Re Selectmove [1995] 2 All ER 531

Facts

• Selectmove, a company, accrued tax arrears owed to the Inland Revenue.
• The company proposed to pay its outstanding debt in installments rather than in a lump sum.
• A representative for the Inland Revenue stated he would relay this proposal to his superiors, but Selectmove received no further response.
• Eventually, the Inland Revenue demanded immediate payment of the entire outstanding sum and threatened a winding-up petition.
• Selectmove argued an agreement had been made for payment by installments and that this should prevent a winding-up petition.
• The company contended that its promise to pay by installments provided a “practical benefit” to the Revenue by increasing the likelihood of full payment, thus constituting valid consideration.

Issues

1. Whether an agreement to accept payment of a debt in installments, offering the creditor a "practical benefit," constituted valid consideration sufficient to bind the Inland Revenue.
2. Whether the principle of "practical benefit" established in Williams v Roffey Bros could extend to a creditor’s promise to accept less than the full sum owed.
3. Whether the House of Lords' authority in Foakes v Beer prevented such an extension and thereby rendered the alleged agreement unenforceable.

Decision

• The Court of Appeal held that Selectmove was liable for immediate payment of the full debt and that the arrangement for installment payments was not binding.
• The doctrine of “practical benefit” as recognized in Williams v Roffey could not be used to support the sufficiency of consideration in cases of part payment of debt.
• The principle in Foakes v Beer was reaffirmed, precluding practical benefit from constituting good consideration when a creditor agrees to accept less.
• The Court emphasized that it was bound by prior precedent and lacked authority to depart from the House of Lords’ ruling in Foakes v Beer.
• Any modification to this principle would require intervention by the Supreme Court or Parliament.

Legal Principles

• The requirement for valid consideration in contractual modifications precludes a mere promise to accept part payment of a debt as sufficient, even if practical benefit results.
• Williams v Roffey establishes a narrow exception, applicable to cases involving provision of goods or services, but not to reduction of debt obligations.
• The Court of Appeal is bound by House of Lords authority, specifically Foakes v Beer, which holds that practical benefit does not override the general rule regarding consideration in part-payment cases.
• Modification of established legal principles by lower courts is not permissible; such changes must come from higher authority or legislative action.

Conclusion

In re Selectmove [1995] 2 All ER 531 confirms that the principle of practical benefit does not amount to valid consideration for part payment of debts, as established in Foakes v Beer. The decision affirms the binding force of precedent and the limits of the practical benefit doctrine in contract law.