Cases Involving Part Payment of Debt

Do you think that the decision in Williams v Roffey Bros. [1990] 2 WLR 1153 should be extended to cover cases involving part payment of debt? Give reasons for your answer.

Introduction:

In 1990 an appeal case was heard at the Court of appeal between Williams V Roffey Bros & Nicholls (Contractors) Ltd. The original facts of this case were that Williams had been sub contracted to carry out carpentry work by Roffey Bros at a set price, payable in instalments. Due to Williams coming into financial difficulty, a result of the price of work being too low, the expected time frame for completion of the work was at risk of not being met and thus would result in Roffey Bros. receiving a penalty. For this reason Roffey Bros. renegotiated with Williams and promised to pay him an extra sum of money per flat, if the completion time was met. Williams received payment for some completed work but not all and therefore sued Roffey Bros. The initial decision of Mr. Rupert Jackson QC was appealed by the defendants, after the judge held that Williams was indeed entitled to the amount owed minus deductions for any incomplete work. The appeal was then dismissed on the basis that both parties had shown consideration in the renegotiation of the contract because both were receiving a benefit or avoiding a disbenefit.

As well as others, I am going to use the reasoning of the judges in the case above, to argue and counter argue that this type of case should not be extended to cases involving part payment of a debt. Usually this is where the creditor has later looked to retrieve outstanding funds when initial satisfaction has been obtained on part payment. Most cases used to back up my theory will come from those determined in the Appeal courts or House of Lords and the ratio decidendi of these cases revolve around consideration.

A legally binding contract requires an offer and acceptance, consideration and an objective intention to create the structure for a legal relationship. These three fundamental factors are looked at when deciding a case based around a contractual breach. Part payments of debt cases are often approached from a different angle than those that require Performance of an existing duty, such as that in Williams v Roffey Bros.

The current principles for cases of performance of existing duty are that consideration must be found in the renegotiation. In other words there must be a practical benefit or an avoidance of a disbenefit, for both parties, for the renegotiation to be binding, although what constitutes a ‘Practical benefit’ is not fully known “Consideration means something which is of some value in the eyes of the law, moving from the plaintiff; it may be some detriment to the plaintiff or of some benefit to the defendant, but at all events must be moving from the plaintiff” [1] . These principles used were laid down in Stilk v Myrick and thus refined in Williams v Roffey Bros. Simply this means that existing contractual duties do not consist as consideration for a new agreement unless there is an obvious practical advantage to both parties.

The principles for a part payment of debt case are quite similar although not entirely exact. There is again the requirement for consideration, though it is examined in a different way. These basic principles were quoted in Pinnel’s case “Payment of a lesser sum on the day in satisfaction of a greater sum cannot be any satisfaction for the whole, because it appears to the judges that by no possibility, a lesser sum can be a satisfaction to the claimant for a greater sum: but the gift of a horse, hawk, or robe, etc. In satisfaction is good… [as] more beneficial to the [claimant] than the money [2] . This simply means that additional consideration must be provided as sufficient in the eyes of the law for discharge of the full debt to stand. This decisioning was applied to the case of Foakes v Beer in which interest payment was sought after agreement of installed payments and created a conflictive argument that this was unjust. This raised the equitable remedy of Promissory Estoppel which I will discuss later in the essay.

The question that needs to be answered is whether or not the reasoning used in Foakes v Beer, that part performance is not sufficient satisfaction to annul a remaining duty, should be overruled and the reasoning behind Roffey of a ‘practical benefit’ should be made a generic rule. I would argue against this using Janet O’Sullivans extract from the Cambridge law journal. She compares the difference between part payment of a debt and an agreement to pay more by stating that “….a debt is a debt is a debt and £10 can’t possibly be sufficient to satisfy a debt of £15″ [3] whereas an offer to pay more to a party than originally agreed can be looked at in completely different terms, especially if the renegotiation has been initiated by the claimant. It is in my opinion that a ‘practical benefit’ is not an exact thing and therefore if any one of these types of reasoning should be dismissed, it should be that used in the Roffey case as it is far too uncertain. At least with the reasoning used in the Foakes v Beer case, there is a way of limiting it through promissory Estoppel and duress.

In contrast the reasoning used in Roffey is highly controversial as stated before, there is no written interpretation of what a practical benefit actually is and if this is true then how can it possibly be applied to part payment of debt cases? This would cause a huge amount of uncertainty and feeling of unjust in the courts. It can be said that part payment of a debt is a benefit to the creditor rather than no payment at all. It can also be applied to a case where part payment has been made earlier than initially required. This would give no protection to a creditor if he wished to bring his case to court.

Conclusion:

It is clear to me that the reasoning used in Williams v Roffey Bros has caused a vast amount of uncertainty and it is likely that the case will remain controversial until it is overruled at some point when a similar case comes to the House of Lords. The question here will be what method of reasoning can be resorted to if the initial idea of a practical benefit is dismissed. It could simply be the case that a clear and concise interpretation on a practical benefit is given, thus making future cases more predictable and clear or they reasoning used in cases of part payment should be widened across performance and payment. It is clear that using existing duties owed in a current contract, cannot and must not be viewed as new consideration in any type of renegotiation unless explicitly implied by both parties.

Facts of case

What were the decisions in both cases along with the ratio decidendi and any obiter dictum

How can this be compared to cases of part payment of debt (Find cases) High trees 1947 case, Pinnels case 1602, Stilk v Myrick 1809 (Protection for creditor from economic duress), Ferguson v Davies 1996

Advantages of applying to the above case

Disadvantages of applying to the above case

Exceptions (Promissory estoppels)

Conclusion