The doctrine of consideration was also used was where alteration promises were made regarding the part payment of debts. The general rule as established in Pinnel's' Case (1602) was that "the gift of a horse, hawk or robe, etc in satisfaction is good." The assumption being that providing something in consideration might be more beneficial to the plaintiff than waiting for the money.
- Foakes v Beer (1884):
In Foakes v Beer, the House of Lords supported the principle of Pinnel's Case: payment of part of the debt did not in itself constitute consideration for Mrs Beer’s promise to forgo the balance. Beer claimed that the agreement was void since Foakes offered no consideration. The Court sided with Beer, allowing Pinnel's case to stand. Foakes v Beer stands for the proposition that payment of a lesser sum cannot constitute consideration for a promise not to enforce the whole sum. Thus, where a creditor accepts less than the full amount owing to him and promises to forgive the remainder, it would generally not be difficult to prove the practical benefits received by the creditor.
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.
- 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. However, on the facts of the case the court found that the defendants received a practical benefit (the work continued, the penalty clause was not triggered, no new subcontractor had to be found and there were various administrative benefits) due to the new agreement such that the new agreement was supported by consideration and enforceable.
Although Williams v Roffey deals with the creation or modification of contractual obligations and Foakes v Beer deals with the discharge of contractual obligations, this is a difference without substance. It is well established that the discharge of contractual obligations is governed by the same principles as the creation of such obligations. It is therefore impossible to justify the different treatment manifested by these two cases in the search for consideration.
- Re Selectmove Ltd (1995):
In Re Selectmove Ltd the English Court of Appeal held that debtors cannot take advantage of recent developments in the law of consideration. The company's defence required that the promise to pay the instalments of the money it owed was sufficient consideration by providing a benefit to the revenue.
The Court of Appeal held that the agreement was not supported by sufficient consideration and the company failed. It further confirms the existing principle that an offer to fulfill an existing contractual obligation cannot be seen as consideration to support a new agreement.
The Court of Appeal, in Re Selectmove Ltd stated that the practical benefit doctrine arising from Williams v Roffey cannot be used as an additional exception to the rule. 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.
