had 5 cancel with no notice, then that could be 1/4 of their estimated 'gross profits' gone with no significant change to their net costs, so how do they calculate the refund - Based on the rate of profit they 'should' have earned for the day, or the rate that they earned without those sales? IYSWIM

They could only have 20 for lunch with a waiter for each table or they could have 200 covers with minimal staff, ultimately the event will have been costed and if the hotel have that obligation to offer something you'd expect them to be honest about it really.

If they wasn't then that's what the court process is for, not that would advise OP to go that far based on my thoughts. 

All this aside hotels are an area where high service is often expected, I'm surprised, given the circumstances, they didn't just offer OP 50% off a meal in the next 3 months, it would fill a table during a slower period and retain a customer.

I'm sure some might say who wants a customer who does this but the circumstances are exceptional, I'm sure many people wouldn't go out for a jolly up when a close member of family has just been admitted to hospital.