ParkingEye drives home a penalty – charge for a breach of contract allowed

A dispute over a parking fine has received a lot of press attention from the angle of the aggrieved motorist standing up to big business. But there are wider implications. The recent Court of Appeal decision in ParkingEye v Beavis demonstrates a more flexible approach to penalty clauses in contracts, and illustrates how the unfairness rules will be applied to penalty charges in consumer-facing contracts (EULAs, e-commerce terms etc).

The dispute arises from a shopping trip in 2011. Barry Beavis left his car at the Riverside Retail Park for longer than the permitted 2 hours. The car park manager, ParkingEye, charged him an £85 penalty. Mr Beavis refused to pay and ParkingEye sued him for breach of contract.

ParkingEye controls use of private car parks, relying on Automatic Number Plate Recognition systems to detect arrivals and departures. It uses signs placed at the entrance to and around its sites to establish contracts with motorists who park there.

By the time the case arrived at the Court of Appeal, two barriers were left. Was the charge unenforceable under contract law as a penalty? And did it fail the fairness test in consumer law?

Was this an unenforceable penalty? No!

This question usually arises in commercial disputes. Where a contract specifies a payment for breach of contract with the primary purpose of deterring the breach, the payment has often been struck down as an unenforceable penalty. A payment should generally pre-estimate the losses of the injured party, and not be ‘extravagant or unconscionable'.

But this situation was rather different.

  • Although ParkingEye had not lost out through Mr Beavis's long stay, it would lose money if it failed to manage the car park properly and lost the contract.
  • And although the charge was primarily a deterrent, it could be justified in context as a mechanism to allow free parking close to the shops for a regular flow of customers.

In context, the charge was not excessive and provided a reasonable mechanism to control use of the car park.

So courts might be willing to take a more flexible view of penalty clauses in future.

Did the charge fail the consumer law fairness test? No!

Consumer law has its own set of rules on fairness. The Court of Appeal analysed the situation against these and decided that the charge was fair.

  • Parking Eye did not breach the duty of good faith towards motorists. Signs explaining permitted use of the car park were prominently displayed with no hidden traps.
  • The term imposing the parking charge did not produce a significant imbalance between the parties. The level of the charge was similar to a fee that a public authority car park operator might impose.

Lessons here? Make sure that consumer-facing notices and terms are prominent, legible and easy to understand. And avoid fees and charges for breach of contract that are so high as to be ‘extravagant'. Comparators are useful – what would a consumer be charged by another business in the circumstances?

UK consumer law is undergoing seismic change, with the Consumer Rights Act expected to take effect in the autumn. But the decision would probably have been the same under the new law, which brings in much of the existing law on fairness. One change it does make, though, is to apply the fairness rules in the same way to contract terms and notices, avoiding the need for an up-font analysis of whether or not a contract was formed before considering fairness.

Reports suggest that Mr Beavis will appeal to the Supreme Court. Quite a fight over £85…

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