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Contract Law - Geoff is the owner of a 1927 Bentley car, which he is renovating to its original condition with considerable help from his brother, Paul.

Extracts from this essay...

Introduction

Contract (2) Geoff is the owner of a 1927 Bentley car, which he is renovating to its original condition with considerable help from his brother, Paul. When the work is nearly completed, Geoff decides to get married and can no longer keep the car. He discusses the situation with Paul and they agree that in consideration of all the work Paul has done on the car, Paul can have it for £2,000 (which is far less than the car is worth). They agree that the money will be paid in four half - yearly instalments of £500, the first being due in December. A note of their agreement is drawn up by Geoff, and signed by Paul and himself. Paul makes the first payment in December but soon after he discovers that it will cost much more to complete, the renovation than was originally thought, as some of the parts are having to be custom-made. Paul tells Geoff about this, and Geoff then agrees to forego the second payment, which has just fallen due in June of the following year. As a result Paul fees able to order the parts required. Geoff now regrets having made a promise to forego the second payment. Advise him about recovering the money from Paul.

Middle

consideration must have value, but need not be sufficient. Therefore the £2,000, although less than the value of the car, is valid consideration. Therefore, there is a contract that Paul will buy the car for £2,000. Now Paul realises he cannot keep the payments. Therefore we will look at whether G agreeing to forego the 2nd payment is a contract. By Pinnel's Case (1602), part payment of a debt does not discharge the whole debt unless there is further consideration e.g. paying earlier, or in a different form or if a different place. This was approved in Foakes v Beer (1984). This means Paul is already bound to pay Geoff the full amount and has furnished no consideration by the new promise to accept less. Re Selectmove (1995) tried to apply the approach in Williams v Roffey (1990) to debts and said that if the creditor got a benefit from the part payment, it should discharge the debt. The court said no. The Court of Appeal was bound by the House of Lords decision in Foakes v Beer. Therefore, if Paul tells Geoff to keep his promise to forego the £500 June payment as following Pinnel's case, part payment of a debt will not discharge the full debt.

Conclusion

For estoppel, it must be inequitable for Geoff to go back on his promise. In DC Builders v Rees (1966), it was inequitable as the promisor had made the promise in response to pressure exerted by the promisee. Geoff could argue that he has not acted inequitably while he did not know Paul would order new parts. Paul as already go the car for well below motor value and Geoff has acted honestly and reasonably. Whether estoppel suspends or extinguishes rights is debatable. Tool Metal v Tungsten Electric Co (1955) said it suspends rights but the High Trees case says it extinguishes rights. It is thought that here it would extinguish Geoff's rights to the £500, if estoppel was held valid. Finally by Combe v Combe (1951), estoppel must be used as a shield and not as a sword. Here, it appears that Paul is using it as a defence and should have no problems. Thus, Paul and Geoff had an agreement at law that Geoff will sell Paul the car for £2,000. This is binding on the parties. The agreement by Geoff to forego the £500 June payment is not binding at law, so Geoff can require the full date to be repaid (Foakes v Beer (1984)). The only bad point for Geoff is that Paul could rely on Promissory Estoppel and stop Geoff from claiming the full debt.

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