Foakes v Beer PDF

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Foakes v Beer
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Foakes v Beer Facts: Beer (Respondent) loaned Foakes (Appellant) money. Foakes was unable to repay the loan, and Beer received a judgement in favour to recover the money she loaned. They then entered into an agreement where a lesser sum of money and six-monthly payments until the amount was repaid, would suffice as consideration and she would not enforce her judgement against him. Foakes was in financial difficulty and created an agreement for Beer to waive any interest on the amount owed which was signed by Beer. Foakes paid back the principal, but not the interest. Relief Sought Beer sued Foakes for the interest. Issue: Whether Beer was entitled to the interest, despite their agreement that he would not need to pay it or worded differently; Was Beers promise not to enforce the judgment supported by consideration? Decision: Beers promise not to enforce the judgment was not binding as Foakes had not provided any consideration. Pinnel’s case was affirmed. Ratio: There has to be some independent benefit, actual of contingent, of a kind which might in law be a good and valuable consideration.   

Payment of a lesser sum on the day- in replacement of a greater sum is NOT consideration. A deal with a lesser sum in settlement in debt of a GREATER sum, does not have any consideration. This rule is often operates harshly acknowledges by the House of Lords in Foakes v Beer.

The harshness of Foakes v Beer rule:   

Men of business everyday recognize that buyers can act on the ground that prompt payment of part of the demand may be more beneficial than to enforce the original deal. Because of this- the court is sometimes willing to work around the rule. This gives respect to the duty of precedent but also gives right to the desire to do justice when the application of the rule is unduly harsh.

A creditor cannot agree to accept a lesser amount of money from its debtor than the actual debt, as there is no consideration. Foakes v Beer Ratio The Limitations to this Rule: 1. It must be a liquidated debt. 2. The claim must be undisputed 3. The introduction of a new element: Namely; o Earlier Payment; o Another form of Payment; and o Or payment by cheque (Overruled) 4. Compromise with Creditor 5. Statutory Exception (s27(a)) Property Law Act. 6. Payment by a 3rd Party 7. Promissory or Equitable Estoppel 1- It must be a liquidated debt. a. The rule only applies when the creditors claim is for a liquidated sum of money. b. Liquidated means that the sum of money asked for is fixed/named. c. It cannot be a debt made for damages or remuneration where no sum is fixed by the terms of the contract.

2- The claim must be undisputed. a. If there is a dispute as to the liability of the debtor to pay the amount in question, or the amount owing, Foukes v Beer rule does not apply. b. If there is no dispute and the parties agree, it forms a ‘contract of compromise’where the creditors agreement of a lesser sum is considered to be supported by consideration. The consideration is that the debtor is giving up the right to its defence being possibly upheld by a court. c. This debt must be genuinely disputed, and they must actually believe that they are not obliged to do what is set out in contract. d. The dispute claim does not have to be correct, but only genuinely held. i. For example: The creditor demands the debt of 100 but the debtor says I have already paid you 400 at a racetrack. The creditor agrees to take 600 in settlement. This is binding, EVEN when it is later found that the creditor was only given 200, so long as this debt was honestly disputed at the time, despite being unfounded. e. There is a difference between a disputed debt and a dispute about the debt. The latter, for instance, when aprties have a dispute surrounding how much a creditor will take, can be excused for haggling and does not constitute a ‘disputed debt’. f. Disputed debt instead will only apply to situations where there is some suggestions that the full amount claimed is not owing.

3- The introduction of a new element. Namely; Earlier Payment; a. Payment earlier, if requested by a creditor, may be good consideration i. The payment, even a day earlier than it is due, can be good consideration, as they were not obliged to do so and technically at some sort of detriment. ii. It must be requested by the creditor. The debtor unilaterally doing so will not constitute consideration.

Another Form of Payment; b. Payment in another form may suffice: For example, the payment of a horse may suffice to discharge a certain debt.

i. Courts refuse to measure the adequacy of consideration. To do so is to hinder one’s ability to bargain rightfully. Courts can not also fully measure in comparative terms what an object may mean to a particular person. ii. But, if a court is presented with the same situation in money, as in 10 dollars to satisfy a debt of 100, the courts cannot help but realise the obvious numeral inadequacy of the deal. iii. This is often used as an intentional mechanism, to avoid the law when someone no longer wishes to be bound.

Or Payment by Cheque (Overruled) c. It used to be law that if you used a negotiable instrument- which is a cheque, that it guarantees the paying of the specific amount of money and that this means that even a cheque of a lower sum of money would be consideration for something of greater value. d. D&C v Rees saw this overturned, as there is ‘no sensible distinction to be drawn between the payment of a lesser sum by cash and a payment by cheque’. If a creditor is not bound when he receives a lesser sum by cash he is not bound by receiving the same amount through cheque -Lord Denning.

4- Compromise with Creditor a. This is when an agreement is made with more than one creditor. i. For example; Jane finds she has assets worth 1000 and five different debts totalling 2000. All five creditors press her for payment. She can make a composition with her creditors- which is when creditors will accept this as a more advantageous situation than the alternative route, which is dealing with her bankruptcy. So, a creditor will receive lesser, but still it will be good consideration.

5- Statutory Exception of s 92 / now s27(a) a. The Judicator Act ’98 said: An acknowledgement in writing by a creditor or by any other person authorised of the receipt of his debt in satisfaction of his whole debt in satisfaction of his whole debt, shall operate as a discharge of the debt. Any rule notwithstanding (Basically saying ‘Foukes and Beer notwithstanding’. b. In order to successfully invoke this section, it must be strictly complied with. c. S 92 was replaced with s27(a) of the Property Law Act 2007. 6-

Payment by a Third Party a. Payment by a third party can extinguish the debt if; i. Lets suppose A owes B 1000. Then C enters into an arrangement with B to say she will pay half the amount owing on the condition that it will discharge the debt owing by A. This will extinguish the Debt.

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Promissory or Equitable Estoppel a. When a creditor and a debtor start in a process of negotiation, which leads the debtor to suppose that on payment of the lesser sum, the creditor will not enforce said balance, and on the faith thereof the debtor pays this sum and accepts it as satisfaction, then the creditor will not be allowed to enforce the balance when it will be unequitable to do so. i. For example: in WWII tenants went away to escape bombs and the landlords reduced their rent, and it was held that they could then not turn around and sue for the balance. b. This is controversial: Under Lord Denning, if a debtor pays a lesser sum pursuant to a relevant agreement, then the creditor cannot turn around and claim the balance. This is blatantly contradictory to Foules v Beer and the only requirement os that it not a) be unquitabnle to enforce the agreement, or there was no element of ‘duress’ or improper conduct. Apart from this ‘Foukes and Beer’ would under Dennings description, disappear. i. Mahn in Home Guard says that Promissory Estoppable is not a way of avoiding Foukes v Beer and the law is not displaced like Denning says. It

would be extraorindary if his word were to replace a binding decision of the House of Lords. ii. There also needs to be a form of detrimental reliance In promissory estoppel; and Lord Denning never mentioned this....