An important feature of the business models of Uber and many other app-based cab operators is the contention that they have no direct contractual relationship with their passengers. In a landmark case, however, the High Court has ruled that, at least in London, that approach does not comply with the law.
Uber London Limited and another cab company sought a judicial declaration that an operator licensed under the Private Hire Vehicles (London) Act 1998 who accepts a booking from a passenger is not required to enter as principal into a contractual obligation with the passenger to provide the requested journey.
Rejecting that assertion, however, the Court found that the Act contemplates and requires that the acceptance of a booking by an operator will create a contract by which the operator takes on an obligation, as principal, to provide a vehicle and driver to convey the passenger to the agreed destination.
Noting the potential vulnerability of passengers using smartphone apps to call cabs late at night, the Court observed that, if a passenger's only contractual relationship is with a driver he or she has never heard of and who is unlikely to be worth claiming against, any such relationship is likely to be practically worthless.
A direct contractual relationship between a passenger and an operator was likely to serve as a powerful incentive to the latter to ensure the reliability of its drivers. If a driver failed to turn up, or something went wrong during a journey, passengers would have a legal remedy against operators that was likely to be worthwhile pursuing.
In the light of its decision that, in order to operate lawfully, an operator must take on a contractual obligation to passengers, the Court noted that Transport for London would need to reconsider its current licensing policy. Both Uber London and the other cab company had indicated that they would amend the basis on which they provide their services given the Court's decision.
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