Foakes v Beer [1884] UKHL 1 (16 May 1884)

Dr Foakes owed a judgment debt to Mrs Beer. She agreed to accept payment in instalments and forgo interest. After he paid the principal, she successfully sued for the interest, as her promise was unsupported by fresh consideration from Foakes.

Facts

The respondent, Mrs Julia Beer, had obtained a judgment in the High Court against the appellant, Dr John Weston Foakes, for the sum of £2090 19s. By law, judgment debts accrue interest from the date of the judgment. Subsequently, the parties entered into a written agreement whereby Dr Foakes agreed to pay £500 immediately and the balance in half-yearly instalments of £150 until the entire principal sum of £2090 19s was paid. In consideration of these payments, Mrs Beer agreed that she would ‘not take any proceedings whatever on the said judgment.’ Dr Foakes duly paid the full principal amount according to the agreement. However, Mrs Beer then brought an action to claim the interest that had accrued on the debt. Dr Foakes argued that the agreement discharged him from all liability, including interest, while Mrs Beer contended the agreement was not binding as Foakes had provided no consideration for her promise to forgive the interest.

Issues

The primary legal issue before the House of Lords was whether the written agreement between Foakes and Beer was an enforceable contract that extinguished the full debt, including the interest. This question turned on whether Dr Foakes had provided valid consideration for Mrs Beer’s promise not to pursue further proceedings on the judgment debt once the principal had been paid. The case required the House to reconsider and apply the long-standing rule of law established in Pinnel’s Case (1602), which held that payment of a lesser sum on the day cannot be satisfaction for a greater debt.

Judgment

The House of Lords dismissed the appeal, holding that Mrs Beer’s promise to forgo the interest was not binding on her. The court affirmed the decision of the Court of Appeal, finding that the payment of a part of a debt is not, in law, good consideration for the discharge of the entire debt. The Law Lords, though expressing some reservations about the commercial sense of the rule, felt bound by established precedent.

Reasoning of the Court

The Earl of Selborne L.C., delivering the leading judgment, confirmed the authority of Pinnel’s Case:

The doctrine itself, as laid down by Sir Edward Coke, may have been criticised, as questionable in principle, by some persons whose opinions are entitled to respect, but it has never been judicially overruled; on the contrary I think it has always, since the sixteenth century, been accepted as law.

He reasoned that for an ‘accord and satisfaction’ to be valid, the ‘satisfaction’ (what is given in return for the promise) must be something of legal value to which the creditor was not already entitled. Here, Dr Foakes was merely paying a sum he was already legally bound to pay. No new element of consideration, such as paying earlier, at a different location, or giving a different item (‘a horse, a hawk, or a robe’), was provided for Mrs Beer’s promise to forgo the interest.

Lord Blackburn, while concurring with the outcome, expressed significant dissatisfaction with the underlying principle, highlighting its detachment from commercial reality:

all men of business, whether merchants or tradesmen, do every day recognise and act on the ground that prompt payment of a part of their demand may be more beneficial to them than it would be to insist on their rights and enforce payment of the whole. Even where the debtor is perfectly solvent, and sure to pay at last, this is often so.

Despite his personal view that the rule was inconvenient and often ignored in practice, he concluded that he was bound by the long line of authority and could not find a legitimate basis to depart from it in this case. Lords Watson and FitzGerald concurred, solidifying the judgment.

Implications

Foakes v Beer is a landmark decision in the English law of contract which authoritatively confirmed the rule in Pinnel’s Case. It establishes that part payment of a liquidated debt, without more, cannot be good consideration for a promise to discharge the entire debt. The creditor remains entitled to sue for the balance. The case cemented a rigid requirement for consideration which has been widely criticised as being contrary to commercial common sense. The inflexibility of this common law rule was a significant factor in the subsequent development of the equitable doctrine of promissory estoppel (as seen in cases like Central London Property Trust v High Trees House Ltd), which can provide a remedy in situations where a party relies on a promise to accept a lesser sum and it would be inequitable for the promisor to retract that promise.

Verdict: Appeal dismissed. The House of Lords affirmed the judgment of the Court of Appeal in favour of the respondent, Mrs Beer.

Source: Foakes v Beer [1884] UKHL 1 (16 May 1884)