Jack wants to have a conservatory built in his house. He writes to three builders, Bob, Ken and Andy, asking them to submit estimates. In the letters Jack sets down his specifications for the conservatory and, furthermore, states that he will accept the

The general rule is that the invitation to tender is not an offer but an invitation to treat. Thus, the offer is only made by the person who submits the tender. Therefore, when Ken replies saying that he will charge £12,000 for the work, he is submitting a tender to Jack aiming to get the building project. Although Andy matches Jack’s specifications of offering to build conservatories with only £8,000, Jack is not obliged to accept the “most competitive offer”. As Bingham LJ in Blackpool and Fylade Aero Club Ltd v Blackpool BC outlines: the employee ‘need not accept the highest tender, he need not accept any tender, he need not give any reasons to justify his acceptance or rejection of any tender received’. After the establishment of the offer, I will proceed to find out the acceptance in this case. An acceptance is a qualified expression of assent to the terms proposed by the offer. With several tenders, an acceptance is made when the person inviting the tenders accepts one of them. When Jack accordingly contacts Ken to say that he will be employing him to do the building work, he is accepting the offer given by Ken to build his conservatory for £12,000. Since the acceptance matches with the offer, the agreement between Jack and Ken is then formed.

After satisfying the basic requirements of an agreement, in order to create an enforceable contract, consideration must be present in the negotiation. In Currie v Misa, a valuable consideration is defined as one that ‘consists either in some right, interest, profit or benefit accruing to the party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.’ Professor Tritel has made a helpful clarification, ‘The traditional definition of consideration “something of value” must be given and according states that consideration is either some detriment to the promisee or some benefit to the promisor.’ In this particular case, the payment by Jack is the consideration for Ken’s promise to build a conservatory and can be described as a detriment to Jack or as a benefit to Ken; and conversely the service of building the conservatory is consideration for Jack’s promise to pay and can be described either a detriment to the Ken or as a benefit to Jack. Therefore, there is benefit and detriments for the promise of each party when considered separately which constitute to the consideration. After establishing the consideration in this case, with the pre-existence of an agreement, an enforceable contract is officially created.

The main issue in this case lies in the variation clause of the existing contract, which is to decrease the payment from £12,000 to £10,000. In order to make this variation clause enforceable, a fresh consideration must be present. For a fresh consideration to be present, both parties must both gain and lose something in the new deal. The part payment is detrimental to Ken as he would gain nothing from the decreased amount of money, in other words, he does not earn any extra benefit from the new deal. Using the general rule in Pinnel’s Case, in the absence of a deed or fresh consideration, part-payment does not discharge the whole debt even though the creditor says or promises that he will forgo the unpaid part. Thus in this case, since Jack owes Ken £12,000 in the first place, therefore, even Ken agrees to receive £10,000 in complete discharge of the debt, from the legal point of view Ken remains entitled to the unpaid balance despite his promise. The whole debt will only be discharged by part-payment if Jack provides fresh consideration, that is Jack does something extra or something not strictly required (such as paying the debt earlier than the due date or give something additional for the dispensation granted by Ken) or Ken releases Jack from the balance by a formal deal. Since none of these circumstances is present in this case, the whole debt will not be discharged by part-payment. The common law rule against decreasing pacts was affirmed by the House of Lords in Foakes v Beer, where B’s promise to abandon her claims to interest on F’s debt to her was unenforceable due to a lack of consideration. B was not barred from claiming the interest in Foakes v Beer.

However, Jack may argue the existence of a practical benefit gained by Ken by saving the risk of a costly legal action against Jack which may result in him recovering even less than the £10,000 offered. Applying the reasoning of the ratio in Williams v Roffey Bros & Nicolls Ltd, Ken actually earned the ‘practical benefit’ of avoidance of expensive litigation process.  There has been fierce objection to the Foakes v Beer rule since it ignores the creditor’s ‘practical benefit’ in receiving part-payment now in the hand rather than having to chase full payment later and eventually failing. In Foakes v Beer, Lord Blackburn was minded to dissent on the basis that ‘a bird in the hand is worth two in the bush’. However, he eventually relented and acquiesced in the other Law Lord’s decision to affirm the common law rule. The ‘bird in the hand’ argument resurfaced before the Court of Appeal in Re Selectmove but the court considered that it lacked the authority to subvert the rule in Pinnel’s Case, by invoking the concept of a ‘practical benefit’ in Williams v Roffey Bros of receiving immediate partial payment. This would have been too bold a subversion of the ancient rule and only the Supreme Court can reverse its earlier decision in Foakes v Beer. Furthermore, in Re Selectmove, the court said that the common law rule was intact and could not be subverted by resort to ‘practical benefit’ reasoning. Therefore, due to the lack of precedent support on this issue, I would advise Jack that it is difficult for him to use the ‘practical benefit’ notion to argue for a fresh consideration in order to construct a new consideration.

After failing in the common law doctrine, Jack may resort to equity doctrine to help himself avoid paying the higher sum because. Promissory estoppel would be able to prevent Ken from claiming back payment of the construction work forgone as promised. However, promissory estoppel requires the representee to have shown at least some form of reliance on the new promise in order to use this equitable doctrine. It is impossible to say that Jack had relied on this new acceptance of £10,000 because Ken had changed his mind after he had posted the letter. Since Jack has not yet received the letter of acceptance of part payment, there is hardly any reason for him to argue that rely on the new deal.

If there is fresh consideration in this case, the postal rule of acceptance should probably be taken into consideration. Since writing is a non-instantaneous method, a different set of rule is applied when considering the acceptance to the offer. In postal rule, once the letter is posted, the acceptance is completed. Postal acceptance rule was laid down by Adam v Lindsell: it was argued on the behalf of L that there was no contract between the parties until the letter of acceptance was actually received. The Court replied, ‘If that were so, no contract could ever be completed by post. For if L were not bound by their offer when accepted by A until the answer was received, then A ought not to be bound till they had received the notification that L had received their answer and assented to it. And so it might go on ad inifinitum.’ Therefore, if there is fresh consideration in this case, there will be an enforceable contract and Ken’s phone call of regretting his acceptance would be invalid. However, in this case, the postal rule can be disregarded as the absence of fresh consideration hinders the case to move forward to a new enforceable contract.

In conclusion, due to the absence of fresh consideration, I would advise Jack not to pursue legal action to enforce the variation clause. Accordingly, Jack will need to pay the original amount of £12,000 he owes to Ken in order not to breach his contract.

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