A Rock-Solid Contract Comes in Handy on an Icy Night

Hughes v. Southwest Airlines Company, 961 F.3d 986 (7th Cir. 2020)

March 2021

By: Jeffrey F. Clement

When counseling our clients on proper drafting of contracts, our attorneys emphasize the need to foresee potential disputes with customers or vendors and prepare appropriate contract language to mitigate against future exposure. One way this is done is through liability limitation clauses. Another way, as exemplified in the recent decision of Hughes v. Southwest Airlines Company, 961 F.3d 926 (2020), is to contractually specify the remedy and/or course of action to be taken in the event one party is unable to perform the contract. 

The Hughes decision shows how this can be done effectively. Plaintiff, Brian Hughes, purchased a Southwest Airlines (“Southwest”) ticket for transportation from Phoenix to Chicago on February 11, 2018. Southwest had to cancel the flight and informed Mr. Hughes it might be several days before it could be rescheduled. Mr. Hughes asserted the real reason the flight was cancelled was because Southwest “ran out of de-icing fluid in Chicago, leading the airline to cancel hundreds of flights out of and into Midway Airport.” 

Mr. Hughes brought a breach of contract claim against Southwest arguing that his ticket obligated Southwest to transport him to the destination and the airline’s failure to obtain such de-icing fluid entitled him to damages, in this case, the consequential damages Mr. Hughes incurred when he decided to fly to Omaha, spend the night at a hotel there and proceed to Chicago the next day. Wisely, however, the ticket issued by Southwest to Mr. Hughes provided that its transportation was subject to certain Terms and Conditions. Most importantly, the Terms and Conditions indicated that if Southwest cancelled or failed to operate any flight according to its public schedule, the remedy available to the passenger would be either 1) the passenger would be transported on the next flight on which space is available to the intended destination without additional charge and in accordance with established re-accommodation practices, or 2) the passenger would be issued a refund. 

Based on this language, the trial court held Hughes could not maintain a breach of contract claim because the contract allowed Southwest to fulfill its duties by placing him on an alternate flight or refunding his fare. On appeal to the United States Court of Appeals, Seventh Circuit, the decision was affirmed. Specifically, the appellate court rejected Mr. Hughes’ attempt to have an implied term written into the contract that Southwest would always have sufficient de-icing fluid on hand for all of its flights. In applying Texas law, the appellate court held implied covenants are disfavored and will be imposed only if it was “so clearly within the contemplation of the parties that they deemed it unnecessary to express it.” Therefore, because the appellate court refused to imply a contractual term and the evidence showed that Southwest fulfilled its duties under the contract, Mr. Hughes could not state a claim for breach of contract.

The Hughes decision proves that business owners are wise to consult with legal counsel before entering into contracts so that appropriate provisions are included to protect the business in the event of a foreseeable inability to perform.