BetterLawNotes-5 (2)


Again, the general rule is that if A promises to pay part of his debt to B in return for B agreeing to forgo the balance, B’s promise to waive the balance is not enforceable: A has provided no consideration.

Pinnel’s case (1602) 5 Co Rep 117a

P sued Cole in debt for £8 10s due on 11th November, 1600 under a conditional bond for £16. C argued that at P’s request he had paid C £5 2s 6d on 1st October in full and final settlement. Judgment was given for P on a point of pleading.

‘[P]ayment of a lesser sum on the day in satisfaction of a greater cannot be any satisfaction for the whole’ (Lord Coke).

Foakes v Beer (1884) 9 App Cas 605

Mrs Beer obtained judgment against Dr Foakes for a certain sum. Dr Foakes then agreed to pay the entire amount to Mrs Beer in instalments if Mrs Beer refrained from taking any further proceedings on the judgment. Dr Foakes paid off the amount due whereupon Mrs Beer took proceedings for interest, to which she had a statutory right, on the original sum. Held: Mrs Beer was entitled to the interest. Dr Foakes had provided no consideration for her earlier promise.

D & C Builders Ltd v Rees [1966] 2 QB 617

D&C carried out building work for R. R paid £250 on account leaving a balance due of over £480. Despite repeated requests for payment, the balance remained outstanding. Subsequently, R offered to pay £300 in full and final settlement. D&C, by this time in dire financial straits, accepted. Having received payment of the £300, D&C claimed the balance. Held: R was liable as there had been no consideration for D&C’s promise to forego the balance.

Re Selectmove Ltd [1995] 2 All ER 531

S owed large sums of tax to the Revenue. S said it would pay off the arrears in instalments and pay future liabilities as they fell due if the Revenue refrained from taking proceedings against it. The Court of Appeal held that there was no consideration provided by S to make any undertaking by the Revenue enforceable.

Collier v P & MJ Wright (Holdings) Ltd [2007] EWCA Civ 1329

C was one of three partners who had incurred a debt to W. According to C, W agreed that C should only be liable for one-third of the debt and that W would pursue the two other partners for the balance. C paid off his share of the debt only for W to demand payment by C of the balance. The CA held that, applying Foakes v Beer, there was no consideration for W’s promise that C’s liability would be limited to a one-third share of the debt. However, it was arguable that W was estopped from enforcing its strict right to claim payment in full from C.

In her judgment, Arden LJ said (at [42]) that where there is a voluntary accord and satisfaction between creditor and debtor it will of itself be inequitable for the creditor to resile from his promise. It follows, she said, that the effect of the estoppel is to extinguish, rather than merely suspend, the creditor’s right to the balance of the debt. In other words, promissory estoppel can be used to circumvent Foakes v Beer.

MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24

Rock entered into a 12-month licence agreement relating to office space managed by MWB. Clause 7.6 provided that, to be effective, any variation of the terms of the agreement had to be in writing and signed by both parties. When Rock fell behind with payment of the monthly licence fees, the parties orally agreed to vary the terms of the original agreement. The effect of the variation was that while Rock would initially pay less each month than provided for by the original agreement, it would pay more in subsequent months. MWB later claimed that it was not bound by the variation agreement and brought a claim for outstanding licence fees and damages for other losses. By way of counter-claim Rock claimed damages for wrongful exclusion from its premises. Judge Maloney in the Central London County Court gave judgment for MWB, holding that while Rock had provided consideration for the variation, because the variation was not in writing and signed by the parties, it did not satisfy the requirements of clause 7.6. Furthermore, the judge held that MWB was not estopped from insisting on its strict rights under the agreement. The Court of Appeal allowed Rock’s appeal: the variation agreement was effective notwithstanding clause 7.6. The Court of Appeal agreed with the judge’s findings on the consideration and estoppel points. The Supreme Court allowed MWB’s appeal and overturned the decision of the Court of Appeal. The Supreme Court held that the variation was not enforceable because, bring oral only, it did not comply with clause 7.6 and that, on the facts, MWB was not estopped from relying on the clause. As such, there was no need to decide the consideration point.

The Court of Appeal in MWB appears to extend the application of the practical benefit approach set out in Williams v Roffey to some part-payment cases. The extent to which this is consistent with Foakes v Beer and Re Selectmove seems, at the very least, arguable. While the exact effect of the parties’ variation agreement remains unclear, there may be an argument that Rock provided consideration by agreeing to pay more in the latter months of the outstanding term than it was obliged to do under the original agreement.

However, it seems clear that the decision of the Court of Appeal on the consideration point has no standing as a matter of precedent. Its overall decision was reversed by the Supreme Court and, as such, is a nullity. Nevertheless, the reasoned view of three Court of Appeal judges will carry some weight in any future judicial consideration of the issue.

The Supreme Court in the MWB case declined to deal with the ‘difficult’ issue of consideration (see at [18]). It was likely, Lord Sumption said, that this would involve re-examining Foakes v Beer:

‘[Foakes v Beer] is probably ripe for re-examination. But if it is to be overruled or its effect substantially modified, it should be before an enlarged panel of the court and in a case where the decision would be more than obiter dictum.’ (At [18]).

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