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Consideration - Case Study Example

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Consideration

Since the Court of Appeal decision in Williams & Roffey Bros [1990] a new area of uncertainty has arisen in the doctrine of consideration, as we shall see. Effectively the Court of Appeal ignored a House of Lord's decision; a decision which has been around for more than 400 years.
Pinnel's Case [1602] examines the doctrine from the view point of Creditors who are already owed something [a legal duty or money], and appear to agree to accept part-payment of the debt. The facts of the case were that a borrower, Cole, owed Pinnel [the lender] the equivalent of 8.50 [8-10s-0d] which was to be repaid on 11 November. At the lender's request, the borrower paid 5.11 [5-2s-2d] on 1 October, which the lender claimed to accept in full settlement of the debt. The lender then successfully sued the borrower for the outstanding amount. The House of Lords held that since no consideration was exchanged to enforce the promise of the lender to accept part-payment of a debt on the due date from the borrower, then the lender could pursue full payment of the debt at a later date.
This remains the general rule at common law. However in Pinnel's Case it was also said that the agreement to accept part payment would have bound the lender if fresh consideration had been provided to show accord and satisfaction. This might be:
Although influential, this case was actually decided on a technicality. If Cole had extracted from Pinnel an agreement that the early payment was in return for accepting part payment, then Cole would have won the case.
The Foakes v Beer [1884] case considered whether statutory interest could be claimed on a judgment debt following the creditor's agreement to accept payment by instalments.

Mrs Beer had obtained judgment for a debt against Dr Foakes. She agreed to accept 500 immediately and the balance by half-yearly instalments of 150. Although Dr Foakes paid the net debt, he did not pay the statutory interest which had accrued and amounted to 360. The House of Lords affirmed the Court of Appeal's decision, dismissing Dr Foake's appeal and followed Pinnel's Case holding that Mrs Beer was entitled to the 360 interest as Dr Foakes had not provided fresh consideration for Mrs Beer's promise to take no further action on the judgment.

It follows from this that the Courts are not interested in whether the consideration is adequate. The reason for this is that consideration goes to the promise; not the value of the contract. Obiter Lord Blackman stated that in his opinion Lord Coke had made a mistake of fact in Pinnel's Case, whilst Lord Blackman stated:

"All men of business do every day recognize and act on the ground that prompt payment of a part of their demand may be more beneficial tot hem than it would be to insist on their rights and enforce payment of the whole." Para 622.

Foakes v Beer is consistent with the common law rule that completion of an existing duty is not fresh consideratio ...Show more

Summary

A valuable consideration, in the sense of the law, may consist either in some right, interest, profit or benefit accruing to the one party, or some forebearance, detriment, loss or responsibility, given, suffered or undertaken by the other." - Lush J: Currie v Misa [1875], para 162
Author : shannastiedeman
Consideration essay example
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