Foakes v Beer (1884) 9 App Cas 605 (HL)

Facts

• Dr. Foakes owed Mrs. Beer a sum of money following a judgment debt.
• The parties agreed that if Foakes paid part of the debt immediately and the remainder in instalments, Beer would not take further action to recover the balance, including statutory interest.
• Foakes complied with the agreed payment plan.
• Mrs. Beer subsequently sought the interest on the original judgment debt, arguing the agreement to forgo it was not enforceable, as no new consideration had been provided for her promise.
• The dispute centred on whether Beer could claim the interest, given the agreement for staged repayment.

Issues

1. Whether part payment of a debt by a debtor constitutes sufficient consideration to discharge the remaining balance under a new agreement.
2. Whether a creditor’s promise to accept a lesser sum in full satisfaction of a larger sum is contractually binding absent fresh consideration.
3. Whether concepts such as 'practical benefit' or equitable doctrines like promissory estoppel could make a creditor’s promise enforceable in such situations.
4. Whether the presence of duress or lack of "true accord" invalidates any claim to promissory estoppel in the context of debt repayment agreements.

Decision

• The House of Lords held that a promise to accept part payment of a debt was not supported by valid consideration from the debtor, as the debtor was already obligated to pay the whole amount.
• The court determined that part payment could not satisfy a greater debt unless additional consideration was provided.
• The rule in Pinnel's Case was reaffirmed: payment of a lesser sum does not discharge the full debt.
• Beer was entitled to recover the interest, as the agreement to accept less had no legal effect absent fresh consideration.
• The case clarified that the notion of a 'practical benefit', as established in later cases, does not apply to a creditor's acceptance of a lesser sum for an existing debt.

Legal Principles

• Consideration is essential for a modification to be enforceable; an existing legal obligation does not constitute new consideration.
• Payment of part of a debt is not good consideration for the creditor’s promise to accept less, as established in Pinnel’s Case.
• Promissory estoppel may prevent a creditor from enforcing the full debt if a debtor has relied on a clear promise, as seen in later cases such as Central London Property Trust Ltd v High Trees House Ltd and Collier v Wright.
• Promissory estoppel does not grant a cause of action; it operates as a shield and requires genuine reliance and an absence of inequitable conduct or duress.
• The 'practical benefit' doctrine from Williams v Roffey does not extend to agreements for part payment of debt.
• Duress or absence of true accord will prevent promissory estoppel from applying to a promise made under undue pressure.

Conclusion

Foakes v Beer remains authoritative in establishing that part payment of a debt, without additional consideration, does not discharge the full debt, though equity via promissory estoppel can sometimes limit this strict common law rule. Later cases have acknowledged these limitations, while retaining the precedent set by the House of Lords.