ACCA F4 - Corp and Business Law (ENG)

62 4: Formation of contract II  Part B The law of obligations

Foakes v Beer 1884

The facts: The defendant had obtained judgement against the claimant. Judgement debts bear interest

from the date of the judgement. By a written agreement the defendant agreed to accept payment by

instalments, no mention being made of the interest. Once the claimant had paid the amount of the debt in

full, the defendant claimed interest, claiming that the agreement was not supported by consideration.

Decision: She was entitled to the debt with interest. No consideration had been given by the claimant for

waiver of any part of her rights against him.

There are, however, exceptions to the rule that the debtor (denoted by 'X' in the following paragraphs)

must give consideration if the waiver is to be binding.

Exceptions

Alternative consideration

Anon 1495

Pinnel's Case 1602

If X offers and Y accepts anything to which Y is not already entitled, the

extra thing is sufficient consideration for the waiver.

 Goods instead of cash

 Early payment

Bargain between the

creditors

Woods v Robarts 1818

If X arranges with creditors that they will each accept part payment in full

entitlement, that is bargain between the creditors

X has given no consideration but he can hold the creditors individually to

the agreed terms

Third party part payment

Welby v Drake 1825

If a third party (Z) offers part payment and Y agrees to release X from Y's

claim to the balance, Y has received consideration from Z against whom

they had no previous claim

Promissory estoppel The principle of promissory estoppel may prevent Y from retracting their

promise with retrospective effect.

3 Promissory estoppel

The principle of promissory estoppel was developed in Central London Property Trust v High Trees House

1947. It means that in some cases where someone has made a promise they can be prevented from
      denying it.

The doctrine of promissory estoppel works as follows.

If a creditor (Y) makes a promise (unsupported by consideration) to the debtor (X) that Y will not insist on

the full discharge of the debt, and the promise is made with the intention that X should act on it and they

do so, Y is estopped from retracting their promise, unless X can be restored to their original position.

Central London Property Trust v High Trees House 1947

The facts: In September 1939, the claimants let a block of flats to the defendants at an annual rent of

£2,500 pa. It was difficult to let the individual flats in wartime, so in January 1940 the claimants agreed in

writing to accept a reduced rent of £1,250 pa. Note, no consideration passed from the defendants in return

for the reduced rent. There was no time limit set on the arrangement but it was clearly related to wartime

conditions. The reduced rent was paid from 1940 to 1945 and the defendants sublet flats during the

period on the basis of their expected liability to pay rent under the head lease at £1,250 only. In 1945 the

flats were fully let. The claimants demanded a full rent of £2,500 pa, both retrospectively and for the

future.

Decision: The agreement of January 1940 ceased to operate early in 1945. The claim for full rent after the

war was upheld. However, the 1940 agreement had estopped any claim for the period 1940 to 1945.

Key term

FAST FORWARD