Forbearance of existing rights as consideration?

kazzasingh's version from 2017-05-16 08:38

Part payment of a debt

Question Answer
Pinnel's Case 1602The claimant was owed £8 10 shillings. The defendant paid £5 2 shillings and 2p. The claimant sued for the amount outstanding. Held: The claimant was entitled to the full amount even if they agreed to accept less. Part payment of a debt is not valid consideration for a promise to forebear the balance unless at the promisor's request part payment is made either: a). before the due date or b). with a chattel or c). to a different destination
Foakes v Beer (1884)Foakes, owed Beer. Beer agreed that she would not take any action against Foakes for the amount owed if he would sign an agreement promising to pay an initial sum of £500 and pay £150 twice yearly until the whole amount was paid back. Foakes was in financial difficulty and, with the help of his solicitor, drew up an agreement for Beer to waive any interest on the amount owed. She signed. Foakes paid back the principal but not the interest. Then Beer sued Foakes for the interest. The question was whether she was entitled to it, despite their agreement that he would not need to pay it. HELD: Held: Dr Foakes was liable to pay the interest. The agreement reached amounted to part payment of a debt and under the rule in Pinnel's case this was not good consideration for a promise not to enforce the full amount due.
Re Selectmove Ltd [1993]Selectmove Ltd owed the Inland Revenue substantial sums in outstanding tax and national insurance. The managing director, Mr ffooks, met with Mr Polland, from the Inland Revenue and said he would pay future tax as it fell due and the arrears at £1000 a month. Mr Polland said he would have to check and would contact the managing director if it was unacceptable. Selectmove Ltd heard nothing until a £25,650 notice came in and a threat of a wind-up petition. Mr ffooks subsequently claimed that the Revenue had said he could repay less. HELD: Although a practical benefit may be found as consideration where there is a promise of extra money for existing duties, as per Williams v Roffey [1990], such a benefit cannot be found in the case of a part payment of a debt. HELD: The clause in the licence did not prevent oral variations to it.
MWB Business Exchange Centres Ltd v Rock Advertising [2016]Rock Advertising (Rock) was the licensee of managed office space owned by the licensor (MWB). It had fallen into arrears with its monthly licence fees. MWB served a notice to terminate the licence. Rock argued that an oral agreement had been reached between MWB’s credit controller and a director of Rock to reschedule the monthly licence fees (so that Rock would pay at a lower rate for a number of months and would then pay at a higher rate for the remainder of the licence). The licence agreement had a standard clause which stated that: “all variations to this licence must be agreed, set out in writing and signed on behalf of both parties before they take effect.” Even though Rock’s promise to pay was essentially a promise to pay what was already due, there were practical benefits in Rock’s promise that could constitute fresh consideration (i.e. MWB not being left with an empty property and recovering the arrears over time without the need for court proceedings).

Forbearance to sue

Question Answer
Cook v Wright (1861)Promise to enforce claim known to be invalid is not good consideration
Wade v Simeon (1846)Promise to enforce claim known to be invalid is not good consideration