Foakes v. Beer
In the House of Lords
9 App. Cas. 605 (1884)

    [Dr. Foakes owed Julia Beer £2090.19s. on a judgment. The parties entered into an agreement which, as interpreted by the Court of Appeal, provided that if Dr. Foakes would pay Mrs. Beer £500 at once, and the remainder of the principal in certain installments, Mrs. Beer would forgive the interest on the debt. This is a suit for the interest brought by Mrs. Beer against Dr. Foakes, alleging that if any agreement to forgive the interest was in fact entered, it was without consideration, since the consideration consisted only in Dr. Foakes' doing what he was already bound to do in paying the principal of the debt. Decision in the Court of Appeal went for Mrs. Beer.]

    W.H. Holl Q.C. for the appellant:- Apart from the doctrine of Cumber V. Wane [that £5 cannot be satisfaction of £15] there is no reason in sense or law why the agreement should not be valid, and the creditor prevented from enforcing his judgment if the agreement is performed. It may be much more advantageous to the creditor to obtain immediate payment of part of his debt than to wait to enforce payment, or perhaps by pressing his debtor to force him into bankruptcy with the result of only a small dividend. Moreover if a composition is accepted friends, who would not otherwise do so, may be willing to come forward to assist the debtor. And if the creditor thinks that the acceptance of part is for his benefit who is to say it is not?....It is every day practice for tradesmen to take less in satisfaction of a larger sum, and give discount, where there is neither custom nor right to take credit.... It has often been held that a sheet of paper or a stick of sealing wax is a sufficient consideration.... Here the agreement is not to take less than the debt, but to give time for payment of the whole without interest, Mankind have never acted on the doctrine of Cumber v. Wane, but the contrary; nay few are aware of it. By overruling it the House will only declare the universal practice to be good law as well as good sense.

    EARL of SELBORNE, L.C. Whatever may be the ultimate decision of this appeal the House is much indebted to Mr. Holl for his exceedingly able argument.

    BOMPAS Q.C. (Gaskell with him) for the respondent:...... There is a strong current of authority that what the law implies as a duty is no consideration. Therefore where a debt is due part payment is no reason for giving up the residue. The doctrine is too well settled to be overthrown..... It is contrary to public policy to make the performance of a legal duty a good consideration.......

    EARL OF SELBOURNE L.C.: ... [T]he question remains, whether the agreement is capable of being legally enforced. Not being under seal, it cannot be legally enforced against the respondent, unless she received consideration for it from the appellant, or unless, though without consideration, it operates by way of accord and satisfaction, so as to extinguish the claim for interest. What is the consideration? On the face of the agreement none is expressed, except a present payment of £500, on account and in part of the larger debt then due and payable by law under the judgment.  The appellant did not contract to pay the future instalments of £150 each, at time therein mentioned; much less did he give any new security, in the shape of negotiable paper, or in any other form, The promise de futuro was only that of the respondent, that if the half-yearly payments of £150 each were regularly paid, she would "take no proceedings whatever on the judgement." .....

    The question, therefore, is nakedly raised by this appeal, whether your Lordships are now prepared, not only to overrule, as contrary to law, the doctrine stated by Sir Edward Coke to have been laid down by all the judges of the Common Pleas in Pinnel's Case [that payment of a lesser sum on the day cannot be a satisfaction of a greater sum]...... but to treat a prospective agreement, not under seal, for satisfaction of a debt, by a series of payments on account to a total amount less than the whole debt, as binding in law, provided those payments are regularly made.... The doctrine itself, as laid by Sir Edward Coke, may have been criticised, as questionable in principle, by some persons whose opinions are entitled to respect, but it has never been judicially overruled; on the contrary I think it has always, since the sixteenth century, been accepted as law. If so, I cannot think that your Lordships would do right, if you were now to reverse, as erroneous, a judgment of the Court of Appeal, proceeding upon a doctrine which has been accepted as part of the law of England for 280 years.....

... 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 of acquittance as supported by any new consideration......

    My conclusion is, that the order appealed from should be affirmed, and the appeal dismissed, with costs, and I so move your Lordships.

    LORD BLACKBURN........

    What principally weighs with me in thinking that Lord Coke made a mistake of fact is my conviction that all men of business, whether merchants or tradesmen, do every day recognise and act on the ground that prompt payment of a part of their demand may be more beneficial to them than it would be to insist on their rights and enforce payment of the whole. Even where the debtor is perfectly solvent, and sure to pay at last, this often is so. Where the credit of the debtor is doubtful it must be more so. I had persuaded myself that there was no such long-continued action on this dictum as to render it improper in this House to reconsider the question. I had written my reasons for so thinking; but as they were not satisfactory to the other noble and learned Lords who heard the case, I do not now repeat them nor persist in them.

    I assent to the judgment proposed, though it is not that which I had originally thought proper......

    LORD FITZGERALD..... I concur .... That it would have been wiser and better if the resolution in Pinnel's Case had never been come to .... [but we] find the law to have been accepted as stated for a great length of time, and I apprehend that it is not now within our province to overturn it.......