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Consideration, Promissery Estopped & Duress
Consideration 2 (PART PAYMENT OF A DEBT)
18
Law
04/19/2012

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Term
General rule - can part-payment of a debt be good consideration?
Definition
NO - even in a situation where the debtee is unlikely to be able to pay the full amount, no consideration comes from the benefit to the debtor of receiving what little he does.
Therefore, if a creditor agrees to release a debtee after part-payment, the debtee remains liable in law & creditor can still sue him for full payment.
Term
Which cases can be used to show that part-payment of a debt is not good consideration?
Definition
Pinnel's case [1602]
Foakes v Beer [1884]
Re Selectmove Ltd [1995]
Term
Has the decision in Williams v Roffey [1991] undermined the rule that part-payment of a debt is not good consideration?
Definition
NO. Roffey concerns an agreement to PAY MORE (rather than an agreement to pay/accept LESS)
Term
Pinnel's case [1602]
Definition
A PROMISE TO ACCEPT LESS AND NOT TO SUE FOR THE REMAINING BALANCE IS UNENFORCEABLE (obiter - ) UNLESS SOME NEW CONSIDERATION WAS GIVEN
IN THIS CASE, NEW CONSIDERATION WAS GIVEN (in the form of earlier payment)
In this case, the debtor had paid a lesser sum AT AN EARLIER DATE than the total sum was due... payment before the payment was due was considered to be fresh consideration. (however, in this case, the creditor won and debtor lost because of a technical error)
Term
Foakes v Beer [1884]
Definition
PART-PAYMENT OF A DEBT IS NOT GOOD CONSIDERATION
D owed C a large lump sum of money and struggled to pay it
C promised D that he could pay by monthly installments
C promised D that if he did so, she would take no further proceedings against him
D paid off the debt
C sued him for interest accrued over the payment period
D argued that C had promised not to sue him
HELD - part-payment of a debt is not good consideration, the C's promise not to sue was un-enforceable, D had to pay the interest
Term
Re Selectmove Ltd [1995]
Definition
PART-PAYMENT OF A DEBT IS NOT GOOD CONSIDERATION
C owed inland revenue (D) money for unpaid taxes
C asked if he could pay in installments
D's agreement was never forthcoming
However, court HELD that if D had agreed, the promise would be un-enforceable, as the C had provided no fresh consideration. The factual benefit to the D of ultimately receiving the money (whereas without installments, C wouldn't have been able to pay) was unable to be construed as consideration for the promise to accept arrears in installments.
FURTHERMORE, the C was known to be suffering financial difficulties, therefore, by allowing installments, the D could prevent the C from going bankrupt, and thus in the long-run secure more payments.
Term
Which case confirms that, despite the judgement in Williams v Roffey [1991], the general rule that 'part-payment of a debt is not good consideration' still stands?
Definition
Re Selectmove Ltd [1995] (as it was decided after Williams)... therefore, w.r.t part-payment, Pinnels & Foakes still stand (this will be the case until HOL/Parliament expressly state otherwise, e.g. that Williams applies)
Term
When considering whether part-payment of a debt can be good consideration... do the courts take the benefit to the creditor of securting some payment, rather than nothing at all?
Definition
NO
Term
Can a promise to pay more be enforced?
Definition
YES - Williams v Roffey [1991]
However, the payee must gain some practical benefit from paying more +agreement to pay more must not be entered in to under ED. e.g. IN WILLIAMS V ROFFEY, ROFFEY APPROACHED WILLIAMS OF THEIR OWN ACCORD AND OFFERED THEM EXTRA MONEY.
Term
Can a promise to accept less be enforced?
Definition
NO - Foakes, Re Selectmove, Pinnels... unless...
Term
There are some exceptions to the rule that part-payment of a debt is not good consideration. What are they?
Definition
a) Payment in ki9nd - e.g. if in place of £500, the creditor accepts a horse or stocks & shares etc.
b) If additional benefit was conferred and/or detriment suffered, e.g. payment in advance at the creditor's request (Pinnels)
c) Payment at a different place at the creditor's request - though not if simply to suit the debtor, because there would then be no additional benefit
d) Some payment by a 3rd party
Term
Sibree v Trip [1846]
Definition
PART PAYMENT OF A DEBT IS GOOD CONSIDERATION WHERE PAYMENT IS GIVEN IN AN ALTERNATIVE WAY (E.G. MONEY / SHARES) AT CREDITOR'S REQUEST/WITH THEIR AGREEMENT
C agreed to pay with a 'negotiable security' rather than a liquidated demand
HELD - there was sufficient consideration for the promise to accept less. (using negotiable security placed an additional burden on the debtor)
Term
D & C Builders v Rees [1966]
Definition
PART-PAYMENT OF A DEBT CAN BE GOOD CONSIDERATION WHERE PAYMENT IS GIVEN IN AN ALTERNATIVE METHOD. HOWEVER, CHEQUE VS CASH IS NOT A GOOD ENOUGH CHANGE IN PAYMENT MODE. (there has to be some advantage / disadvantage gained through the change in payment mode)
CASE WAS ALSO DECIDED ON THE BASIS THAT THERE WAS ECONOMIC DURESS
D owed C money for building work
D was due to pay in cash
D paid a lesser amount by cheque
HELD - not sufficient consideration - in no way was it better to have part payment by cheque than full payment in cash.
Furthermore, there was also the issue of economic duress, as the D had known that the C was experiencing financial difficulties.
Term
VanBergen v St Edmund Properties [1933]
Definition
PART PAYMENT OF A DEBT AT A DIFFERENT PLACE CAN AMOUNT TO VALUABLE CONSIDERATION, PROVIDED IT IS AT THE CREDITOR'S REQUEST
Term
Welby v Drake [1825]
Definition
WHERE A 3RD PARTY ENTERS INTO AN AGREEMENT WITH A CREDITOR, BY WHICH THE CREDITOR ACCEPTS PART-PAYMENT OF THE DEBTOR'S DEBT, THE CREDITOR CANNOT SUE THE DEBTOR FOR THE DIFFERENCE
D owed C money
D's father entered into an agreement with C to pay 1/2 the debt, in return for the C's promise to accept it as payment in full satisfaction
C then sued D for outstanding balance
HELD - Father had provided sufficient consideration for the C's promise not to pursue the D for the outstanding balance. If C pursued the D, this would breach his contract with the father + amount to fraud (as he had induced father pay on the faith that his son would be discharged from further liability)
Term
Which case can be used to show that part-payment of a debt by a 3rd party is sufficient consideration?
Definition
Welby v Drake [1825]
Term
If a creditor agrees to accept part-payment from a 3rd party, in return for the promise that he will no longer hold the debtor lilable - but the creditor continues to hold the debtor liable - in what circumstances will this amount to a fraud on the part of the creditor?
Definition
where, at the time of the creditor giving his promise, he had no intention of honouring it.
Term
How can the principle 'a 3rd party can settle a debt with part-payment' be applied to a situation in which a debtor owes money to a number of creditors, can't pay each of them in full, and so agrees with each of them to pay a lesser amount?
Definition
Each creditor can be identified as a 3rd party to the debtor's agreement with another creditor. The debtor's money legally belongs to the creditors. By allowing the debtor to pay in part, the creditor is enabling the debtor to pay another creditor... Each creditor becomes a 3rd party to the agreement between the other parties (e.g. creditor agrees to accept less, so that other parties can receive their money)