Last month the Canadian Transportation Agency ruled that Swiss had to honor first class tickets issued at a deep deep discount originating in Myanmar.
I’ve never sued to have a deal enforced, I’ve always wanted to be a part of a deal when an airline or hotel chooses to honor it, I do not feel at all badly throwing my hat in the ring for that. Writing about it isn’t ‘encouraging folks to do bad things’. It’s sharing something exciting that may lead to a once-in-a-lifetime opportunity, the way it has for others in the past.
Many tickets were honored under this deal, but tickets issued on Swiss ticket stock were mostly cancelled. Some consumers pursued the issue with the Canadian government and won.
Last week reader David J. sent me a copy of the response from Swiss appealing the ruling. (.pdf) (Update: I’ve now linked to a version of the file that includes only the first five exhibits by request of individuals involved whose email addresses were published in exhibit 6.)
SWISS suggests that since the fare was discussed online as a mistake, it was some form of conspiracy to take advantage of them. I’m not sure their claims in this regard are especially legally relevant (and in fact several of their specific claims are wrong) but rather framed to elicit sympathy — to make Canadian authorities want to reconsider their ruling.
Even as SWISS contends that customers were acting in bad faith by booking these tickets, they make several characterizations in their filing that was appear to be knowingly false. For the purposes of this reply, they suggest that there is important new information that the government should consider in re-opening its proceeding.
..there are other facts and circumstances pertaining to the Decision that have arisen due to the ongoing investigation of this matter by SWISS and that are germane to the issues.
To the extent that one of the facts “that have arisen” subsequent to the Canadian Transportation Agency’s decision is that this was viewed by many frequent flyers as a mistake fare, and discussed as such including on this blog, it’s an outright misrepresentation on the part of the airline. SWISS definitely didn’t discover this as a result of its “ongoing investigation” subsequent to the CTA’s decision.
In fact, SWISS e-mailed me directly immediately following the removal of the fare to ask me where I got it. On September 28, their US head of Corporate Communications emailed me,
Dear Mr. Leff,
Understand you are the responsible for View from The Wing.
May we ask you please where you received this information on behalf of SWISS from?
http://viewfromthewing.com/2012/09/27/mistake-fare-one-way-first-class-originating-in-myanmar-is-back/
Thank you for your immediate attention in this matter.
Some additional items regarding the filing:
- In the year preceding this fare, Swiss sold only 17 tickets originating in Myanmar and only 2 with Montreal as the destination, none in first class. About 1000 tickets were issued on Swiss ticket stock for this fare.
- SWISS repeatedly suggests it shouldn’t be responsible for the tickets since they didn’t sell them — that online travel agencies sold the tickets on Swiss stock. That just suggests to me that they have an issue with the online agencies, not with passengers. And if the Canadian government accepted this argument then no airline would have to honor any fare booked through a travel agency.
- There are courts in the US that have rejected consumer claims (which are not obviously relevant to Canada).
- They represent their losses as the full retail price of one-way first class travel, which is disingenuous. And they list an additional cost as mileage earned from the tickets. But that’s double-stating the losses (since the miles would certainly be included in the price of full fare one-way first class travel) and overstates the cost (because Swiss won’t likely incur the full cost of miles for flights flown on other carriers and credited to other frequent flyer programs).
- Swiss contends that they were ‘targeted’ by unscrupulous consumers. In fact, few knew or expected their tickets would be issued on Swiss stock and indeed many of the tickets were issued on the ticket stock of other airlines (and honored).
I can’t speak to Canadian law, but certainly in US contract law (and common law contracts generally) there’s very much a concept of mutual mistake. Both parties realize that an error is involved and the contract is not binding. The US Department of Transportation has (only recently) developed rules requiring air carriers to honor mistake pricing.
In the past many mistake fares had been honored not on the basis of a contract between them and the passenger but between them and the GDS — airlines frequently have had contracts requiring them to honor any data they put into the system. (That’s what led to the Alitalia $33+tax business class Toronto-Cyprus fare getting honored… they started cancelling and Orbitz got their lawyers involved.) And of course many mistake fares have been honored purely on the basis of goodwill.
I can even think of one “mistake fare” that was intentionally loaded by an airline in order to generate publicity. Independence Air loaded some mistake fares around midnight one night, waited until a few tickets were purchased, and then called the Washington Post (“you see? it always pays to check our website! you never know the great deals you’ll find!”).
Now, the concept of mutual mistake is a muddy one in travel. As I say, mistake fares have been offered intentionally. Great deals are advertised — cruises from $2, even! What’s a mistake and how is a consumer to actually know? In this case, yes, we know. In this case Swiss is extra angry because while it was their ticket stock used (for some tickets) it wasn’t their fare.
I think it’s relevant that
- plenty of people have flown on the fare
- this isn’t the first time the fare has been offered, in fact it’s known as “round 3.”
- if they have recourse it shouldn’t be against the customer but the entity loading the fare, which they do have contracts with
I don’t expect travel providers to honor these deals, but I do hope they will. I think it’s pretty cruddy, though, to impugn people for making the bookings and for sharing a great opportunity. Great opportunities come along quite frequently. Sometimes they are honored. They are exciting. They’ve often been the subject of news stories as well, in the vein of once in a lifetime ‘manna from heaven’.
- You can join the 30,000+ people who see these deals and analysis every day — sign up to receive posts by email (just one e-mail per day) or subscribe to the RSS feed. It’s free. Don’t miss out!
My TA send the ticket to the local Swiss office for verification. Came back positive saying it’s a normal IATA fare and good to book. Of course, they didn’t even acknowledge it when handling the cancelations.
Oh please, Gary. Please please please don’t talk about the law on your blog as you have absolutely no idea what you’re talking about.
A mutual mistake has nothing to do with an “error being involved”. A mutual mistake may be operational as a defence if it is fundamental enough and the parties are cross purpose, i.e.. they are mistaken about different things. This isn’t the case here.
Mistake is a defence, ie. the airline can raise it as a defence. It’s not something you can use to sue them. A fundamental part of both common and mutual mistakes is that neither party realizes the mistake. In the case of a mistaken fare, you as a consumer should certainly realize that the fare is mistaken. THE AIRLINE can then raise a defence based in unilateral mistake against YOU. Read up on the remedies that then follow and on the difference between common, mutual, and unilateral mistake.
This, btw.,, is used a lot when people fraudulently obtain benefits, e.g.. by presenting false ID.
@Mike Smith you are reading way too much into what I wrote. I did not comment on the issue of one-party mistake at all.
I was disappointed that my four tickets were cancelled. I filed a complaint with the US authority (FAA? DOT? I forget now), but they did nothing. I have better things to spend my time on…
I think Mike’s post is a little long-winded but his assesment of the legal issue is, in my legal opinion, correct. The issue here is not mutual mistake (if any one is a legal nerd the famous case defining legal mistake is here http://en.wikipedia.org/wiki/Sherwood_v._Walker). Since one party knows the fare is a mistake it raises a different set of legal questions.
That said, I think Gary is correct that most of Swiss’ post-ruling arguments are not persuasive or compelling.
Interesting story of the morning
At least they got free publicity. I never new they existed till this article 🙂
Swiss Air heard of Swiss Yogurt/Swiss Yanglang
is a new one on me. Don’t even know where they fly!
“SWISS suggests that since the fare was discussed online as a mistake, it was some form of conspiracy to take advantage of them.” another view following this reasoning- if a good thing went viral online & it benefits the party then the party should happily bask in the glory. if in the attempt to do a good thing the party inadvertently made a mistake & customers take advantage then there’s a conspiracy. Only the airline can call it what it is.
Just to add my two cents…
The case against LX in TX was dismissed for want of jurisdiction. Meaning the damages were too large to be handled in Small Claims Court. While LX is technically correct, one court in TX dismissed the claim, it is disingenuous to make it sound like a Judge heard the matter and ruled for LX. More to come on this one.
Thanks for the update Gary.
The thing that bothered me about SWISS’ behavior was that they would intercept and interfere with the passengers flying these tickets mid-trip.
Their issue should have been an administrative one.
I would even suggest that they have breached their contracts with the IATA, credit card companies, Star Alliance, and even the OTAs.
By refusing carriage, leaving people stranded (in Asia), and canceling tickets I would also suggest that trust in their ability to manage etickets has been breached and should be restricted.
Tickets issued using credit cards were canceled unilaterally. SWISS’ contracts with the credit card companies should be re-assessed and ultimately withdrawn if it was determined that they breached their agreements with VISA, MC, and AmEx.
This dispute, it seems to me, is far from clear-cut as a question of the common law of contracts. I agree with Dan that the legal issue here is not mutual mistake, but the mistake of one party (here, SWISS). Purchasers of the RGN mistake fare made no mistake; they knew quite well what they were buying (a first-class ticket to RGN) and how much the ticket would cost them. The mistake was made by SWISS—or, more precisely, the Airline Tariff Publishing Company (ATPCO), with whom SWISS is in privity of contract, it seems.
So, when does the mistake of one party to a contract make that contract voidable? According to section 153 of the Restatement (Second) of Contracts:
“Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in § 154, and (a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or (b) the other party had reason to know of the mistake or his fault caused the mistake.”
No one disputes that the price of the ticket constitutes a basic assumption on which both the seller and buyer entered into the exchange. Nor does anyone dispute that for SWISS to perform the exchange—that is, provide first class travel pursuant to the ticketed reservation—would adversely and materially affect SWISS.
Did the folks who bought these RGN tickets “ha[ve] reason to know of the mistake”? For some buyers, the answer is plainly yes. Jeffrey Kwok, for instance, publicly admitted he knew the fare at issue was a mistake, yet he booked it nevertheless. The common law permits SWISS to revoke the tickets issued to Kwok, and to others like him who demonstrably booked the RGN fare despite knowing it was a mistake.
Yet of the many RGN tickets sold while this mistake fare was available, some were likely purchased by people who thought the fare was published intentionally. Airlines are notorious for offering wildly variable pricing for an array of reasons. Earlier this year, I flew from D.C. to Istanbul on United for $412 roundtrip, including taxes and fees, on a non-mistake fare. A couple months later, I flew from D.C. to Portland for $192 roundtrip. The point is that a first-class fare of $600 from Canada to an obscure, economically-depressed third-world country is plainly a great deal—but not so great a deal as to be plainly erroneous to a reasonable person who lacks expertise in how air travel is priced. To be sure, a noted flying expert such as Gary might be reasonably expected to see this mistake fare for what it is at first glance—but the same cannot be said about a sizable portion of the traveling public.
Gary is right to criticize SWISS for “represent[ing] their losses as the full retail price of one-way first class travel.” Whether requiring SWISS to perform its contractual promise to transport passengers in first class is unconscionable as a matter of contract law depends on the expected actual economic loss to the airline of doing so. SWISS must show that it would have actually suffered a significant economic loss had it transported the RGN fare passengers in first class. It is not enough for SWISS to show that it earned less from those passengers than it would have earned had they paid full fare. Cf. WilFred’s, Inc. v. Metropolitan Sanitary Dist., 57 Ill.App.3d 16, 372 N.E.2d 946 (1978) (unconscionable to forfeit bid deposit when contractor’s bid had been based on a subcontractor’s mistake, the subcontractor would have been rendered insolvent if forced to perform and the Sanitary District had not changed its position).
Another relevant question is how a court should define an “erroneously quoted fare by reason of a technical failure prior to said erroneous quote being detected and corrected.” What, exactly, is a “technical failure”? A computer malfunction clearly fits the bill, but what about human error? If an employee of ATPCO intentionally entered a fare that happened to be incorrect, how is that a “technical failure”? And if the term is ambiguous, shouldn’t a court construe its meaning against the drafter (that is, SWISS)? See Restatement (Second) of Contracts § 206 (“In choosing among the reasonable meanings of a promise or agreement or a term thereof, that meaning is generally preferred which operates against the party who supplies the words or from whom a writing otherwise proceeds.”).
Wow, Ryan, this is a really good analysis. I am impressed.
Ryan’s comments made me, a Canadian lawyer, want to chime in here. The Canadian law of contracts differs somewhat from the “Restatement of Contracts” when it comes to unilateral mistake. In the US, it appears a contract is voidable if one party “had reason to know of the mistake.”
In Canada, the law is more strict. One must have actual knowledge of the mistake. Even suspicions do not amount to actual knowledge.
Second, “technical failure” was defined by SWISS in their submissions as EXCLUDING errors of judgment. Yet, Swiss admitted in their pleadings that the fare was caused by ATPCO misreading an IATA bulletin. If that is not an error in judgment, what is?
Third, the law of contract only has limited application. This is an administrative decision by an administrative body that has jurisdiction and expertise over aviation. If CTA upholds their decision, they will be given some deference if it ends up in federal court.
Fourth, Gary is right on what constitutes a “deal” and a “mistake” is very unclear.
Fifth, the most important point of this whole affair is that Swiss misled the CTA before its original decision. Swiss initially said that “Swiss maintains that there is no connection between this matter and the spring 2012 devaluation of the Myanmar Kyat (MMK).” (http://www.otc-cta.gc.ca/eng/ruling/239-c-a-2013 at para. 45). YET, the documents Swiss provided in this latest round show that the First Class fare was the same price in MMK as has been published for years and that the IATA memorandums were designed to exclude such fares from being republished. The fares were therefore not erroneous. If the MMK was not devalued compared to the CAD or USD, no one would be talking about this. It is a clear human error, not a technical error, that caused the fare to be available after the devaluation.
Interesting legal fare. Did this get billed to pro bono, admin or client development? Practical question – If I was flying in August to/from YVR/YYZ or whatever the routing was, am I flying? Has anyone used the Administrative ruling to fly?
Jonathan is correct that U.S. contract law is of dubious relevance here. However, it should be noted that Ryan Radia’s post misses a key point. Before we can even ask whether the other party knew of the mistake, or if enforcement would be unconscionable, we must decide whether the party resisting performance should “bear the the risk” of its mistake.
Section 154. When a Party Bears the Risk of a Mistake
A party bears the risk of mistake when:
(a) the risk is allocated to him by agreement of the parties, or
(b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or
(c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.
Subsections (a) and (b) are inapplicable here. (To head off any argument otherwise, (b) refers to a situation in which a buyer fails to inspect and receives something of lesser value–it’s not at all applicable to where, as here, the buyer gets more than is allegedly bargained for.) When faced with (c), courts are loath to do anything other than assume that the buyer should have known a product/service would be worth less and/or that a seller should have known a product/service would be worth more.
That is to say that there is not strong argument in U.S. law pursuant to which this contract could be invalidated as a mistake. I’m unsure as to what Gary was going for with mutual mistake, but it’s not applicable here.