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The common law position on the part payment of debts is to be found in Pinnel’s Case,157 as confirmed by the House of Lords in Foakes v Beer.158The rule is that part payment of a debt on the date that it is due can never be satisfaction for the full amount owed.159 _The

creditor will still be able to recover the balance of the debt, unless the debtor can show that some consideration was supplied in return for the creditor’s agreement to take the lesser sum. Thus, if payment is made early, or on the day, but at a different place from that specified in the contract, the debt may be discharged. Equally, if the debtor provides goods, or services, instead of cash, this, if accepted by the creditor, will discharge the debt fully, even if the value of what was supplied is less than the total amount owed: ‘the gift of a horse, a hawk, or a robe, in satisfaction is good’.160Thus, the payment of £5 on the due date could never discharge a debt of £100; but if the debtor offered and the creditor accepted a book worth £5 in satisfaction, the creditor could not then claim the balance of £95. The justification for this rather odd rule is that the book must have been regarded by the creditor as more beneficial than money, otherwise it would not have been accepted, and the court will not inquire further into the creditor’s motives.

3.11.1 The decision in Foakes v Beer

The rule in Pinnel’s Case was strictly obiter, in that the debtor had paid early, and had therefore in any case provided sufficient consideration to discharge the whole debt, but it was confirmed by the House of Lords in Foakes v Beer. Dr Foakes owed Mrs Beer a sum of money in relation to a judgment debt. Mrs Beer agreed that Dr Foakes could pay this off in instalments. When he had done so, Mrs Beer sued to recover the interest on the debt, in relation to the delay in the completion of payment resulting from the payment by instalments. The House of Lords held that, even if Mrs Beer had promised to forego the interest (which was by no means certain),161it was an unenforceable promise because Dr Foakes had provided no consideration for it. The Court of Appeal has recently confirmed in two cases that this is still the standard position as regards part payment of debts.

The first is Re Selectmove,162 _{which was discussed above;}163 _{the second is Ferguson v}

Davies.164 In the latter case, the plaintiff started a county court action to recover a debt, originally stated at £486.50 but later increased to £1,745.79. The defendant, as part of his ‘defence’ in relation to these proceedings sent the plaintiff a cheque for £150, sending

157 (1602) 5 Co Rep 117a; 77 ER 237. 158 (1884) 9 App Cas 605.

159 It seems unlikely that a reliance-based approach would come up with any different general rule on this issue. It is difficult to see that a debtor who has made part payment has ‘relied’ on a promise to accept this in full satisfaction – unless, perhaps, the debtor has subsequently taken on other commitments on the basis that the original debt has been extinguished.

160 (1602) 5 Co Rep 117a; 77 ER 237.

161 Cf the comments of Gilmore, 1974, at pp 31–32. 162 [1995] 2 All ER 534.

163 At 3.7.10.

letters to the plaintiff and the court indicating that, while he admitted liability to this extent, the cheque was sent in full settlement of his dispute. The plaintiff, having sought advice from the county court, presented the cheque for payment, but continued with his action. The trial judge held that by accepting the £150 the plaintiff had compromised his action by a binding ‘accord and satisfaction’. The Court of Appeal disagreed. Henry LJ, with whom Aldous LJ agreed, did so on the basis that there was no consideration here for the plaintiff’s alleged agreement to abandon his claim. This was not a situation where a claim for a disputed amount was settled by a compromise involving partial payment by the debtor (a common basis for the settlement of legal actions). On the contrary, the defendant had admitted liability for the £150 sent, and so was giving the plaintiff nothing which could amount to consideration for the plaintiff’s alleged agreement to forgo any further claim. By his own admission, he was bound in law to pay the £150, so this payment merely constituted the settlement of an acknowledged debt, and could not serve as consideration for any other promise. The principles of Foakes v Beer and D and C

Builders v Rees165 applied, and the plaintiff was free to pursue his claim for the balance which he alleged was owed to him.

It should perhaps be noted that the other member of the Court of Appeal, Evans LJ, with whom Aldous LJ also agreed, decided the case on the different ground that on the facts there was no true ‘accord’, in that the defendant’s letters could reasonably be interpreted as not being intended to assert that the £150 was sent as full settlement of all claims by the plaintiff. On the consideration issue, Evans LJ specifically indicated that he was expressing no view. Nevertheless, there is no doubt that in the light of these latest Court of Appeal decisions, the principles in Pinnel’s Case and Foakes v Beer remain good law in relation to the payment of debts. As Peter Gibson LJ put it in Re Selectmove:166

Foakes v Beer was not even referred to in Williams’ case,167 and it is in my judgment impossible, consistently with the doctrine of precedent, for this court to extend the principle of Williams’ case to any circumstances governed by the principle of Foakes v Beer. If that extension is to be made, it must be by the House of Lords or, perhaps even more appropriately, by Parliament after consideration by the Law Commission.

What is the effect, if any, of the doctrine of promissory estoppel on these principles? In this context, it is important to note that Foakes v Beer was decided in 1884, that is, seven years after Hughes v Metropolitan Rly.168Hughes was not even cited in the later case. Given

that three of the four members of the House of Lords who delivered speeches in Foakes v

Beer expressed some unhappiness about the outcome to which they felt that the common

law bound them,169 so that they would gladly have accepted an escape route via the equitable doctrine of waiver, if that had been available, it must be assumed that the approach taken in Hughes was considered to have no relevance to the situation of part payment of debts. This, then, was a further way in which Lord Denning’s decision in

Central London Property Trust Ltd v High Trees House Ltd broke new ground. The case was

concerned, in effect, with the partial payment of a debt (that is, half the rent for the war years). Nevertheless, Denning felt able to apply to it the Hughes principle of ‘equitable waiver’, and it seems now to be generally accepted that this doctrine, in its new guise of ‘promissory estoppel’, can mitigate the harshness of the rule in Foakes v Beer, in

165 [1966] 2 QB 617; [1965] 3 All ER 837 – discussed above, at 3.10.4. 166 [1995] 2 All ER 531, at p 538.

167 Ie, Williams v Roffey [1991] 1 QB 1; [1990] 1 All ER 512. 168 (1877) 2 App Cas 439.

appropriate cases.170This is not to say that Foakes v Beer would definitely be decided differently if it came before the House of Lords again today. That would depend on what exactly Mrs Beer was found to have promised, whether Dr Foakes could be said to have relied on that promise and also on whether promissory estoppel can ever be applied to extinguish a ‘one-off’ debt as opposed to payment obligations under a continuing contract. This issue has been discussed in the previous section, in considering whether promissory estoppel is only suspensory in its effect. It is, however, probably significant that the issue of promissory estoppel was not discussed in either Re Selectmove or Ferguson

v Davies. This would suggest that the courts remain reluctant to introduce this principle

into the area of part payment of simple debts.