Cruisersplc: A Contractual Dispute Essay.

Cruisersplc, a car leasing company enter into contracts in January with each Donald, Edwina and Fiona. Cruisers agree to hire a car to each of them for a period of three (3) years for £400 monthly. Donald, Edwina and Fiona each takes delivery of their respected cars that month. Subsequent international incidents cause a sharp rise in the rate of inflation. By February, the Cruisers are aware that many of their customers will face difficulty in maintaining payment under their contracts. In order to avoid possible breaches of a large number of these contracts, Cruisers sends out a standard letter to each of their clients. The letter states that “In view of rapidly rising costs, Cruisers will only require their customers to pay three (3) quarters of the amount due under their agreement with Cruisers until the rate of increased costs subsides”.

Donald receives the letter but did not open it. In February, March and April he sends Cruisers cheques for £200 ‘in full and final satisfaction of this month’s account’. Cruisers bank each of these cheques.

Edwina receives the letter in late February, after she had sent Cruisers £300 cheque with an accompanying letter stating that in view of her increased costs, that amount was all she could afford.

When Fiona receives Cruisersstandard letter she is pleased, as the nature of her business is such that her business is little effected by rising costs. Cruisers, later realising the limited impact upon Fiona’s business, sends a letter stating that the reduction arrangement did not apply to Fiona. Fiona reads this letter and immediately sends Cruiser a cheque of £300 for February’s payment. She also did this for March and April.

By May, Cruises faces financial ruin if it continues to accept only there (3) quarters of the amounts due under its various contracts.

Advise Cruisers as to its possible courses of action with regard to Donald, Edwina and Fiona

Background of the Case

The main issue of the case is to determine whether Cruisers can take any action against Donald for non-compliance of the offer or not.

The subject matter of the case is based on the basic principle of acceptance and compliance of an offer. Offer is one of the main elements of contract. According to the Contract law, a contract could be regarded as valid on meeting certain requirements. Offer is a willingness of the person who has a legal intention to be bound with another regarding a subject. The offer will be legally binding in nature when it accepts by another. It has been held in Esso Petroleum Ltd v Commissioners of Customs and Excise[1] that intention is necessary in case of forming a contract. If the parties do not have a legal intention to be bind with each other, no contract will be formed validly. There are certain norms laid down behind the offer and acceptance of the offer. According to the general rule of contract, an offer can be accepted directly that is the person to whom the offer has been made should accept the offer by direct communication with the person who made the offer. However, there are certain exceptions to this rule. One of such provision is the postal rule where it has been stated that an offer will be treated as accepted if the person to whom the offer has been made has posted his consent statement. In this case, it is not necessary that the offer maker received the posted consent letter. This rule has been established for the first time in the case of Adam v Lindsell[2]. There are certain rules mentioned regarding the process of acceptance too. According to the general principle of law, if an offer could not come in the knowledge of any person, the offer could not be treated as effective and valid in nature. It has been observed in Jacques & Co v McLean[3] that the person accepts the offer should have a knowledge about the offer and contents of the offer.

Apart from the offer and acceptance, consideration plays an important role in this regard. It has been stated under the general provision of law that there should be certain consideration regarding a contract. Contract is an exchange of promise and therefore, there should be certain benefit substances, which is known as consideration. In Thomas v Thomas[4], it has been observed that consideration should be something that has a legal value in the eyes of law. However, the subject matter of consideration should be differed from any things that gained by love and affection. Therefore, a gift could not be regarded as consideration. There are certain rules regarding the consideration. The subject matter of the consideration should not be a past event. The principle has been established in the case of Re McArdle[5] . However, it has been observed in Lampleigh v Braithwaite[6]  that in case there are any request proceeded in the past event, the said past thing could be regarded as valid consideration. Further, the amount of consideration should be sufficient and it will be transferable in nature. The subject matter of the consideration is required to be transferred to the person to whom the promise has been made. This principle has been made in Tweddle v Atkinson[7]. Any existing contractual or public duty could not be regarded as consideration. Further, it has been held that any part performance or part payment regarding any debt is invalid consideration. it has been made in the case of Pinnel’s case 1602 5 Rep 117 that part payment of any consideration will not be treated as valid unless the promise for part payment has been made by the promise maker before the due date of the payment.  According to the general provision of law, if not all these elements could be met, the same will not be treated as valid consideration and in the absence of valid consideration, no offer will take place.

The Legal Principles of Offer and Acceptance in Contract Law

However, it can be stated that if the person to whom the offer has been made should have received the offer and he should have certain knowledge regarding the offer or if there is  any reward mentioned in the offer. In case, he is totally unknown regarding the facts of the newly generated offer, the benefit or detriment of the offer will not be applied to him. in that case the person is required to maintain all the terms of the previous offer.

In this given case, it has been observed that Cruisers has made a leasing contract with Donald and provide car to him. it has been contracted between them that Donald will pay £400 to the company and enjoy the use of car. However, the company had made certain changes regarding the previously decided price due to sudden financial crisis and it has been decided that Donald had to pay £300 in lieu of £400. However, it has been observed that Donald had received the offer letter but did not open the same. Therefore, according to the case of Jacques & Co v McLean, it can be stated that the newly made offer price will not be applied on him and he has to pay the money as decided in the previous contract. However, it has been observed in the case that Donald had paid less than the previously generated contract and in that case, the company can bring action against him. Further, it can be stated that Donald had made part payment and according to the general provision, it be stated that this does not create valid nature of consideration. it can be stated that the company is allowed to take proper action for non-maintenance of previously generated contract and not for the newly offered price.

Conclusion:

Therefore, it can be stated that Cruisers can bring action against Donald for non-maintenance of previously decided contractual consideration.

The present issue in this case is to decide whether Cruisers can take any action against Edwina or not.

The subject matter of the case is based on the effects of contractual terms. According to the general provision of contract, it can be stated that it is an agreement by which one party promises to give something as against any consideration and the party has accepted the same. In Malaysia, the nature of the contract has been described in the Contracts Act 1950. All the provisions of the Act has followed the English rule of contract. According to section 2 (h) of the Act, it can be stated that contract is a legally enforceable contract and all the terms of the contract will be imposed on both the parties mandatorily. The parties are required to maintain all the rules of the contract and in case of any breach, legal action can be taken against them. According to the Malaysian Contract Act, it has been stated that not all the agreements are contract and there are certain elements must be fulfilled in all this case to make an agreement valid contract. An offer and acceptance to the contract should be mentioned in the agreement. Further, there should be valid consideration as against the offer and the nature of the consideration should be transferable. In addition, both the parties should have the intention to bind with each other legally. This principle has been observed in the case of Preston Corp Sdn Bhd v Edward Leong & Ors (1982). Both the parties to the contract should have the capacity to enter into a valid contract.

Role of Consideration in Contract Law

On the other hand, the offer and acceptance to the offer should be made in accordance with the legal principle. According to the contract law, when an offer has been made, the person to whom the offer has been made should know the same. According to section 4(1) of the Act, an offer can be effective when communicated. In case, any person does not know about the content of the offer, the rules of the offer will not be applied to the person and the offer could not treated as effective. On accepting the offer, it is the right of the intended person to accept or reject the content of the offer. However, if the person has accepted the offer, it will be legally bind the parties to the contract. The same principle has been established in the case of R. v Clarke[8] where it has been observed that if any person is very unaware of the contents or reward mentioned in an offer, he is restricted to make any claim regarding the reward mentioned in the offer in any subsequent event. It has further been observed under the Malaysian Contract Act that if the person to whom an offer has been made make any changes in the offer, the application of the offer in all the future circumstances could not be accepted. This principle has been established in the case of Hyde v Wrench. However, it can be stated that if the party on previous occasion nd a contract has been signed in between them has accepted all the offers, the parties are legally enforceable and the parties are bound by the nature and terms of the contract. According to section 7(a) of the Contracts Act 1950, the nature of the acceptance should be absolute and there should not be any confusion. The parties to the contract should have to meet all the requirements and conditions of the contract and in case of any breach made to these terms, legal actions can be taken against the infringing parties. Further,  according to section 6 (a) of the Act, if any party to the contract wants to make any changes regarding the previous offer, the same should be acknowledged by the person to whom such changes have been addressed. This rule has been mentioned in the case of Ignatiues vs. Bell[9]. Therefore, it can be stated that the contents of the offer should have to be accepted by the party. Otherwise the terms of the previous contract will be maintained.

Possible Courses of Action against Donald

In this case, it has been observed that Cruisers is a car lending company who leased off their cars and it has made a contract with Edwina. It has been decided in between them that Edwina could enjoy the use of the car if she paid £400 on monthly basis. A contract has been made in between them regarding this and it can be stated that all the terms of the contract will be validly imposed on both the parties and the same bind the parties. However, the company has made a change regarding the leasing price and reduced it due to make a balance due to financial downturn. The company had sent the offer letter to Edwina who received the letter after making the payment for the month of February. It has been observed that she had paid less to the previously contracted price. According to the case of R. v Clarke, it can be stated that the provision of the newly made offer will not be applied to her as she had received and acknowledged the offer letter after making the payment for the month of February. According to the terms of the previous contract, she had to pay £400 and she had pay £300. Therefore, the company can bring action against Edwina for breaching the provision of previously generated contract. however, it has been observed that Edwina had stated that she could not afford much money and therefore, it is the discretion power of the company whether to accept or reject the proposal made by Edwina.

Conclusion:

Therefore, it can be stated that Cruisers can take action against Edwina for the making part payment regarding the previously agreed consideration and breaching the provision of the contract.

The main issue of the case is to determine whether the company can make any legal action against the payment made by Fiona or not.

The subject matter of the case is based on non-performance of contractual terms. Every contract consists of certain terms and conditions that are mandatorily imposed on the parties to the contract. It has been mentioned in Rose and Frank Co. v J.R. Crompton & Bros Ltd[10]  that the parties to the contract should have to comply all the terms of the contract and legal action will be taken in case of any failure to meet the requirements. In case the offer maker makes any changes in the previously contracted offer, the person to whom the offer has been made should acknowledge it. The contract includes offeror who make the offer and offeree to whom the offer has been made. This principle has been established in Scammell & Nephew v. Ouston[11]. There are certain provisions by which an offer can be revoked. According to the general principle of law, a person can revoke the offer before the intended person had accepted the previous offer. This has been held in the Hyde v Wrench[12]. However, if the offeree has made any thing adverse after acknowledging the newly generated offer, then it will be regarded as the violation to the offer. However, according to the general principle of contract law, it is the discretionary rights of the offeree either to accept or reject the offer. Further, it has been observed in Felthouse v Bindley[13] that if an offer has been communicated and accepted, valid contract will be made and both the parties to the contract will be bound by the terms and conditions of the contract.

Possible Courses of Action against Edwina

The present case is based on the general principle of consideration and according to the decision made in Thomas v Thomas[14], it can be stated that the rate of consideration should not be adequate but sufficient in the eyes of law. Further, it has been observed in the case of Foakes v Beer[15] that once the offer has been accepted, the offeree is required to make full payment regarding the considered price and no part payment will be treated as valid. The parties to the contract are obliged to abide by all the rules of the contract and the offer. According to Section 7(1) of the Malaysian contracts Act 1950, if the offeree has not maintained the terms and condition of the offer or contract, the offeror can take legal action and revoke the contract.

Further, in case of any exemption clause made by the offeror to the offeree and the same has been accepted or acknowledged by the offeree, the offeror could get certain benefits if the person to whom the offer has been made has taken any wrong step. Further, legal action for non-maintenance of contractual terms will be taken against the person in case he has failed to meet all the requirements properly mentioned in the offer or contract. In Curtis v Chemical Cleaning[16], it has been observed that the parties to the contract should have to acknowledge the exemption provision.

In addition to this, it can be stated that the rules regarding postal offer and acceptance has been observed in this case. According to Henthorn v Fraser[17], where an offer has been made through post, the acceptance will be made once the person to whom the offer has been made has posted the consent letter regarding the offer. However, in case the offeror wants to revoke the offer, he should have to send another letter regarding the same to that person and the same should be received by the offeree before he send the consent letter. This is regarded as the basic principle of offer and acceptance in postal rule.

In this case, it has been observed that Fiona had made a contract with Cruisers and leased a car. Further, it has been decided in between them that Fiona will pay £400 per month. When the partiers have signed the contract, all the contractual terms of the contract has become mandatorily applied on the parties. However, certain financial downturn has been started and the company had reduced the amount of considered payment and send offer letter to all the parties including Fiona. However, later the company felt that the financial crisis has not affect Fiona, revoke the offer, and send letter to Fiona. Considering the case law, it has been observed that Fiona had received and acknowledged the fact that the company has revoked the newly made offer. However, it has been observed that Fiona had not abided by the contents of the revoke letter. According to the Contract Act, the revocation letter has been received and acknowledged by Fiona before she has made any transaction regarding the same. Therefore, it can be stated that she had made a breach regarding the contents of the contract signed in between the company and her. Further, it has been observed in the case that Fiona has not paid the lease amount in full and she had made a part payment of the same. Therefore, according to the Foakes’ case it can be stated that she ought to make full payment until the company has made any changes regarding the same. However, nothing has been observed in this case and therefore, Fiona became liable for non-maintenance of the contractual terms and it has been observed that she had made breach regarding the contractual terms.

Conclusion:

Therefore, it can be stated that Cruisers can validly take action against Fiona for non-performing all the contractual terms and made part payment to the considered price. In case of any damage suffered by the company, it can claim compensation from Fiona.

Reference:

Adam v Lindsell [1818] B & Ald 681

Contracts Act 1950

Curtis v Chemical Cleaning [1951] 1 KB 805

Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117

Felthouse v Bindley [1862] EWHC CP J35

Foakes v Beer (1883-84) L.R. 9 App. Cas. 605

Henthorn v Fraser, 2 Ch. 27

Hyde v Wrench (1840) 49 ER 132

Ignatiues vs. Bell (1913) 2 FMSLR 115

Jacques & Co v McLean [1880] 5 QBD 346

Lampleigh v Braithwaite [1615] EWHC KB J17 

v Clarke (1927), 40 CLR 227

Re McArdle (1951) Ch 669

Rose and Frank Co. v J.R. Crompton & Bros Ltd  [1924] UKHL 2 

Scammell & Nephew v. Ouston [1941] AC 251

Sdn Bhd v Edward Leong & Ors (1982)

Thomas v Thomas (1842) QB 851

Tweddle v Atkinson [1861] EWHC QB J5

[1] [1976] 1 All ER 117

[2] [1818] B & Ald 681

[3] [1880] 5 QBD 346

[4] (1842) 2 QB 851

[5] (1951) Ch 669

[6] [1615] EWHC KB J17 

[7] [1861] EWHC QB J57

[8] (1927), 40 CLR 227

[9] (1913) 2 FMSLR 115

[10] [1924] UKHL 2

[11] [1941] AC 251

[12] (1840) 49 ER 132

[13] [1862] EWHC CP J35

[14] (1842) QB 851

[15] (1883-84) L.R. 9 App. Cas. 605

[16] [1951] 1 KB 805

[17] 2 Ch. 27