Collier v Wright [2008] 1 WLR 643

Facts

• Collier was jointly liable with two business partners for a debt owed to Wright.
• Wright agreed to accept one-third of the total debt from Collier, stating he would seek the remainder from the other partners.
• Collier paid his one-third share in full.
• The other partners became bankrupt.
• After their bankruptcy, Wright demanded the entire outstanding balance from Collier.
• Collier relied on Wright's promise in making the part payment.
• The Court of Appeal found Collier had a triable issue based on promissory estoppel.

Issues

1. Whether promissory estoppel can prevent a creditor from enforcing the full balance of a debt after accepting part payment as full satisfaction.
2. Whether Collier's reliance on Wright’s promise was sufficient to extinguish the remaining debt.
3. To what extent the doctrine of promissory estoppel can limit the traditional rule in Foakes v Beer regarding part payment and consideration.

Decision

• The Court of Appeal held that there was a triable issue regarding the application of promissory estoppel in Collier’s favor.
• It was determined that where a debtor pays part of a debt in reliance on the creditor’s promise to accept less, promissory estoppel may bind the creditor to that promise.
• Arden LJ articulated that if a creditor voluntarily accepts part payment and the debtor relies on this to their detriment, the promise can extinguish the creditor’s claim for the balance.
• The rule in Foakes v Beer was recognized as limited by this application of promissory estoppel.

Legal Principles

• Promissory estoppel prevents a party from enforcing strict legal rights where it would be inequitable due to the other party’s detrimental reliance on a clear promise.
• The doctrine serves as a defense (a shield), not as a cause of action (a sword).
• For promissory estoppel to apply, the promise must be clear and unambiguous, and reliance must cause a change in the party’s position.
• In the context of debt, part payment may extinguish the full debt if reliance and inequity are established.
• Promissory estoppel may have either suspensory or extinctive effect depending on the nature of the parties' actions and the context of the obligation.
• The principle of "practical benefit" (from Williams v Roffey) does not extend to part payment of debt following Re Selectmove and Foakes v Beer.

Conclusion

The case confirms that promissory estoppel can serve to extinguish a creditor’s right to remaining debt where the debtor, in reliance on a clear promise to accept part payment as satisfaction, fulfills that payment. This doctrine operates to ensure equity and protect reliance, though it is subject to limitations and does not override settled principles concerning consideration in all debt contexts.