In the case of promissory estoppel, consideration has centered on the notion of exchange or bargain as a reasonable basis for the elucidation of what is meant by promissory estoppel in payment of consideration under the law of contract. In Williams v. Roffey, the formalistic notions of consideration were extended to their limits but it was obvious that amendment of the contract facilitated Roffey to receive some financial benefits. The plaintiff carpenter entered into a contract with the defendant to do carpentry work in 27 flats. After completing 9 flats, the plaintiff suffered a financial strain. Smelling the foulness that the work may not be completed on time, the defendant offered the plaintiff an additional bonus of £ 575 for each flat that had been fitted out by him. After completing further 8 more flats, the plaintiff terminated work. The defendant was compelled to pay the bonus for the 8 flats and also the agreed rate for all 17 flats. The main crucial finding, in this case, was that both deceit and duress were absent from the plaintiff’s side. Further, the agreement was lucidly drafted by the defendant in the genuine interest of both parties. Though, Williams merely assured to prolong his original commitments, the practical benefit to Roffey was enough to make his promise obligatory. In promissory estoppel, there are occasions where some amendment in a contract involves one party surrendering some of his privileges in a scenario in which the other party offers no further consideration to substantiate the promise.
In Pinnel’s case (1602), it was held that payment of a lesser amount in fulfillment of a greater one did not cater to the requirements under the law of contract. The principle laid down in Pinnel’s case was again confirmed in Foakes v Beer (1884). In that case, Foakes had to pay £2,000 to Beer who filed a suit and obtained in judgment. A At this juncture, Foakes pleaded for more time and this was accepted by Beer that Beer would initiate no further proceedings against Foakes in return for immediate settlement of £ 500 plus agreed on installments until the whole amount was satisfied. However, Beer claimed an additional £360 by way of interest on the judgment debt. The court accepted her claim. It is to be observed through Foakes had repaid the entire loan amount (lesser capital sum), it did not discharge the greater debt. (Capital plus interest). It was held by the Court that Beer was entitled to a greater amount though she agreed to forego interest portion earlier since Foakes had offered no consideration for the promise made by him.
Thus, the ‘ruthless reason ‘of this common law stand can be applied to any new deal between Foakes and Beer.
- A contractual connection presents between Foakes and Beer.
- A new agreement is entered in which Beer assures or promises to Foakes that she will acknowledge less than is due to her under the contract.
- Hence, Beer’s promise is not substantiated by a new consideration from Foakes.
- It is assumed that there exists no new agreement substantiated by the consideration which absolves the liability under the original contract.
- Therefore, Beer can resile her promise, be firm on her firm legal rights and sue for the full, original debt. ( Mulcahy & Tillotson: p. 93).
Further, it was held in Coke Littleton, where the stipulation was the payment of a lesser amount in full satisfaction of the entire amount and it is obvious that a lesser sum of money cannot be considered to be a satisfaction of a greater amount than a release of debt under seal, in whole satisfaction of the entire amount, it would be binding and valid.
In Re Selectmove Ltd, the company had large tax outstanding. One of the directors tried to conclude a settlement with a tax authority to pay these arrears in installments. However, the company never received any feedback about this arrangement from the tax authority even after the lapse of considerable time. The main question is whether the rule of acceptance by Inland Revenue can be regarded as acceptance of the proposal by silence and whether there are any events of consideration for the promise to acknowledge payment of the arrears by installments. The Court of Appeal found itself bound by the decision in Foakes v Beer and was not able to extend the decision in William v Roffey in favour of the appellant. (Oughton & Davis 2004: p. 132).
In D& C Builders Ltd v Rees, the Court of Appeal concurred with the defendant that the plaintiff builder’s contract to accept a cheque for a lesser amount due, instead of payment in cash, could be regarded as a new consideration to substantiate a promise to accept less as the facts of the case divulged a magnitude of coercion rather than a mutual and consensual contract. ( Kotz et al 1997 : p. 70).
Thus, in case of coercion, undue influence, the court may sanction some sort of protection to the plaintiff who had paid a lesser amount of consideration. Further as laid down in the Williams v. Roffey, in the absence of deceit and duress, the court may offer some sort of safeguard to the plaintiff. Further, as laid down in Foakes v Beer, if there exists no new agreement substantiated by the consideration which absolves the liability under the original contract, the court may not protect the interest of the plaintiff in case of lesser payments to the defendant.
List of References
- .Kotz Hein , Flessner Axel and Tony Weir. (1997). European Contract Law. Oxford : Oxford University Press.
- Mulcathy Linda & Tillotson John. (2004) Contract law in perspective. London: Routledge Cavendish.
- Oughton David W & Davis Martin. (2000) Sourcebook on Contract Law. London: Routledge.