Foakes v Beer
House of Lords
Citations: (1884) 9 App Cas 605.
Facts
A debtor was struggling to pay his debt to the creditor. They reached an agreement whereby the debtor would immediately pay part of the debt, and the remainder in instalments. In return, the creditor would not bring any legal proceedings in relation to the debt. The debtor stuck to the agreement and eventually paid off the debt.
The creditor then claimed interest on the balance for the period in which the debtor had been paying the instalments. The debtor argued that the creditor was bound by her agreement not to bring any claims over the debt. The creditor argued that the debtor had not provided any consideration for this promise. Therefore, it was not binding.
Issue(s)
- Had the debtor provided consideration for the creditor’s promise?
Decision
The House of Lords held in favour of the creditor. The debtor’s promise to pay a lesser amount, or the same amount over a greater period of time, was not good consideration.
This Case is Authority For…
A promise to pay part of a debt is not good consideration for an agreement to settle the full amount. This is because the defendant is already under an obligation to pay. Existing obligations cannot be relied on as consideration.
Lord Blackburn noted that if the debtor had instead promised to pay early, or give the creditor an object (such as a horse), or do something else which he was not already obliged to do, this would have been good consideration even if it was of less value than the full debt.
Other
The Supreme Court in Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24 recently commented that they may reconsider the validity of this case in future.
