60 Chapter 2Making a contract
Despite the decision in Foakesv Beer, the rule that a lesser sum of money cannot be
consideration for a greater sum owed has always been subject to some exceptions:
(i) If the creditor agrees to take anything else instead of, or as well as, a lesser sum of
money then the debt is extinguished.
(ii) If the creditor asks for a lesser sum to be paid before the debt is actually due then the
debtor’s paying the lesser sum early can amount to good consideration.
(iii) If the creditor requests that a lesser sum be paid in a different place, perhaps a different
country, then the debtor’s agreeing to this could possibly amount to good consideration.
(iv) If there is a dispute as to the amount owed, and the creditor agrees to settle for less than
he thinks he is owed, this agreement will be binding. (The parties will have settled out
of court.)
(v) Another possible exception, promissory estoppel, is considered below.Promissory estoppel
The concept of promissory estoppel arose in the following case.whatever’ on the judgment in her favour. Dr Foakes paid the full amount in instalments, as
he had agreed to do. Mrs Beer then sued him for £360 interest. (Interest is always payable
on a court judgment which is paid in instalments.)
HeldDr Foakes had to pay the £360 interest. A lesser sum of money cannot be consider-
ation for a greater sum owed. Therefore, £2,090 payable by instalments without interest
(the lesser sum) could not be consideration for £2,090 payable by instalments with interest
(the greater sum owed).
CommentFoakes vBeeris an important case because in it the House of Lords directly
approved the decision in Pinnel’s Case. As House of Lords decisions are binding upon
all other courts, the decision gave great strength to the rule that a lesser sum of money
cannot be consideration for a greater sum owed.Central London Property Trust Ltd vHigh Trees House Ltd (1947)
(the High Trees Case)In 1937 the defendants took a lease on a block of flats in London at a rent of £2,500 a year.
During the Second World War (1939 – 45), many people moved away from London as it
was being bombed. In 1940 the defendants found that they could not sublet the flats and
could not therefore pay the claimants the full rent. The claimants accepted that this was the
position and agreed that the defendants should pay a reduced rent of £1,250 a year. It was
not agreed for how long the reduced rent should be paid. In 1945 the claimants were once
again able to fully sublet the flats. However, the claimants were still paying a rent of only
£1,250 a year. In September 1945 the claimants sued for the full rent in the future and the
full rent from the time when the flats had once again become fully sublet.
HeldThe claimants were entitled to the full rent both in the future and from the date on
which the flats had become fully sublet.