Law of Contract

00:00 Jan 01

Cruisers plc, 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 Cruisers standard 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.