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contract law

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Introduction

Law Q. What is the present position of practical benefit keeping the following cases in mind: 1) Pinnel's Case (1602) 2) Foakes v Beer (1884) 3) Williams v Roffey (1990) 4) Re Selectmove Ltd (1995) 1) Pinnel's Case (1602): The general rule is that if a creditor promises to discharge a debt in return for a fraction of the payment, in paying the agreed fraction, the promisee is not providing consideration for the promise, as this is merely part performance of a contractual duty already owed. Consequently, the debtor is still liable for the whole amount, as he cannot force the promissor to accept less. This is true unless the debtor provided fresh consideration for the promise. Where there was the introduction of some new element in the transaction, (at the creditor's request), then the court said it would be prepared to hold the creditor to his promise. ...read more.

Middle

The practical benefits to the creditor would be the immediate receipt of payment and the saving of time, effort and expense. Whenever a creditor and a debtor reach an agreement on the payment of the debt by installments, the creditor will always see a practical benefit for himself in agreeing. However, this practical benefit, expressly considered in Foakes v Beer, was held not to constitute good consideration in law. 3) Williams v Roffey (1990): Williams v Roffey is a significant decision because it weakens the requirement of consideration in the context of contract modification, thus giving effect to commercial realities and the intentions of the parties. In the case, the Court of Appeal was in favour of the plaintiffs and the oral agreement made was enforceable. All three judges indicated that it was good law and that a gratuitous promise would fail for lack of consideration: just as in Stilk v Myrick (1809), the new agreement imposed no additional detriment above that of the original contract on the plaintiffs. ...read more.

Conclusion

In that case, it was held that the doctrine only applies where the original promise was a promise to pay extra and not to pay less. It should be noted, however, that the Court of Appeal in Re Selectmove were unable to distinguish Foakes v Beer (a House of Lords decision), in order to apply Williams v Roffey (Court of Appeal). It therefore remains to be seen whether the House of Lords would decide this point differently. In any event, the equitable principle of promissory estoppel may provide the debtor with relief. The Court of Appeal failed to acknowledge that its decision in Williams v Roffey was incompatible with the decision of the House of Lords in Foakes v Beer. Instead of harmonising these two lines of cases, the Court of Appeal in Re Selectmove Ltd restricted the application of the practical benefits analysis to the context of contract modification relating to only the supply of goods and services. ...read more.

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