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Oxford Law Citator

Part II Formation, 6 Consideration

From: Contract Law in Practice

Neil Andrews

Content type:: Book content

Product:: International Commercial Law [ICML]

Published in print:: 27 May 2021

ISBN:: 9780192897947

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Subject(s):: Construction of contract — Formation of contract — Illegality and contract — Interpretation of contract — Performance of contract — Validity of contract

(p. 126) 6 Consideration

Consideration Doctrine: Formation

Introduction.

6.01 Consideration¹ is that which is provided in return for a promise. The core idea of consideration is the attempt to separate bargains from gratuitous promises. The defendant promisor is bound if the claimant/promisee has done something (or omitted to do something) as the price for the other’s promise. And so, the claimant/promisee’s act or omission must have been requested by the defendant. Unless a promise is made by covenant or deed, consideration must be provided by the promise, that is, the promisee must enter into a bargain by doing, or agreeing to do, something, at the other’s request. As Brian Coote observes, this element of bargain is a ‘quite simple concept’ but it has become ‘a maze of ramifying refinements filling page after page of the contract textbooks’.²

6.02 A gratuitous promise is not legally binding unless made as a deed). Consideration is the ‘get out of jail’ card for those who have made ill-considered promises of pure and extravagant generosity. For example, if the alumnus of a school or university promises to pay £1 million as a donation, the promise is not enforceable, even if the promisor orally incanted before witnesses ‘this promise is to be legally binding’. What counts is whether the gratuitous promise was formalized as a deed, such a formal undertaking resting on these three foundations: (i) the deed was signed by the covenantor, (ii) (contemporaneously) witnessed and signed by an independent third party, and then (iii) activated by delivery to the covenantee.

6.03 And so, it is axiomatic that the Common Law is unwilling to give effect to a bare, gratuitous promise, in the absence of a deed. For example, Robert Goff J in Amalgamated Investment (p. 127) & Property Co Ltd (in liquidation) v Texas Commerce International Bank Ltd (1982) noted:³ ‘the general principle that a purely gratuitous promise is unenforceable at law or in equity’.⁴

6.04 Consideration can arise where: (i) the parties have exchanged valid promises (an ‘executory’ bilateral contract); or (ii) the promisee has incurred some requested detriment; or (iii) the promisee has conferred a requested benefit on the promisor or on a third party (the relevant request must be made by the promisor; and the request is sufficient to introduce the element of bargain, even though the material benefit is received by the stipulated third party).

6.05 In Currie v Misa (1874-76) Lush J said:⁵

A valuable consideration, in the sense of the law, may consist [provided it is requested] either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other: Com Dig Action on the Case, Assumpsit, B 1–15.

Main Elements of the Consideration Doctrine.

6.06 Nine main elements or features will now be listed.

(1) Requested Detriment Incurred or Benefit Conferred.

6.07 Consideration is the buying of the right to sue by giving (or promising to give) something at the promisor’s request. The thing given can be money, property, services, or any other valuable asset, conduct, or abstention. Giving (or promising to give) the relevant thing will normally involve detriment to the claimant/promisee. But exceptionally it might be merely a benefit conferred on the promisor or a third party (sometimes described as a ‘practical benefit’: for example, Williams v Roffey Bros & Nicholls (1991) [6.48]). It is enough that the benefit is conferred on a third party at the promisor’s request (‘consideration must move from the promisee, but need not move to the promisor’).

(2) No Testing of the Adequacy of Consideration: Nominal Consideration.

6.08 There is no weighing of the adequacy of the thing given or performance to be rendered: anything of even token value will suffice. Parties can make a bargain by use of nominal consideration: ‘the court does not assess the adequacy of consideration’.

(3) Further Requirement of an Intent to Create Legal Relations.

6.09 In the absence of a deed, consideration is necessary. But it is not sufficient: there must also be an intent to create legal relations (although this is presumed in commercial situations: Edwards v Skyways).

(4) Formation and Variation and Consensual Discharge.

6.10 Consideration is required not just for the formation of contracts but for the variation or consensual discharge of a contract (unless the variation is effected by deed).

(5) Past Consideration.

6.11 No legally binding agreement will arise if a promise is made in gratitude for someone’s earlier unrequested services or intervention. But a person can enforce a promise in respect of his earlier performance if: (i) he had expected to be rewarded (p. 128) and so had not acted gratuitously, and (ii) the other party requested this performance, and (iii) enforcement of the promise is not contrary to public policy.

(6) Pre-existing Duty.

6.12 No consideration is provided if what is performed is already obligatory by virtue of a statutory or other public duty, unless the requested performance goes beyond that duty.

(7) Pre-existing Commitment to Third Party.

6.13 Consideration is provided when someone promises to perform, or performs, even though this involves the very same performance as that required under an earlier contract between that person and a third party.

(8) Variation (1): ‘Increasing (or Ameliorative) Pact’.

6.14 A promise to increase the remuneration payable under a subsisting contract (an ‘increasing (or ameliorative) pact’) is supported by consideration and hence enforceable (in the absence of duress or fraud) if the effect of the promise is to confer a ‘practical benefit’ on the promisor, such as the assurance that the other party will not abandon that agreement or deviate from it.⁶

(9) Variation (2): ‘Decreasing (or Forbearance) Pact’.

6.15 A creditor’s promise that a debt will be reduced or extinguished (a ‘decreasing pact’) will be binding (in the absence of duress or fraud) if:

(a) the debtor, at the creditor’s request, supplies consideration to support the creditor’s promise; or
(b) the decreasing pact was made under deed; or
(c) it has been suggested that the debtor might enjoy legal protection if he or she sufficiently acts on this assurance so as to merit the protection of the equitable doctrine of promissory estoppel (but possibility (c) remains unsubstantiated in the case law).

Consideration’s Branches Lopped but Trunk Intact.

6.16 There has been a steady disinclination to allow consideration to obstruct the enforcement of promises which appear to deserve legal enforcement. For example, in the New Zealand Shipping case (1975), stevedores (responsible for loading or unloading ships) were held to have provided consideration by acting (unloading a vessel), even though they were obliged under a pre-existing contract with a third party—the relevant carrier—to do that very same thing. Effectively, consideration was here brushed aside as a doctrinal technicality, Lord Wilberforce commenting:⁷

[Consideration] may quite well be provided by the [defendant stevedores] … even though … [they were] already under an obligation to discharge [the cargo from the ship, that pre-existing obligation being owed] to the carrier … An agreement to do [or the performance of] an act which the [defendant stevedores are] under an existing obligation to a third party [the carrier] to do, may quite well amount to valid consideration and does so in the present case . …

Detriment or Benefit as Elements of Consideration: Two Illustrations.

6.17 The claimant/promisee must show that he or she incurred detriment or conferred a benefit, at the defendant promisor’s request, thus satisfying the element of a bargain Here we will note two illustrations. Both of these cases can be rationalized as a bargain either on the basis of a (p. 129) requested detriment or the conferring of a benefit. For the most part, the element of requested detriment will predominate and supply the obvious basis for discerning a bargain. But, occasionally, the facts might require identification of a benefit because the element of detriment is missing or very weak on the relevant facts.

6.18 First, in Attrill v Dresdner Kleinwort Ltd (2013) the defendant bank had promised a large sum as a bonus pot for its hard-working and not insignificantly remunerated traders. The consideration received by the bank was: an element of benefit, taking the form of the (strong and realistic) chance of this promised bonus incentivizing the employees and so achieving an overall benefit and/or detriment incurred, namely the consequent failure of the promisee/employees to take up alternative employment.⁸

6.19 Secondly, in Bolton v Madden (1873)⁹ the defendant and claimant had promised each other to vote for the other’s nominated charity. The claimant complied, but the defendant defaulted. The possible elements of consideration here are (i) that the defendant had received the vicarious benefit of having secured funding (as a result of the claimant’s compliance) for the defendant’s favoured third party charity; and (ii) the claimant had committed itself to a mode of voting which it might later have regretted, thus fettering its power of decision. Blackburn J adopted analysis (ii), but Chitty (2018) prefers analysis (i).¹⁰ The problem with (ii) is that it involves circularity of reasoning (analysis (ii) presupposes that the promise is binding; X, the claimant, will be suffering detriment only if he has in fact bound himself to vote in accordance with the X/Y agreement; but the question whether he has bound himself is the very issue underlying the search for consideration. Furthermore, the court held that this arrangement was not contrary to public policy (such an arrangement within the public sector, for example, within Government, or a local authority, or Parliament, would surely involve bribery).

No Testing of the Adequacy of Consideration.

6.20 Consideration need only be token. The relevant promise is binding even though the defendant promisor entered an inherently bad bargain. This same feature of the consideration doctrine can be used by the parties as a means of manufacturing enforceable rights without the formality of a deed. The giving of nominal consideration operates as a substitute for a deed and is thus a means of giving effect to promises which are in reality gratuitous.

6.21 The leading case on ‘no weighing of the adequacy of consideration’ is Chappell v Nestlé and Co (1960).¹¹ Here the majority of the House of Lords held that chocolate bar wrappers formed part of the consideration on the following facts. As part of a product promotion, Nestlé had promised potential customers that they would sell to them, for 1s. 6d. (one shilling and six pence, in pre-decimalized money), a record called ‘Rockin’ Shoes’, provided the buyer also enclosed three chocolate bar wrappers. The majority of the House of Lords held that these wrappers were part of the consideration for the purchase, even though they would be thrown away once received by the manufacturer. This meant that the customer’s consideration for each record was not money alone, but money plus three wrappers. Under (p. 130) the (then) copyright law, this meant that there had been an infringement of copyright, and an injunction to prevent further sales could be obtained.¹²

6.22 Another example of a court noting the adage that it is unnecessary to assess the adequacy of consideration is Alexander v Rayson (1936),¹³ where the Court of Appeal held that there was not complete overlap between the schedule of services contained in the lease and in the supplementary services agreement, because the latter included the provision of a refrigerator. And so, there was consideration for the latter, applying the principle that the court does not assess the adequacy of consideration (on the more important issue of illegality in this case see [16.54]). Romer LJ (giving the judgment of the court) said:¹⁴ ‘The provision and maintenance of the frigidaire does, however, constitute some consideration for the agreement. It certainly would seem to be a somewhat inadequate one, but the Court is not concerned with the adequacy of consideration if consideration there be.’

6.23 Similarly, Lord Campbell LC said in Walters v Morgan (1861)¹⁵ that the court cannot refuse specific performance simply on the basis of inadequacy of consideration. But he upheld a court’s refusal (Vice-Chancellor Wood) to grant specific performance on the facts, the tenant having procured by employing surprise tactics a long extension of a lease in circumstances which the Lord Chancellor regarded as contrary to ‘good faith’.

6.24 In Re-Use Collections Ltd v Sendall (2014)¹⁶ the judge suggested that there is no need for consideration to be adequate to support a restrictive covenant or confidentiality clause in a contract of employment, where the relevant clause results from a variation imposed by the employer: in other words, consideration can be nominal. Instead the strength or size of the consideration will be relevant to the assessment whether the restrictive covenant is reasonable (no such evaluation is possible with respect to a confidentiality clause).

6.25 The consideration provided must not involve performance under a contract which is void because it is contrary to public policy. This was the predicament facing the former employee in Wyatt v Kreglinger and Fernau (1933).¹⁷ Wyatt had worked for many years for KF in the wool trade. KF now laid him off but promised him a pension subject to a restrictive covenant, as follows: ‘Upon your retirement on 31st July next we have decided to grant you a pension of £200 per annum … You are at liberty to undertake any other employment or enter into any business, except in the wool trade.’ Payment of the pension continued for a decade, from 1923 until 1932, when KF wrote to cancel the arrangement. Wyatt sued for damages. In the Court of Appeal, Greer and Slesser LJJ found an intent to create legal relations and offer and acceptance, but held the pension arrangement was not supported by consideration. Wyatt’s satisfaction of the condition not to re-enter the wool trade, whether construed as a promise or as a condition fettering the pension stream, was contrary to public policy because it was an unreasonable restraint of trade (generally on that doctrine (p. 131) [16.60]). And so, Wyatt could not show that his actual compliance with the wool trade prohibition constituted valid consideration.

Evaluation: Consideration as a Test for Formation of Contract.

6.26 It is submitted that consideration is a sensible and efficient mechanism to prevent bare, non-formalized gratuitous promises from being legally enforceable. Consideration is the ‘get out of jail’ card for those who, without promising by deed, have made ill-considered promises of pure and extravagant generosity. The criterion of an ‘intent to create legal relations’ (chapter 7) is insufficient. The additional requirement of ‘consideration’, the element of a bargain, is both (i) a protective or paternalistic rule and (ii) a rule which avoids or simplifies disputes. As for (i), this doctrine shields promisors and their estates or those administering their insolvency affairs from ill-considered, informal and over-generous gratuitous undertakings. As for (ii), the consideration doctrine avoids the need to engage in meticulous and protracted factual inquiries to determine whether (a) a gratuitous promise was really made and, if so, (b) whether the parties intended it to have legal force. These points will now be elaborated briefly.

6.27 The first function of the consideration doctrine is to protect a promisor from legal enforcement of informal gratuitous promises (even if such a promise is made in writing, it will be invalid unless made formally by deed).

6.28 In Pillans v Van Mierop (1765),¹⁸ Wilmot J emphasized the ‘deliberative’ rationale, saying that the doctrine of consideration has been adopted ‘in order to put people upon attention and reflection, and to prevent obscurity and uncertainty … Therefore it was intended as a guard against rash inconsiderate declarations: but if an undertaking was entered into upon deliberation and reflection, it had [legal effect] . …’ The Pillans case sought to subvert consideration by substituting bare writing, not under seal, as a sufficient cause of action; and it was reversed by the House of Lords in Rann v Hughes (1778).¹⁹

6.29 Suppose (under an arrangement governed by English law) X promises by telephone or letter that she will pay the appeal office of Thatcher College £1 million, stipulating nothing in return. The office must wait for the deed or cheque to clear: ‘pledges’ do not count.

6.30 It is different if the money is handed over in cash, or gold bullion is delivered. These will be valid transfers, completed gifts, not requiring confirmation in writing. This protective or paternalistic policy also protects the promisor’s estate, or shareholders, or liquidators from the depletion of assets by gratuitous promises. If the father drinks or gambles away his fortune, that is one thing. But, if he enters into a series of gift promises, and then dies before satisfying them, the doctrine of consideration ensures that the folly of his promised generosity is not visited upon his offspring. Similarly, during the promisor’s lifetime, the same doctrine and the same policy ensure that his trustee in bankruptcy will have more assets to distribute to ordinary creditors who have supplied goods, etc.²⁰

(p. 132) 6.31 Secondly, the consideration doctrine efficiently filters out potential contractual disputes. Otherwise, a gratuitous promise might be binding and the courts would need to test each set of facts to discover whether a legally binding promise was truly intended or understood to have been intended (on these practical and evidential problems see the discussion and examples presented at [5.02] in the context of written formalities). The additional requirement of a bargain, the element of ‘consideration’, avoids in millions of situations each year a possible dispute over whether the promise should be legally enforceable. Instead, English law provides a clear rule: a gratuitous promise is manifestly unenforceable unless formalized as a deed.

6.32 A reform body (imprudently) recommended removal of the doctrine of consideration in 1937. And the Law Commission did not include this doctrine in its abortive 1960s general contract code.²¹ But the doctrine of consideration survives.²²

Past Consideration Rule.

6.33 Promises to reward kindly but unrequested intervention are unenforceable for lack of consideration. This is the past consideration rule, consecrated in Eastwood v Kenyon (1840).²³ Here an executor/guardian had financially assisted a young woman. Later her husband retrospectively promised to reimburse him, but then resiled. Lord Denman said that the husband had a good defence, because there was no consideration for his promise: he had promised to reward in respect of something already done, and which he had not requested. The court was also worried that the present context gave too much scope for executors and/or guardians to procure subsequent gratitude, and for the earlier intervention to be undertaken in the impure hope of eventual reimbursement. And thus this decision offers protection against people being ‘guilt-tripped’ into paying for unrequested benefits. The doctrine removes the incentive for the performing party to march ahead and confer an unrequested ‘benefit’ and thus create an opportunity to ‘guilt-trip’. Lord Denman CJ said:²⁴

Taking then the promise of the defendant [to reimburse the plaintiff for £140] to have been an express promise, we find that the consideration for it was past and executed long before, and yet it is not laid to have been at the request of the defendant, nor even of his wife while [unmarried and adult] … In holding this [claim] bad because it states no consideration but a past benefit not conferred at the request of the defendant, we conceive that we are justified by the old common law of England.

6.34 The ‘past consideration’ rule was applied in Roscorla v Thomas (1842), where it was held²⁵ that a warranty given after sale had no legal effect.

6.35 The same doctrine was applied in Re McArdle (1951).²⁶ This case concerned a mother’s expenses incurred when improving a house. Her work was later acknowledged in writing by (p. 133) her five grown-up children, who promised her £488 in recognition of her intervention, this sum to be paid after her death to her executor. But the Court of Appeal held that the mother’s expenses had not been requested by the children and so this promise was unenforceable.²⁷

Requested Performance and Binding Subsequent Promise.

6.36 If instead the intervention has been requested, the picture entirely changes: the promise becomes binding, even though the promise was subsequent to the claimant’s intervention. Lord Scarman in the Privy Council in Pao On v Lau Yiu Long (1980) confirmed²⁸ that X can enforce Y’s promise in respect of X’s earlier performance if: (i) X expected to be rewarded in some way; (ii) Y requested X’s performance; (iii) Y later promised to reward X; and (iv) if X had made an initial agreement to perform in return for reimbursement by Y, that exchange of promises would not have been contrary to public policy. The ‘request’ mentioned at (ii) is crucial (it was missing in Eastwood v Kenyon, 1840). The combination of (i) and (ii) creates an inchoate bargain. The amount of X’s reward is then fixed at stage (iii) or, if the sum is not specified at this stage, Y at least acknowledges a contractual obligation to pay. As Bowen LJ said²⁹ in Re Casey’s Patents (1892), the promise at stage (iii) ‘may be treated either as an admission which evidences or as a positive bargain which fixes the amount of that reasonable remuneration on the faith of which the service was originally rendered’. Element (iv) is a public policy safety valve (eg if X killed T at Y’s request and Y later promised to pay X for this, this ‘contract killing’ would not give rise to a legally enforceable right).

6.37 On the facts of Pao On, there were three stages. Stage 1: X (having shares in a private company) acquired (by way of a share swap) some of the public shares in a company from Y, who was the majority shareholder. X undertook not to sell more than 40 per cent of the public shares for a year, otherwise this might depress the market price of the public shares. This meant that X was at risk of a fall in the shares’ value attributable to other factors. Stage 2: and so, Y agreed to buy back some of the public shares at a future date and at a stated price. X then realized that this second deal was a bad bargain (because X would not be entitled to any gain if the share value increased). And so, X threatened to sell the shares, in breach of the initial contract, unless Y replaced the second agreement with a guarantee against a fall in their value. Stage 3: this led to a third and distinct contract. The court treated the guarantee as implicit in the initial agreement and a confirmation of an understanding that the market risk was Y’s responsibility. And economic duress was not found at any of these stages.

6.38 The preceding doctrine founded on Re Casey’s Patents and the Pao On case, enabling the promisee to point to the element of a ‘request’ in order get round the past consideration objection, was applied in Longulf Trading (UK) Ltd v Niyazi Onen Gida Sanayi AS (2019).³⁰ The trial (at which the defendant guarantor made no appearance, so that the claimant’s lawyer made all points, for and against, relating to the claim) concerned a guarantee which had been provided subsequent to the principal transaction. But the evidence clearly supported the finding that the guarantor had requested the main transaction. Indeed that transaction contained a statement that it was conditional on the present guarantee being given. The past (p. 134) consideration plea, therefore, was inapplicable in accordance with the qualification established in the Casey’s Patents/Pao On line of authority.

6.39 In The Flying Music Company Ltd v Theater Entertainment SA (2017) it was held³¹ that a guarantee, which had been given after the relevant principal contract, was supported by consideration because, in essence, the guarantee was required otherwise the principal would cancel the main contract. And so, the guarantee was a lifeline: it injected decisive reassurance to maintain a contract which was already in peril, and under which the relevant creditor could have brought future performance to a halt. According to this reasoning, therefore, the consideration was not past. Instead the principal, the creditor, had conferred on the debtor, as contemplated and impliedly requested by the surety, the benefit of ‘not pulling the plug’ on the relevant transaction. And so, the principal could sue the surety under the guarantee, which was supported by consideration.

Evaluation: the Past Consideration Rule.

6.40 We will see soon (text below) that the law has shifted in the context of increasing (or ameliorative) pacts so as to give effect to such arrangements unless the relevant variation was procured by duress or fraud. The issue is whether the doctrine of past consideration might be similarly revised so as to reverse the current approach and instead treat such a promise as prima facie binding, in the absence of duress or fraud. Another possibility is that the past consideration rule might be confined to situations where the intervener occupied a position of trust and confidence, as was the case in Eastwood v Kenyon, the promisee in that case having been both guardian and executor.

6.41 In 1937, the Law Revision Committee (unsuccessfully, thus far) recommended abolition of the ‘past consideration rule’.³² However, it is submitted that the present rule is sound. The rule is in effect a prophylaxis against people being harried, cajoled, pressurized, and ‘guilt-tripped’ into paying for that which they did not request in the first place. There are, of course, special situations in which necessitous intervention should be rewarded, not on the basis of contract law, but on the principle of unjust enrichment.³³

Pre-Existing Statutory or Public Duty.

6.42 A promise to do that which statute, or public duty, already requires you to do is prima facie a non-detrimental performance of a higher and pre-existing obligation. The leading case is Glasbrook Bros Ltd v Glamorgan County Council (1925).³⁴

6.43 But consideration will arise if the promise entails going beyond the relevant statutory duty and is incurring fresh and independent detriment. It was on this basis that the majority of the House of Lords in that case held that a colliery owner had to pay for contractually arranged intensive on-site policing. The level and type of policing exceeded the statutory obligatory requirement. Within the majority, Lord Shaw said:³⁵ ‘the agreement for payment (p. 135) must be supported, because it was for something which, although within the power of the police to give, could not be declared as a protection proved to be necessary for the reasonable demands of the occasion’. In short, the services promised and performed were over and beyond the ordinary call of police duty.

6.44 The Police’s capacity to uphold promises to pay for ‘special … services’ is now governed by section 25(1) of the Police Act 1996. Commenting on this provision, Lord Dyson MR said in Leeds United FC v Chief Constable of West Yorkshire Police (2013):³⁶

Thus a distinction [in the Glasbrook case, above] was clearly drawn between the police (i) performing their duty of doing what is necessary to prevent crime and provide protection (for which they cannot make a charge) and (ii) doing something else at the request of an individual (for which they can charge). That was the position at common law. It was later reflected in legislation. It is common ground that the legislation (including section 25 of the 1996 Act) did not change the law.³⁷

6.45 As mentioned, and as illustrated by the Glasbrook case itself, the promise or performance can constitute consideration if it exceeds that which is strictly required by the statute. A curious illustration is the Court of Appeal’s decision in Ward v Byham (1956).³⁸ Here the majority’s reasoning—that of Parker and Morris LJJ—adopted necessary but intellectually embarrassing sophistry to identify consideration. The case concerned a father’s promise to a mother to pay a weekly sum for the benefit of their illegitimate daughter. Parker and Morris LJJ said that the mother had promised (i) to ensure the child’s happiness and (ii) not merely to provide minimum care, as required by statute. In the third judgment, Denning LJ agreed that the promise was supported by consideration. But he adopted different reasoning by suggesting that the father had received a ‘benefit’ on these facts, namely satisfaction of the father’s conscience.

6.46 The third judge in Ward v Byham, Denning LJ, considered³⁹ that the father had derived a benefit of a psychological nature: the father’s promise to pay maintenance to his daughter was the price for his gaining assurance that the child would be looked after. The objection to Denning LJ’s approach is that it conflicts directly with the basic rule in the Glasbrook case and thus is inadmissible.

6.47 It would have made greater sense if Denning LJ had instead identified the benefit in Ward v Byham (1956) as the conferring on a third party, here the child, of care and assistance. That is a conventional use of ‘benefit’ and such a perspective would be consistent with the analysis underlying Bolton v Madden (1873–1874) [6.19], where the benefit was intended to be the eventual receipt of charitable funds by a nominated third party charity. Denning LJ repeated his minority approach (benefit obtained by the promisor) to this question of consideration in another family contractual context (a maintenance promise between separated spouses) in Williams v Williams (1957).⁴⁰ It should be noted that Denning LJ was (p. 136) outnumbered within the Court of Appeal in both Ward v Byham (1956) and Williams v Williams (1957) and that the majority in each case analysed the facts as instead requiring consideration by the incurring of detriment on the promisor’s part.

Consideration and Variation (1): Promises to Pay More

‘Practical Benefit’ Analysis.⁴¹

6.48 The Court of Appeal’s decision in Williams v Roffey Bros & Nicholls (1991)⁴² convincingly revolutionized the approach to increasing (or ameliorative) pacts by introducing the notion of a ‘practical benefit’ to support the promise to pay more for a job which has not yet been completed. An increasing pact involves a promise to improve the performer’s remuneration and thus to lift the payment above the original level, or a promise to improve in some other way the performing party’s package of terms. The decision in Williams v Roffey Bros & Nicholls (1991) rests on sound commercial appreciation of the need to give effect to variations of this nature, unless they have been procured by duress or fraud. A pragmatic and liberal spirit underpins this development.

6.49 In Williams v Roffey Bros & Nicholls (1991) a contractor promised more money to sub-contractors if they hurried up their work. They had been proceeding slowly, and it seems unacceptably so. The main contractor had been concerned that he might otherwise miss the deadline for completion of the project. Such delay would have triggered the main contractor’s liability to pay liquidated damages to the site owner. The Court of Appeal held that the sub-contractors (a team of carpenters) were entitled to freshly promised bonus payments even though their carpentry work remained the same. With respect to that bonus promise, what was the main contractor getting in return? The court held that the main contractor’s consideration (‘practical benefit’) was keeping the project on schedule. It was also emphasized that, when making that variation, the main contractor had suffered neither coercion nor trickery (fraud). Purchas LJ said:⁴³ ‘The initiative in coming to the [renegotiation] agreement … came from [the main contractors, the defendant] and not from the claimant.’

(p. 137) 6.50 Upholding the first instance judge, Rupert Jackson QC, the Court of Appeal in Williams v Roffey Bros & Nicholls (1991) said that a ‘practical benefit’ received by the main contractor is sufficient consideration. And Glidewell LJ encapsulated the law as follows:⁴⁴

if … B has reason to doubt whether A will … complete his side of the bargain, and B thereupon promises A an additional payment in return for A’s promise to perform his contractual obligations on time, and … B obtains in practice a benefit … [provided also that] B’s promise is not given as a result of economic duress or fraud on the part of A, … the benefit to B is capable of being consideration for B’s promise . …

6.51 It is the law, therefore, that the promise of such a bonus payment, that is, an ‘increasing (or ameliorative) pact’, is binding unless there has been duress, fraud, or misrepresentation, or unless the promise is a mere act of kindness after the relevant project has been completed and so akin to a congratulatory ‘tip’ (on the ‘past consideration’ rule, see [6.33]).

6.52 The defendant, the main contractor, in the Roffey case (1991) had received one or more of these ‘practical benefits’ (it is enough if even a solitary practical benefit is found: that will suffice to supply good consideration):

(1) (a) the sub-contractor went on with the job, and so the main contractor avoided the hassle of seeking substitutes (in fact this benefit was short-lived because, ultimately, the sub-contractor ceased work: but the Court of Appeal upheld the judge who had held that at that later point, work on the additional eight flats was substantially done, to justify pro rata payment; the carpentry work was eventually completed by substitutes); (b) the main contractor was reassured that timely completion would avoid his having to pay liquidated damages (on such damages [27.69]) for delay in completion of the site to X (this is in fact merely a psychological version of the benefit already mentioned at (1); in any event, this reassurance was short-lived because the sub-contractor did not complete all the work, and the main contractor became liable to the site owner for late completion (but only for one week of delay);⁴⁵
(2) the parties agreed a new and clearer system of periodical payments for the work; but the law report is vague on this suggested benefit;
(3) the sub-contractor agreed to concentrate on finishing one flat at a time rather than manically trying to do carry out carpentry work across the whole site; this flat-by-flat system of work would leave room for other trades to work efficiently on the site; in fact factor (3) is two-edged: it is not entirely fanciful to regard this cooperative change of performance as a possible ‘detriment’ incurred by the carpenters, but this is not how the case was reasoned. (This type of benefit would be more concrete where, for example, the relevant performer agrees to do the same work, but on different days, for example, agreeing to work on weekends, or in the evenings, at the convenience of the promisor.)

6.53 Russell LJ commented in the Roffey case:⁴⁶ ‘Where, as in this case, a party undertakes to make a payment because by so doing it will gain an advantage arising out of the continuing relationship with the promisee the new bargain will not fail for want of consideration.’

(p. 138) 6.54 In the same case Purchas LJ distinguished⁴⁷ the old cases of Harris v Watson (1791)⁴⁸ and Stilk v Myrick (1809)⁴⁹ in both of which the courts rejected claims by merchant sailors to enforce mid-voyage promises to pay extra wages. Purchas LJ said:

[These two old cases] involved … the extraordinary conditions existing at the turn of the 18th [and 19th] century [involving] seamen … There were strong public policy grounds at that time to protect the master and owners of a ship from being held to ransom by disaffected crews … The modern cases tend to depend more upon the defence of duress in a commercial context rather than lack of consideration for the second agreement. In the present case the question of duress does not arise.

Possible Coercion.

6.55 The Court of Appeal in the Roffey case (1991) conceptually circumvented Stilk v Myrick (1809) by overt manipulation of the consideration rule. That 1809 case had required the bonus promisor (the ship’s master) to have received consideration for the variation (the ‘increasing (or ameliorative) pact’) in the form of a manifestly more onerous arrangement undertaken by the promisees (loyal seamen, their mates having absconded at a foreign port) in order to assist the promisor. Stilk v Myrick (1809) was underpinned by the fear that in some contexts, notably mid-voyage promises on the high seas to pay more to merchant seamen, such a bonus promise might have been extorted by coercive and opportunistic, even conspiratorial, tactics. In 1809, ‘duress’ was confined to threats of personal violence or physical damage to property. It was not until the 1970s that English law extended duress to encompass threats to breach a contract, that is, to inflict purely economic harm, the ‘breakthrough’ case being Kerr J’s recognition of economic duress in ‘The Siboen and the Sibotre’ (1976).⁵⁰ The fact that this legal development had already become embedded well before the 1990s enabled the Court of Appeal in the Roffey case to bypass the blunt device of consideration and to confine a contracting party’s protection against unfairness to the specific doctrines of duress and fraud. The concept of ‘practical benefits’ was the key chosen to unlock the door to that new approach, a door which had seemed to be locked by the authority of Stilk v Myrick.

6.56 Stilk v Myrick (1809) had earlier been distinguished in two nineteenth-century cases concerning claims for maritime wages. A mid-voyage agreement to pay an extra sum would be enforceable, if, as on the extreme facts of Hartley v Ponsonby (1857),⁵¹ a significant number of the men had deserted. That would render the remaining crew’s task radically different. Indeed, as the court accepted, it would then have become unsafe to continue so that the loyal men would have been entitled to refuse to complete the voyage. They were, therefore, foregoing their right to refuse performance by agreeing to perform, but for extra money.

6.57 Similarly, in Hanson v Royden (1867)⁵² the promised bonus was enforceable because it had been made in recognition of the promotion of an ordinary seaman to a higher rank. Here the captain had died shortly after beginning a long voyage. Under maritime custom, the first (p. 139) mate became captain; as such he promoted the claimant able seaman to be second mate, a position of higher responsibility. Although no written variation had occurred, the appointment was valid and the claimant had thus become entitled to the promised higher wages. The Court of Common Pleas distinguished the ordinary situation (typified by Stilk v Myrick, see above) where seamen are required to perform to their utmost in an emergency. But in Hanson v Royden (1867), by contrast, the claimant had been promoted to a new position, and this was a long voyage and not a short-term emergency where he might be expected to take on greater responsibility but for no extra pay.

6.58 The old intellectual baggage of Stilk v Myrick has now been swept away, as the following comment makes clear. On the issue of consideration in the context of ‘increasing (or ameliorative) pacts’, Leggatt J commented in Blue v Ashley (2017):⁵³

[59] … There used to be a rule that a promise to perform, or actual performance of, a pre-existing duty could not constitute consideration. That rule may sometimes have helped to protect contracting parties against exploitation through the other party refusing to do what it had contracted to do unless some extra payment or other benefit was provided. But it is now recognized that this mischief is better addressed by other doctrines such as economic duress and public policy. The decision of the Court of Appeal in Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 effectively rendered the rule obsolete by accepting that performance or a promise to perform an existing duty can satisfy the requirement of consideration by providing a practical benefit to the other party, which it will invariably do.

Evaluation: Increasing or Ameliorative Pacts: Goodbye to Consideration?

6.59 Some consider that the practical benefit analysis, just summarized, is otiose, a fifth wheel on the coach, an excrescence which should be excised by Ockham’s Razor. But the problem is that in other contexts, notably employer–employee relations, the consideration doctrine has a valuable role to play in ensuring that there is a real element of bargain if the employee’s terms and conditions, including post-employment restrictions, are varied at the employer’s behest (see the Re-Use case at [6.61] below).

6.60 Most commentators accept that, following Williams v Roffey Bros & Nicholls (1991), English law can be stated as follows: any single ‘practical benefit’ will provide consideration to support an ‘increasing (or ameliorative) pact’, including the promisee’s manifestly non-detrimental promise to carry on with precisely the same job. If so, consideration has been effectively eliminated from the context of increasing (or ameliorative) pacts.⁵⁴ Perhaps the Supreme Court might be tempted to go further and declare that consideration is no longer required in this context.⁵⁵

No Consideration to Support Post-Formation Restrictive Covenants and Confidentiality Clauses Imposed by Employer.

6.61 In the Re-Use Collections case (2014)⁵⁶ an employee’s assent (p. 140) to restrictive covenants imposed by an employer after commencement of the employment, but with nothing tangible being given in return by the employer, was not supported by consideration. No consideration had been provided when the employer merely continued to employ the employee.⁵⁷ It will be seen that there is a difference in approach between the contractual relationship in the Re-Use case and that between the main contractor and sub-contractor in the Roffey case. In the latter case the Court of Appeal accepted that mere continuation of contractual relations by the sub-contractor (carpenters) constituted a ‘practical benefit’ which they would confer on the main contractor. That element of bargain rendered the main contractor’s bonus promise enforceable. By contrast, the employer in the Re-Use case had not supplied consideration by merely continuing to employ the relevant employee. And so the absence of consideration meant that the employer could not have enforced the employee’s restrictive covenant, even if that clause had been valid (in fact it was invalid, on the basis of public policy, because it operated for too long a period).⁵⁸

6.62 It is submitted, therefore, that, in the light of the Re-Use case, and notwithstanding the generality of the analysis in the Roffey case, it cannot be stated that consideration in the form of a ‘practical benefit’ will invariably arise whenever party X promises an improved set of terms to Y and Y ‘in return’ continues the contractual relationship with X.

Consideration and Variation (2): Promises to Reduce Debts or Give More Time

The Rule in Pinnel’s Case.

6.63 The Common Law doctrine rests on the long-standing and much debated rule in Pinnel’s Case (1602),⁵⁹ which the House of Lords affirmed in Foakes v Beer (1884).⁶⁰ That rule is that a creditor’s promise to forego a sum, in whole or in part, without equivalent complete or part-payment is not binding, unless made in a deed or supported by fresh consideration supplied by the debtor. The rule applies equally to a creditor’s entitlement to interest on a debt. And so, this is another context where consideration continues to operate so as to bar attempts to uphold unequivocal promises where a creditor generously, but without gaining anything in return, promises to reduce or to extinguish a clear debt (in this context, the consideration factor is known as ‘accord and satisfaction’). It should be noted that this topic is complicated by the need to consider the following cognate issues: (i) third party payments [6.83]; (ii) promissory estoppel [6.74]. And the topic of reform is addressed at [6.82].

Affirmations of Rule.

6.64 The House of Lords in Foakes v Beer (1884) unanimously confirmed the rule in Pinnel’s Case (1602) that a creditor is not bound by a voluntary (gratuitous and uncovenanted) promise to relieve the debtor of an unpaid portion, here, promised waiver of interest on a judgment debt.⁶¹ In later cases the same rule was:

(p. 141)

(1) applied by the Court of Appeal in Vanbergen v St Edmunds Properties Ltd (1934) (where it was held that a change of place of payment did not constitute fresh consideration if the variation was made to suit the debtor rather than the creditor and at the latter’s insistence or request);⁶²
(2) applied by the majority of the Court of Appeal in D & C Builders v Rees (1966);⁶³
(3) the rule was followed in Re Selectmove (1995), where the Court of Appeal refused to use ‘practical benefit’ reasoning to circumvent the settled authority of this rule;⁶⁴
(4) and the same rule was applied by the Court of Appeal in MWB Business Exchange Centres Ltd v Rock Advertising Ltd (2016) (overturned on a different point by the Supreme Court, where Lord Sumption’s dictum suggests that the Rule in Pinnel’s Case might be usefully re-examined; see [6.82] below).⁶⁵

Leading 1884 Decision.

6.65 In Foakes v Beer (1884) a creditor (Mrs Julia Beer) had agreed to accept a schedule of payments in respect of a judgment debt owed by Dr Foakes. Beer further agreed not to seek interest (which was accruing under the Judgments Act 1838). Although the main sum was repaid six years later (Foakes having then paid the whole of the principal sum of £2090, 19 shillings, by instalments, as agreed under the schedule), a dispute arose concerning the unpaid interest. The House of Lords held that the agreement to waive interest was caught by the rule in Pinnel’s Case.

6.66 The Earl of Selborne LC said (1884):⁶⁶

The distinction between the effect of a deed under seal, and that of an agreement by parol, or by writing not under seal, may seem arbitrary, but it is established in our law; (p. 142) nor is it really unreasonable or practically inconvenient that the law should require particular solemnities to give to a gratuitous contract the force of a binding obligation … It might be (and indeed I think it would be) an improvement in our law, if a release or acquittance of the whole debt, on payment of any sum which the creditor might be content to receive by way of accord and satisfaction (though less than the whole), were held to be, generally, binding, though not under seal; nor should I be unwilling to see equal force given to a prospective agreement, like the present, in writing though not under seal; but I think it impossible, without refinements which practically alter the sense of the word, to treat such a release or acquittance as supported by any new consideration proceeding from the debtor. … [p. 614] [It is not enough to show] that sort of benefit which a creditor may derive from getting payment of part of the money due to him from a debtor who might otherwise keep him at arm’s length, or possibly become insolvent, but is some independent benefit, actual or contingent, of a kind which might in law be a good and valuable consideration for any other sort of agreement not under seal. (Lord Blackburn agreed, but made clear that he would have preferred to have re-opened the whole doctrine.)⁶⁷

Cheque Payment Not Fresh Consideration.

6.67 A promise to reduce the debt remains gratuitous if a part-payment is made by a mode of payment equivalent to cash, such as by cheque. The majority of the Court of Appeal in D & C Builders v Rees (1966),⁶⁸ applying the rule in Pinnel’s Case, considered that it would be madness to allow part-payment by cheque to constitute fresh consideration and thus prevent the creditor, the builder, from remaining entitled to the unpaid portion of his invoice. Part-payment by cheque had not constituted accord and satisfaction: it was of no significance that he had made payment in this way, rather than by legal currency (notes and/or coins).

Genuinely Dispute Claim.

6.68 If the debt is genuinely contested, or its amount is subject to honest dispute, a compromise payment will be binding. Consideration arising from the debtor and creditor having settled a disputed debt claim was found by the Court of Appeal in Simantob v Shavleyanat (2019).⁶⁹ In that case a debtor tried to contend that a $1000-a-day payment clause was invalid as a penalty (generally on penalties [27.69]). The Court of Appeal held⁷⁰ that surrender of that defence constituted consideration because the debtor had bona fide believed that he might have such a defence, and at the time of the agreement there had been no clear determination of the point, even though, mysteriously, the argument had been rejected in an application for summary judgment during civil proceedings between these parties.

Promise to Give Debtor More Time: Creditor’s Commercial Advantages.

6.69 In MWB Business Exchange Centres v Rock (2016),⁷¹ the creditor had agreed to reschedule periodic payments under a licence for use of commercial premises. The result was that the creditor now gave the debtor more time to pay off accumulated arrears over the (p. 143) remainder of the life of the licence. The creditor’s forbearance in the Rock case did not smack of generosity, more of commercial self-interest. This is because the licensor/creditor was obviously reckoning that giving the debtor more time to pay would increase the chance that the debtor would pay in full. On these facts, the Court of Appeal astutely discerned consideration moving from the debtor/licensee to support at Common Law a pact which delayed enforcement proceedings with respect to the arrears.⁷² But it should be noted that the Rock case involved simply chronological forbearance, rather than substantive relaxation: it was a ‘more time’ promise, not a ‘release’ or ‘reduction’ promise, and so the rule in Pinnel’s Case (1602)⁷³ was not germane because that rule is clearly confined to purported substantive reductions or releases. This feature of the Rock case was curiously overlooked when the case proceeded to the Supreme Court in the Rock case (2018).⁷⁴ There, Lord Sumption (see text below), in comments clearly constituting dicta and nothing more, expressed doubts concerning the consideration reasoning on this point adopted by the Court of Appeal. Furthermore, Lord Sumption indicated that the Supreme Court in a future case might fruitfully reopen the line of cases traceable to Pinnel’s Case (1602). If it is possible for dicta to be per incuriam, that is, based on a fundamental misperception of the legal context, the present dicta should be treated as such. It is true that Lady Arden has contended that ‘it was common ground [in the Rock case] that the Rule [in Pinnel’s Case] applied to an agreement deferring payment of a debt as much as it did to an agreement for part payment of a debt’.⁷⁵ However, and with respect to those who took this view, that has not been the traditional understanding of the scope of that Rule.

6.70 But these elements of ‘practical benefit’ were doubted by Lord Sumption in the Supreme Court in the same litigation, although in dicta (see below). These comments suggest that Kitchin LJ’s treatment of consideration in the Court of Appeal might not be persuasive. It appears, therefore, that, if the opportunity arises, the entire rule in Pinnel’s Case will need to be revisited (for the author’s submissions on this rule see [6.82]).

6.71 In Rock Advertising Ltd v MWB Business Exchange Centres Ltd, Lord Sumption said in the Supreme Court (2018):⁷⁶

That makes it unnecessary to deal with consideration. It is also, I think, undesirable to do so. The issue is a difficult one. The only consideration which MWB can be said to have been given for accepting a less advantageous schedule of payments was (i) the prospect that the payments were more likely to be made if they were loaded onto the back end of the contract term, and (ii) the fact that MWB would be less likely to have the premises left vacant on its hands while it sought a new licensee. These were both expectations of practical value, but neither was a contractual entitlement.

(p. 144) 6.72 Lord Sumption continued:

In Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, the Court of Appeal held that an expectation of commercial advantage was good consideration. The problem about this was that practical expectation of benefit was the very thing which the House of Lords held not to be adequate consideration in Foakes v Beer (1884) 9 App Cas 605: see in particular 622 (Lord Blackburn). There are arguable points of distinction, although the arguments are somewhat forced. A differently constituted Court of Appeal made these points in Re Selectmove Ltd [1995] 1 WLR 474, and declined to follow Williams v Roffey. The reality is that any decision on this point is likely to involve a re-examination of the decision in Foakes v Beer. It is probably ripe for re-examination. But if it is to be overruled or its effect substantially modified, it should be before an enlarged panel of the court and in a case where the decision would be more than obiter dictum.

6.73 Towards the beginning of this passage, Lord Sumption used the phrase ‘a less advantageous schedule of payments’. But that phrase (confusingly) elides ‘release/reduction’ pacts and ‘more time’/forbearance pacts. It should be noted that in the MWB case the variation was not of the Foakes v Beer type: a reduction in amount; instead the MWB case variation was of the Hughes v Metropolitan Railway (1877) type [6.75], a forbearance pact, that is, a promise to afford the debtor more time. And for this reason, Kitchin and Arden LJJ’s remarks concerning fresh consideration are not, strictly speaking, addressed to the rule in Pinnel’s Case but instead concerned with a promise to afford more time (chronological forbearance, as distinct from substantive reduction or release).⁷⁷

Promissory Estoppel and Creditors’ Rights.

6.74 One of the forms of estoppel (generally on estoppel [2.51]) is promissory estoppel. It is an equitable doctrine (as distinct from a Common Law form of estoppel). Its essence is that a representation, including a statement concerning the future (hence the terminology of ‘promissory estoppel’), might give rise to defensive protection of the representee. Hence the representor will be precluded (following the intervention of Equity) from asserting his or her strict legal rights to the extent that assertion would be unjust. Those strict rights are not to be regarded as having been extinguished (see also Evaluation of the Rule in Pinnel’s Case: Decreasing or Forbearance Pacts [6.82]). Instead their exercise is suspended, in accordance with the equitable protection of this form of estoppel. Andrew Burrows QC, Deputy High Court Judge, in Harry Greenhouse v Paysafe Financial Services Ltd (2018), acknowledged that it is a controversial issue whether, and if so when, promissory estoppel will not merely suspend but extinguish rights.⁷⁸

6.75 The suspensory operation of promissory estoppel is illustrated by the leading case, Hughes v Metropolitan Railway Company (1877). This did not involve a debt, but rather a duty to repair the demised premises. The issue concerned forfeiture of a lease. The case is a clear demonstration of the suspensive and defensive nature of promissory estoppel. Here the House of Lords held that a landlord’s conduct (negotiations had ensued between a tenant and the landlord concerning a possible purchase of the reversion) made it unfair for the tenant to be (p. 145) held to a notice that the tenancy would be forfeited for non-compliance with its obligation to satisfy a repair covenant. In this case Lord Cairns LC formulated the following general principle of promissory estoppel:⁷⁹

it is the first principle upon which all Courts of Equity proceed that if [a party enters] upon a course of negotiation [or makes some other representation] which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense … [the representor] will not be allowed to enforce [those strict legal rights] where it would be inequitable having regard to the dealings which have thus taken place between the parties.

6.76 According to a first instance judge’s audacious suggestion, that is, Denning J’s famous obiter remarks in the High Trees Case (1947), Equity is capable of stopping the creditor from asserting the strict legal rights which are protected by the rule in Pinnel’s Case (1602), provided (a small additional requirement), the debtor has assumed, when making the relevant part-payment(s), that the creditor would honour his undertaking to treat the part-payment(s) as complete discharge. It will be seen that this involves an equitable defence to a Common Law debt claim. Such an equitable defence would operate in manifest collision with the Common Law’s pro-creditor grundnorm, namely the rule in Pinnel’s Case [6.63]) that the part-payment achieves a complete discharge only if (i) the creditor has so promised and the debtor and the creditor have reworked the transaction so that the creditor is receiving a requested benefit (‘accord and satisfaction’, and ‘fresh consideration’) or (ii) there has been a deed of release given by the creditor, that is, a formal release executed by a deed or covenant.

6.77 Denning J’s radical dictum is as follows, Central London Property Trust Ltd v High Trees House Ltd (1947):⁸⁰

The logical consequence, no doubt, is that a promise to accept a smaller sum in discharge of a larger sum, if acted upon, is binding notwithstanding the absence of consideration: and if the fusion of law and equity leads to this result, so much the better. That aspect was not considered in Foakes v Beer. At this time of day however, when law and equity have been joined together for over seventy years, principles must be reconsidered in the light of their combined effect. It is to be noticed that in the Sixth Interim Report of the Law Revision Committee, paras 35, 40, it is recommended that such a promise as that to which I have referred, should be enforceable in law even though no consideration for it has been given by the promisee. It seems to me that, to the extent I have mentioned, that result has now been achieved by the decisions of the courts.

6.78 And on the facts he said:⁸¹

I am satisfied that the promise was understood by all parties only to apply under the conditions prevailing at the time when it was made, namely, when the flats were only partially let, and that it did not extend any further than that. When the flats became fully let, early in 1945, the reduction ceased to apply.

(p. 146) 6.79 In MWB Business Exchange Centres v Rock (2016)⁸² Kitchin LJ (Arden LJ conceding that Kitchin LJ’s comments are correct) protested that Denning J’s audacious resort in The High Trees case (1947) to Equity, in the form of promissory estoppel, is unconvincing, indeed wrong. Kitchin LJ said that the issue whether the debtor’s obligation is ever extinguished cannot be regarded as settled:⁸³

I do not for my part think that it can be said, consistently with the authorities, including, in particular, the decisions of the House of Lords in Foakes v Beer and this court in In re Selectmove [1995] 1 WLR 474, that in every case where a creditor agrees to accept payment of a debt by instalments, and the debtor acts upon that agreement by paying one of the instalments, and the creditor accepts that instalment, then it will necessarily be inequitable for the creditor later to go back upon the agreement and insist on payment of the balance. Again, all will depend upon the circumstances.

In the MWB case Arden LJ said:⁸⁴ I agree with the judgment of Lord Justice Kitchin on the general principles that he sets out at [61] above.

6.80 It follows that the equitable doctrine of promissory estoppel does not protect the debtor against a claim for the unpaid balance, other than by giving the debtor more time, where appropriate.

6.81 For a rent case where the ‘penalty doctrine’ was applied, the tenancy having begun at a commercially low level of rent, which would be increased if the tenant defaulted even in a quite minor way, for example, by paying a quarter’s rent late, see Vivienne Westwood Ltd v Conduit Street Development Ltd (2017) [27.89].⁸⁵

Evaluation of the Rule in Pinnel’s Case: Decreasing or Forbearance Pacts.

6.82 It is submitted that:

(1) Summary of the Submissions Made Here. The author proposes a modified survival of the Rule in Pinnel’s Case and the retreat of promissory estoppel (which will operate only suspensively: see (5) below). And so the courts should recognize the following doctrine of Common Law Prospective and Provisional Waiver:
1. (a) accrued debts can be released or reduced only by deed or a pact supported by consideration; and this extends to the right, by statute or under agreement, to interest arising with respect to an accrued debt, as on the facts of Foakes v Beer [6.65] itself;
2. (b) prospective debts can be reduced or released in futuro; hence this is a prospective form of waiver, and not retroactive; the release/reduction just mentioned is contingent on the creditor not having given (prior to the relevant payment date) reasonable notice to return to the original level of debt; hence this is a provisional form of waiver;
3. (p. 147) (c) thus a reduced/released debt which had became payable during the operation of the period of waiver is forever reduced/released; thus the waiver will operate extinctively (there should be no need to show detrimental reliance).
(2) Scope of the Rule. Creditors who are parties to contracts involving periodic sums might agree variations concerning (i) the timing of payment; and/or to (ii) the amount of payment; and/or (iii) the place of payment; (iv) the currency; (v) mode of payment (cash, direct debit, etc); (vi) the nominated recipient (on this last point see discussion of Taurus Petroleum Ltd v Scott Oil Marketing Co of the Ministry of Oil, Republic of Iraq (2017) at [27.12]. The rule in Pinnel’s Case should be restated so that it is concerned only with protection of element (ii), that is, the amount of payment and, it is submitted, only if the debt has arisen, that is, where the money obligation has accrued (it should be noted, therefore, that the issue in Rock Advertising Ltd v MWB Business Exchange Centres (2016, CA) and (2018, SC) did not concern reduction in the level or payment, but chronological forbearance, the debtor thus being given a more lenient schedule of payment dates).
(3) The Rule Should Survive (Subject to Modification in Case of Prospective Payment Variations, see (2)). The rule in Pinnel’s Case (1602) is sound because a debt is an asset and a promise to reduce or to extinguish the asset in favour of the debtor is a gift, whether outright or pro tanto, of that asset; that rule recognizes that a gratuitous promise to release in whole or in part an accrued debt, including interest arising thereunder, requires the formality of a deed, because the creditor is getting nothing in return. And so, a creditor’s promise (whether to suspend or even extinguish a debt) will be binding only if there has been a variation supported by fresh consideration or a variation made by deed. The rationale for this recognition that a debt can be reduced in a binding fashion (‘extinctively’) is that the creditor and debtor have created a new deal, that is, a variation which constitutes a fresh bargain between them. And so, fresh consideration, where properly identified, changes things in favour of the debtor. A deed of release (ie made formally by covenant) is equally effective to protect the debtor.

The Law Revision Committee in 1937 recommended that the present rule be abrogated.⁸⁶ The Committee considered the criticism made by Sir George Jessel MR in Couldery v Bartrum (1881),⁸⁷ and by Lord Blackburn in Foakes v Beer (1884).⁸⁸ The Committee regarded these comments as devastating: ‘[the rule] has been shattered by argument and ridicule from the judicial bench’.⁸⁹ Three main points were made by the Law Revision Committee in its 1937 report:⁹⁰ (i) that the rule is easily evaded by the creditor taking a nominal form of consideration in return for the promise to reduce a debt; (ii) that the rule supporting enforcement of composition agreements amongst creditors is not easily reconciled with survival of the rule in Pinnel’s Case (1602);⁹¹ (iii) that the way forward is for a partial payment received in complete (p. 148) discharge to be an effective discharge of the whole debt, not just upon payment, but at the stage of a promise (although that promise will disappear if the debtor fails to satisfy the new agreement). But the Committee failed to consider any positive argument in favour of the rule in Pinnel’s Case.

It is submitted that this rule, although overstated in so far as it precludes prospective adjustment of periodic payments, is sound in its application to accrued debts. The creditor’s right to payment under an accrued debt is treated in commerce and in law as equivalent to cash in hand. Commerce presupposes that debt obligations are not mere phantoms but rights which can be traded and literally banked upon. Certainly, a debt right is an asset which can be traded (see chapter 10 on assignment of contractual rights). The underpinning assumption is that the payment obligation will be honoured. It is not an obligation which should be lightly extinguished or reduced. The creditor’s promise to forego or reduce the debt will effect a transfer to the debtor of the credit. The debtor’s debit will literally become a credit. It is different if the debt is genuinely disputed. The assumption, therefore, is that the debt is good in law and undisputed or at least incapable of being sensibly disputed.

The consideration doctrine here impinges in a salutary way to protect (i) the creditor and (ii) his or her creditors and (iii) the creditor’s successors. To gift the benefit of the debt is to confer a gratuitous benefit on the debtor (and his creditors and successors). It is the central function of the consideration doctrine to require clear evidence, through the formality of a deed, of an intention to make a binding gratuitous promise. In the absence of a deed, the creditor’s only remaining legal opportunity to ‘gift away’ the right to payment is to enter into a fictitious bargain. Hence the use of nominal consideration is permitted as a means of allowing the debtor to escape full liability by instead making part-payment. There is one remaining situation. This is where the arrangement between the creditor and debtor is not in essence a gratuitous release (a fictitious bargain, founded upon nominal consideration), but is instead a fully fledged commercial bargain. And so, in this last situation fresh consideration (that is substantial rather than nominal consideration) is provided by the debtor as the price for gaining a partial or complete release.

Lord Sumption’s obiter comments in Rock Advertising Ltd v MWB Business Exchange Centres Ltd (2018)⁹² are neutral and contain no hint that the rule in Pinnel’s Case is about to be toppled. Instead these remarks should be interpreted as indicating that the cluster of rules relating to variation of accrued debts and prospective periodic payments needs to be reviewed, in the interest of clarity and coherence.
(4) Prospective Payment Variations: Author’s Suggestions for Modifying the Rule in Pinnel’s Case. Debts are either accrued or prospective. Where future instalments (eg future quarterly rent payments) are in issue between creditor and debtor, it might be pragmatic for the law to recognize the need for mutual adjustment. And thus where periodic payments commence at a level of £10,000 each quarter, but the creditor allows the debtor a grace period when the amount of instalments yet to accrue will be reduced to £5,000, that grace period might benefit the debtor only so long as the creditor does not give prospective notice that the sum is to be £10,000, as originally (p. 149) agreed. In effect the creditor is ‘gifting’ 50 per cent of each prospective but not yet accrued instalment. But once a periodic or lump sum debt has already accrued, the rule in Pinnel’s Case will continue to operate in the creditor’s favour. The comments made here would require Supreme Court endorsement, as these remarks do not represent the current law.

Blacktower Illustration. To illustrate this: suppose X owes Y £5000 rent per quarter day on the Blacktower office block. At the end of 2019 Y agreed with X to accept £2500 per quarter ‘until further notice’. Accordingly, X paid £2500 to Y in the first two quarters of 2020. Y gave notice to X before the commencement of the third quarter that the original rent of £5000 would resume. This means that for the third quarter, and thereafter, £5000 is payable. Y cannot seek to recoup the unpaid portions of the rent for the first two quarters. This is because the rent of £2500 for each of those quarters had been revised and the reduced figure had become (irrevocably, for those two quarters) the applicable amount for those periods. An agreement to reduce periodic sums permanently, for the residue of the relevant contract, will need to be supported by consideration or the variation will need to be effected by a deed of variation. This is because the payee is giving up entitlement to a higher, originally agreed, amount.

Whitetower Illustration. To illustrate this further: suppose premises (the Whitetower office block) are let under a ten-year lease by A to B. The quarterly rent is £25,000. Before the commencement of year two, the tenant regrets that it cannot pay the first quarter for year two in full. Negotiations immediately ensue. The landlord forbears to evict and repossess. Instead it is agreed that the tenant in years two and three will pay 80 per cent of the rent (£80,000 not £100,000 a year). The quarterly sum is scaled down accordingly, for those years, to £20,000. All proceeds to plan. But in year four the landlord’s administrator seeks payment of the unpaid £40,000 with respect to years two and three. Denning J in his famous dictum in ‘The High Trees’ case [6.76] sought to protect the tenant, not by direct abrogation of the rule in Pinnel’s Case but by the subtlety and subterfuge of the equitable doctrine of promissory estoppel.⁹³ But it has rightly become unfashionable for Equity to be used to circumvent Common Law rules, at any rate within the general body of contractual doctrine (generally on Equity and the law of contract [1.30]). On the assumption that the agreement just mentioned was not expressly or manifestly intended to operate suspensively, the landlord retaining the underlying right to the temporarily withheld portion of the rent, it is submitted that the tenant in the situation just presented, having paid the adjusted rent of £80,000 in years two and three, cannot be required to pay the unpaid £40,000. This is because that sum has been irrevocably released. The landlord could have reinstated the original level of rent at any stage during years two and three by giving reasonable notice. It elected not to do so and instead received a reduced level of rent, consistent with its prospective decreasing pact. It is submitted that the law should give effect to that decreasing pact only if (i) it arises prior to the accrual of the relevant payment obligation; (ii) the creditor was not made subject to coercion or misrepresentation or fraud; (iii) there has not been a reactivation by (p. 150) reasonable notice of the original level of rent prior to the relevant quarterly payment date(s). The doctrine just explained would achieve a satisfactory balancing of the interests of the creditor and the debtor in the context of periodic sums. The analysis builds upon the distinction between accrued debt obligations (which remain governed by the rule in Pinnel’s Case, 1602)⁹⁴ and prospective debt obligations, where flexibility might be desirable.
(5) Promissory Estoppel not Extinctive. The analysis presented here dispenses with the fifth wheel on the coach: the intrusion of the equitable doctrine of promissory estoppel. Promissory estoppel becomes a redundant doctrine, once the analysis presented at (4) is recognized. That would involve recognition of a Common Law doctrine of prospective and provisional waiver: a Common Law refinement of the rule in Pinnel’s Case (rather than the interposition of an external and Equitable gloss). It is time to expunge the confusion which was injected by Denning J’s over-ambitious and unprincipled dictum. Equity should retreat from this context, except to the extent that (consistent with Hughes v Metropolitan Railway Co (1877) [6.75]) promissory estoppel can legitimately protect a party who has been told that the other party’s strict legal rights will be suspended (as distinct from extinguished).

Third Party Payment to Creditor.

6.83 Where partial payment is received by the creditor as closure of the debtor’s obligation (a fortiori when the amount of the total debt is disputed reasonably and in good faith), upon part payment by the third party the creditor will cease to be entitled to require the debtor to pay the balance. This was decided in Hirachand Punamchand v Temple (1911).⁹⁵ The result achieved by the Court of Appeal might now be replicated simply on the basis that the debtor would become a ‘limb two’ third party beneficiary of a promise between creditor and third party under the Contract (Rights of Third Parties) Act 1999 [9.50]. The third party in the Hirachand case was the debtor’s father. The triangular nature of that context distinguishes it from the simple context governed by the rule in Pinnel’s Case (1602) [6.63]. The latter rule is a bilateral doctrine, concerning only creditor and debtor. The result in the Hirachand case was acknowledged as sound by Winn and Danckwerts LJJ in D & C Builders v Rees (1966), where he said:⁹⁶ ‘[w]here a cheque for a smaller sum than the amount due is drawn by a person other than the debtor and delivered in satisfaction of his debt, it is clear that the debt is discharged if the cheque be accepted on that basis and duly paid; cf Hirachand Punamchand v Temple’.

6.84 In the same 1966 decision, Danckwerts LJ:⁹⁷ ‘I accept that the cheque of some other person than the debtor, in appropriate circumstances, may be the basis of an accord and satisfaction.’

6.85 Similarly, in Snelling v John Snelling Ltd (1973)⁹⁸ three brothers (C, X, and Y) had agreed (‘the promise’) that they would not sue their family company to recover sums to which they were otherwise entitled. C, the claimant, broke rank and sued the company. The other two (p. 151) brothers, X and Y, were joined as parties to the proceedings. Although the old Common Law privity doctrine at the date of this case (on that doctrine [9.35]) did not permit the company to take advantage of a contract to which it was not party, Ormrod J held that X and Y could, as promisees, invoke the promise for the defendant company’s protection. And, rather than grant a mere ‘stay’ (a court order playing proceedings in suspense), the appropriate final relief was to dismiss outright the claim.

6.86 In the Hirachand case, it was clear that the payee had assented to the third party’s stipulation that the part-payment would preclude any further recourse by the payee against the debtor. But sometimes it is not clear whether receipt or cashing of a cheque given in full and final settlement discloses such an accord and satisfaction.⁹⁹

Footnotes:

¹ PS Atiyah, ‘Consideration: A Restatement’, reprinted in PS Atiyah, Essays on Contract (OUP 1996) ch 8; M Chen-Wishart, ‘Reforming Consideration: No Greener Pastures’ in S Degeling, J Edelman, and J Goudkamp (eds), Contract in Commercial Law (Thomson Reuters 2016) ch 5; AG Chloros, ‘The Doctrine of Consideration and the Reform of the Law of Contract’ (1968) 17 ICLQ 137; B Coote, ‘Consideration and Variations: A Different Solution’ (2004) 120 LQR 19, noting Antons Trawling Co Ltd v Smith (2003, New Zealand); B Coote, ‘Variations Sans Consideration’ (2011) 27 JCL 307; J Cartwright, Formation and Variation of Contracts: The Agreement, Formalities, Consideration and Promissory Estoppel (2nd edn, Sweet and Maxwell 2018) Part III; M Furmston and Tolhurst GJ, Contract Formation: Law and Practice (2nd edn, OUP 2016) ch 12; M Hogg, ‘Competing Theories of Contract: An Emerging Consensus?’ in L DiMatteo and others (eds), Commercial Contract Law: Transatlantic Perspectives (CUP 2014) ch 2; S Kiefel, ‘The Doctrine of Consideration in Contract: Some Historical and Comparative Perspectives, in Degeling, Edelman, and Goudkamp (eds), Contract in Commercial Law, ch 4; Law Revision Committee, Sixth Interim Report on ‘The Statute of Frauds and the Doctrine of Consideration’ (1937, Cmd 5449), paragraphs 17 to 40 and 50; J Morgan, Great Debates in Contract Law (3rd edn, Palgrave Publishing 2020) ch 2 (and the literature cited at 72–73); J O’Sullivan, ‘In Defence of Foakes v Beer’ [1996] CLJ 219; GH Treitel, ‘Consideration: A Critical Analysis of Professor Atiyah’s Fundamental Restatement’ (1976) 50 Australian Law Journal 439; GH Treitel, Some Landmarks of Twentieth Century Contract Law (OUP 2002) ch 1; S Waddams, ‘Principle in Contract Law: The Doctrine of Consideration’ in JW Neyers, R Bronaugh, and SGA Pitel (eds), Exploring Contract Law (Hart Publishing 2009) 51 ff; S Waddams, Principle and Policy in Contract Law: Competing or Complementary Concepts? (CUP 2011) ch 3. See also M Arden, ‘Time for an English Commercial Code?’ [1997] CLJ 516, 533, citing Harvey McGregor, preface to Contract Code: Drawn up on Behalf of the English Law Commission (Giuffre Publishing 1993) 3.

² Coote, ‘Variations Sans Consideration’, 192.

³ [1982] QB 84, 106.

⁴ Kerr v Jamison [2019] NICh 4 at [54] to [66].

⁵ (1874–75) LR 10 Ex 153, 162 (Exchequer Chamber); the majority judgment was delivered by Lush J; affirmed, (1876) 1 App Cas 554 (HL).

⁶ Treitel, Some Landmarks of Twentieth Century Contract Law, 11.

⁷ [1975] AC 154, 168 (PC).

⁸ Both points identified by Owen J, [2012] EWHC 1189 (QB) at [182] and [183], not challenged on appeal, but noted in [2013] EWCA Civ 394, [2013] 3 All ER 807, [2013] ICR D30 at [95] (Elias LJ).

⁹ (1873–74) LR 9 QB 55 (Blackburn J; Mellor and Quain JJ agreeing).

¹⁰ Chitty on Contracts (HG Beale gen ed, 33rd edn, Sweet and Maxwell 2018) 4-041.

¹¹ [1960] AC 87 (HL) (Lords Tucker, Reid, Somervell; Viscount Simonds and Lord Keith dissenting).

¹² s 8, the Copyright Act 1956 required that a tune which was the subject of copyright could only be validly copied if the copier paid a royalty based on ‘the ordinary retail selling price’ (the position has been altered by the Copyright, Designs and Patents Act 1988, s 170, Schedule 1, paragraph 21).

¹³ [1936] 1 KB 169 (CA) (Scott, Greer, Romer LJJ).

¹⁴ ibid, 182.

¹⁵ (1861) 3 De GF & J 718, 723; 45 ER 1056, 1059.

¹⁶ [2014] EWHC 3852 (QB), [2015] IRLR 226 at [70], [71] (Stephen Davies QC).

¹⁷ [1933] 1 KB 793 (CA).

¹⁸ (1765) 3 Burr 1663, 1670; 97 ER 1035, 1039.

¹⁹ (1778) 7 Term Rep 350 (note); 4 Bro PC 27; 2 ER 18.

²⁰ For gratuitous promises to charities: Re Hudson (1885) 54 LJ Ch 811 (Pearson J); Re Cory (1912) 29 TLR 18 (Eve J); by contrast, in the United States, an informal promise to subscribe to charity is enforceable once the promisee has relied upon it: Restatement of the Law Second, Contracts, section 90(2).

²¹ See remarks by Harvey McGregor QC in the preface to his Contract Code: Drawn up on Behalf of the English Law Commission (Giuffre Publishing 1993) 3; and Law Revision Committee, Sixth Interim Report on ‘The Statute of Frauds and the Doctrine of Consideration’ (1937, Cmd 5449).

²² See also the observations by Phang JA in Gay Choon Ing v Loh Sze Ti Terence Peter (2009) in Singapore at [2009] SGCA 3, [2009] 2 SLR 332 at [92] to [118]; for brief comment, E McKendrick, Contract Law (13th edn, Palgrave Publishing 2019) 5.29.

²³ (1840) 11 Ad & El 438; 113 ER 482, Court of Queen’s Bench (Lord Denman CJ).

²⁴ (1840) 11 Ad & El 438, 450–52; 113 ER 482, 486–87.

²⁵ (1842) 3 QB 234, Court of Queen’s Bench.

²⁶ [1951] Ch 669 (CA).

²⁷ Notably, Jenkins LJ, ibid, 678.

²⁸ [1980] AC 614, at 629, adopting Re Casey’s Patents [1892] 1 Ch 104, 115–16 (CA) (Bowen LJ).

²⁹ ibid.

³⁰ [2019] EWHC 1573 (Comm) at [11] and [12] (Christopher Hancock QC).

³¹ [2017] EWHC 3192 (QB) at [70] to [73] (Martin Griffiths QC).

³² Law Revision Committee, Sixth Interim Report on ‘The Statute of Frauds and the Doctrine of Consideration’ (1937, Cmd 5449) at [32]; similarly, see Denning LJ’s minority comments in both Ward v Byham [1956] 1 WLR 496, 498 (CA), and Williams v Williams [1957] 1 WLR 148, 151 (CA).

³³ This is indeed a separate category within the law of unjust enrichment: AS Burrows, The Law of Restitution (3rd edn, OUP 2011) ch 18; Goff and Jones, The Law of Unjust Enrichment (C Mitchell, P Mitchell, and S Watterson eds, 9th edn, Sweet and Maxwell 2016) ch 18; G Virgo, Principles of the Law of Restitution (3rd edn, OUP 2015) ch 12.

³⁴ [1925] AC 270 (HL).

³⁵ ibid, 290–91.

³⁶ [2013] EWCA Civ 115, [2014] QB 168 at [6].

³⁷ For a successful, but controversial, decision awarding a contractual sum to another public service, a fire brigade, see on Upton-on-Severn Rural District Council v Powell [1942] 1 All ER 220 (CA).

³⁸ [1956] 1 WLR 496 (CA).

³⁹ ibid, 498.

⁴⁰ Williams v Williams [1957] 1 WLR 148, 151 (CA).

⁴¹ J Adams and R Brownsword, ‘Contract, Consideration and the Critical Path’ (1991) 53 MLR 536; Cartwright, Formation (2018) 9-11 to 9-16; M Chen-Wishart, ‘The Enforceability of Additional Contractual Promises. A Question of Consideration?’ (1991) 14 NZULR 270 (at 281 providing a check-list of relevant factors when assessing the merits of a claim for an increasing (or ameliorative) pact); Coote, ‘Consideration and Variations: A Different Solution’, 19, noting Antons Trawling Co Ltd v Smith [2002] NZCA 331, [2003] 2 NZLR 23; <IBT>Coote, ‘Variations Sans Consideration’, </IBT>185; Coote notes both the Antons Trawling case and Greater Fredericton Airport Authority v Nav Canada (2008) 290 DLR (4th) 405 at [31] (CA, New Brunswick); and Coote, ibid, 187 fn 14, citing extensive literature; R Halson, ‘The Modification of Contractual Obligations’ (1991) 44 CLP 111 (deft exploration of the case law and issues of policy); R Halson (case note) (1990) 106 LQR 183; S Harder, ‘One-sided contract Modifications and the Requirement of Consideration’ [2019] LMCLQ 138; NJ Hird and A Blair, ‘Minding your Own Business—Williams v Roffey Re-visited: Consideration Re-Considered’ [1996] JBL 254 (contending that the Roffey result could be achieved by a more radical use of promissory estoppel); S Fennell and S Ball, ‘Welfarism and the Renegotiation of Contracts’ in R Brownsword, G Howells, and T Wilhelmsson (eds), Welfarism in Contract Law (Dartmouth Publishing 1994) ch 8. On variation in this context of building contracts more generally, M Sergeant and M Wieliczko, Construction Contract Variations (Informa Law 2014).

⁴² [1991] 1 QB 1 (CA).

⁴³ ibid, 21.

⁴⁴ ibid, 15–16; this statement was adopted by Christopher Clarke J in Birmingham City Council v Forde [2009] EWHC 12 (QB), [2010] 1 All ER 802 at [86].

⁴⁵ Roffey case, ibid, 6.

⁴⁶ ibid, 19.

⁴⁷ ibid, 21.

⁴⁸ (1791) Peake 102; 170 ER 94.

⁴⁹ (1809) 2 Camp 317; 170 ER 1168.

⁵⁰ Occidental Worldwide Investment Corporation v Skibs A/s Avanti (‘The Siboen and the Sibotre’) [1976] 1 Lloyd’s Rep 293.

⁵¹ (1857) 7 E & B 872; 119 ER 1471.

⁵² (1867) LR 3 CP 47.

⁵³ [2017] EWHC 1928 (Comm).

⁵⁴ For confirmation, see the dictum by Leggatt J in Blue v Ashley [2017] EWHC 1928 (Comm) at [59], cited in the text above.

⁵⁵ This has been the response in New Zealand: Antons Trawling Co Ltd v Smith [2002] NZCA 331, [2003] 2 NZLR 23 at [93]; noted, B Coote (2004) 120 LQR 19; Coote, ‘Variations Sans Consideration’, 189–93.

⁵⁶ Re-Use Collections Ltd v Sendall [2014] EWHC 3852 (QB), [2015] IRLR 226 at [70] to [83] (Stephen Davies QC).

⁵⁷ ibid, at [84].

⁵⁸ ibid, at [89] sub-paragraph (4), where the judge held that the six-month restriction was too long; a maximum three-month duration was suggested by the judge; it was also held (ibid, at [85]) that absence of consideration rendered a post-formation confidentiality clause unenforceable.

⁵⁹ (1602) 5 Co Rep 117a (entire Court of Common Pleas).

⁶⁰ (1884) 9 App Cas 605 (HL).

⁶¹ ibid; for detailed examination of the 1884 decision, see M Lobban, in C Mitchell and P Mitchell (eds), Landmark Cases in the Law of Contract (Hart Publishing 2008) 223 ff.

⁶² [1934] 2 KB 223 (CA).

⁶³ [1966] 2 QB 617 (CA), 626 (Danckwerts LJ), 632–3 (Winn LJ).

⁶⁴ [1995] 1 WLR 474 (CA); see Peter Gibson LJ’s remarks, 450–51.

⁶⁵ [2016] EWCA Civ 553, [2017] QB 604; for Lord Sumption’s dictum, see Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24, [2019] AC 119 at [18]. Pre-MWB/Rock commentary: Law Revision Committee, Sixth Interim Report on ‘The Statute of Frauds and the Doctrine of Consideration’ (1937, Cmd 5449) at [33] to [35]; Lady Arden has examined the present controversy concerning the role of promissory estoppel: ‘Should Consideration be Required for the Consensual Discharge of an Agreement by Part Payment?’ in A Dyson, J Goudkamp, and F Wilmot-Smith (eds), Defences in Contract (Hart Publishing 2017) ch 6; Coote, ‘Consideration and Variations: A Different Solution’, 19, noting Antons Trawling Co Ltd v Smith [2002] NZCA 331, [2003] 2 NZLR 23 at [93]; Coote, ‘Variations Sans Consideration’, 307; M Lobban, in C Mitchell and P Mitchell (eds), Landmark Cases in the Law of Contract, 223 ff; B McFarlane, ‘Equitable Estoppel as a Cause of Action: Neither One Thing Nor the Other’ in PS Davies and J Pila (eds) The Jurisprudence of Lord Hoffmann: A Festschrift in Honour of Lord [Leonard] Hoffmann (Hart Publishing 2015) ch 16; J O’Sullivan, ‘In Defence of Foakes v Beer’; Treitel, Some Landmarks of Twentieth Century Contract Law, ch 1 (‘Agreements to Vary Contracts’). Post-MWB/Rock commentary: Not surprisingly, the Rock/MWB case, Court of Appeal and the dicta of Lord Sumption in the Supreme Court (and the ‘No Oral Modification’ clause issue), have precipitated a mass of comment which includes (for earlier comment on this topic, see above): Lady Arden has examined the present controversy concerning the role of promissory estoppel: ‘Should Consideration be Required for the Consensual Discharge of an Agreement by Part Payment?’ in Dyson, Goudkamp, and Wilmot-Smith (eds), Defences in Contract, ch 6; see also the literature cited there at p 121; M Burton, ‘Practical Benefit Rids Again: MWB Business Exchange in Comparative Perspective’ (2017) 46 Common Law World Review 69; Cartwright, Formation (2018) 9-17 ff, and ch 10; K Chng and Y Goh, ‘A Renewed Consideration of Consideration … ’ (2016) 16 OUCLJ 323; J Fisher, ‘Contract Variation in the Common Law: A Critical Response to Rock v MWB’ (2018) 47 Common Law World Review 196; Harder, ‘One-sided Contract Modifications and the Requirement of Consideration’; E McKendrick, ‘The Legal Effect of an Anti-oral Variation Clause’ (2017) 32 Journal of International Banking Law and Regulation 439; J Morgan, ‘Contracting for Self-denial: On Enforcing “No Oral Modification” Clauses’ (2017) 76 CLJ 589; M Roberts, ‘Foakes v Beer: Bloodied, Bowed, But Still Binding Authority?’ (2018) 29 King’s LJ 344; M Roberts, ‘MWB Business Exchange Centres Ltd: The Practical Benefit Doctrine Marches On’ (2017) 80 MLR 339; Janet O’Sullivan, ‘Unconsidered Modifications’ (2017) 133 LQR 191; A Shaw-Mellors, ‘Contractual Variations and Promises to Accept Less: Pragmatism in the Court of Appeal’ [2016] JBL 696; A Shaw-Mellors and J Poole, ‘Recession, Changed Circumstances, and Renegotiations: The Inadequacy of Principle in English Law’ [2018] JBL 101.

⁶⁶ (1884) 9 App Cas 605, 613–14 (HL).

⁶⁷ Lord Blackburn, (1884) 9 App Cas 605, 622–23 (HL).

⁶⁸ D & C Builders v Rees [1966] 2 QB 617, 626, Danckwerts LJ, 632–33, Winn LJ (CA), overruling Goddard v O’Brien (1882) 9 QBD 37 (Div Ct).

⁶⁹ [2019] EWCA Civ 1105.

⁷⁰ ibid, at [49] to [53] (Simon LJ giving the Court’s judgment).

⁷¹ [2016] EWCA Civ 553, [2017] QB 604 (overturned on a different point by the Supreme Court in Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24, [2019] AC 119).

⁷² See Kitchin LJ’s remarks, [2016] EWCA Civ 553, [2017] QB 604 at [45]. A similar case is Re Smith and Hartogs (1895) 72 LT 221 (CA), where rent was reduced, but the unpaid balance was to be added to future rent days; this was cited by Christopher Pycroft QC in Re SHB Realisations Ltd [2018] EWHC 402, [2018] BCC 712, [2018] 2 BCLC 654, [2018] Bus LR 1173 at [39], on the latter.

⁷³ (1602) 5 Co Rep 117a (entire Court of Common Pleas).

⁷⁴ [2018] UKSC 24, [2019] AC 119 at [18].

⁷⁵ M Arden, ‘Should Consideration be Required for the Consensual Discharge of an Agreement by Part Payment?’ in Dyson, Goudkamp, and Wilmot-Smith (eds), Defences in Contract, ch 6, at 119.

⁷⁶ [2018] UKSC 24, [2019] AC 119 at [18].

⁷⁷ There are dicta of Kerr J in Simcantob v Shavleyanat reviewing the tangled law in this area: [2018] EWHC 2005 at [119] to [138], Kerr J; the ratio in that case was that consideration had arisen in the traditional form of a settlement of a disputed debt claim; but Kerr J acknowledged the unwillingness of the Court of Appeal in Re Selectmove (1995) to allow ‘practical benefit’ analysis to undermine the rule in Pinnel’s Case.

⁷⁸ [2018] EWHC 3296 (Comm) at [14] to [17], [38] to [40], [50] to [52].

⁷⁹ (1877) 2 App Cas 439, 448 (HL).

⁸⁰ [1947] 1 KB 130, 135.

⁸¹ ibid.

⁸² [2016] EWCA Civ 553, [2017] QB 604.

⁸³ ibid, at [61].

⁸⁴ ibid, at [92].

⁸⁵ [2017] EWHC 350 (Ch), [2017] L & TR 23 at [65]; and see S Wilken and K Ghaly, The Law of Waiver, Variation, and Estoppel (3rd edn, OUP, 2012) 22.28 and 22.29. The Vivienne Westwood case was distinguished in Re SHB Realisations Ltd (formerly BHS Ltd) (In Liquidation) [2018] EWHC 402, [2018] BCC 712, [2018] 2 BLC 654 at [19] to [39] (Christopher Pycroft QC), in the context of company voluntary arrangements ‘CVAs’.

⁸⁶ Sixth Interim Report on ‘The Statute of Frauds and the Doctrine of Consideration’ (1937, Cmd 5449) at [33] to [35].

⁸⁷ (1881) 19 Ch D 394, 399.

⁸⁸ (1884) 9 App Cas 605, 622 (HL).

⁸⁹ Sixth Interim Report on ‘The Statute of Frauds and the Doctrine of Consideration’ (1937, Cmd 5449) at [33].

⁹⁰ ibid, at [33] to [35].

⁹¹ (1602) 5 Co Rep 117a (entire Court of Common Pleas).

⁹² Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24, [2019] AC 119 at [18].

⁹³ Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130, 133–5; Denning later wrote about his theory in ‘Recent Developments in the Doctrine of Consideration’ (1952) 15 MLR 1.

⁹⁴ (1602) 5 Co Rep 117a: entire Court of Common Pleas).

⁹⁵ Hirachand Punamchand v Temple [1911] 2 KB 330; on which, J Beatson, Use and Abuse of Unjust Enrichment (OUP 1991) 177, at 184, fn 45; earlier presented in (1976) 92 LQR 188 with P Birks.

⁹⁶ [1966] 2 QB 617, 629 (CA).

⁹⁷ ibid, 626.

⁹⁸ Snelling v John Snelling Ltd [1973] QB 87, 99 (Ormrod J).

⁹⁹ See Jacob J’s survey in IRC v Fry [2001] STC 1715, [2002] BTC 3, and see Stour Valley Builders v Stuart (1992) (Court of Appeal, 21 December 1992, Lloyd LJ and Connell J, The Times, 22 February 1993; The Independent, 9 February, 1993).

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