Tungsten Electric Co Ltd

This is of course the obvious question to follow from the above and may well have close links with what might appear to be past consideration. Simply put we are looking at a situation where there is contract between A and B, if later A offers B more money for performing the same contract is this enforceable? Under strict contract law thinking it shouldn't be, once a contract is agreed the terms are fixed, if there is any alteration of the terms this must be met with consideration from both parties or it would surely be unfair the new agreement would be only one sided.

This was indeed the traditional approach to the question. Stilk v Myrick (1809) 2 Camp 317 concerned a crew of a ship, after the outward leg of the journey a small number of crewmen deserted. The Captain offered the remaining crew a share of the saved wages if they returned the ship. The Captain on arrival in port refused to pay the money, the court agreed with him that the sailors had not provided any fresh consideration for the extra money. Could this be as much a public policy decision as a strictly contract law one?

The only way the courts had under this traditional approach to circumvent this was to undertake a similar approach to that used in Glasbrook brothers and say the original duty had been exceeded. In Hartley v Ponsonby (1857) 7 El & Bl 872 a crew of 36 was reduced to 19 by desertions. Under those circumstances the court were prepared to enforce the promised extra payment, but only because the voyage with such a small crew had become dangerous, thus the crew had exceeded their original duty.

If though it is possible to suggest that a person may exceed their duty and use that argument for supporting extra payments is it not also possible to see that Denning's thoughts may also apply. Could it not be said that by offering an extra payment that person does indeed gain some benefit if only peace of mind. It has tended to be that this has been rebuffed by saying that to allow such extra payments may open the way for fraud and extortion the earlier public policy consideration. A new approach

The traditional approach was re-evaluated in the case Williams v Roffey & Nicholls Contractors) Ltd [1990] 1 All ER 512. The facts of the case are rather complicated but in essence they are these, M was a main contractor on a block of flats and they had to complete the job by a certain date or face a heavy penalty clause. The carpentry work in the flats was subcontracted to S, but as the work progressed it was clear that S was losing time over the carpentry because they had under priced their work and could prevent completion on time.

M decided to offer them extra money to ensure completion on time, but after a short period of time defaulted on these extra payments. S stopped work and sued M for the extra payments; M said that no consideration had been given for the payments. If we were to look at the case purely from the traditional standpoint of Stylk v Myrick it would be clear that no extra consideration had been given. The fact that S had made a bad bargain would be no concern of the courts.

Williams v Roffey changed that, the Court of Appeal said there was no evidence of extortion or economic duress exerted by S (economic duress is a topic we will return to later in the course) indeed it was M who had commenced the renegotiations. There was though a further important factor and that was that S would have been able to confer a benefit upon M the extra money would have been used by S to complete on time and thus avoid the penalty clause benefiting M in the process.

It was this that distinguished the case from Stylk v Myrick. Part payment of a debt If Stylk v Myrick had been the traditional approach with regards to goods and services then Pinnel's case (1602) 5 Co Rep 117a and Foakes v Beer (1884) 9 App Cas 605 supply the traditional approach with regards to debts. In Pinnel's case it was decided that part payment of a debt could not amount to consideration for the whole debt. The exception to this was if a further gift was granted then this could, because consideration need not be adequate.

The court appears to view money as only being money but an object has the value given to it by an agreement; this may seem a little odd but it does seem to comply with contract law's view of consideration and the need for adequacy. The only other way a lesser sum may amount to full consideration was if it was given early but this could be seen as conferring some benefit to the creditor, which could amount to consideration. The House of Lords affirmed this principle in the case of Foakes v Beer and indeed the contract law position over part payment of a debt is often labelled the rule in Foakes v Beer.

The rule has been criticised and it can be said that it has perhaps left those relying on an agreement to accept less money for a debt with no safety despite their honest and full reliance. The rule can though work favourably too for such an example see D & C Builders v Rees [1966] 2 QB 617. There has been further criticism of the rule following the developments of Williams v Roffey, surely it could be argued that so long as the renegotiation is not a product of extortion or economic duress and the person accepting a lesser sum gains some benefit then the situation in Williams v Roffey is mirrored.

The CA have considered this in Re Selectmove [1995] 2 All ER 531 and although deciding the case on other grounds concluded that the HL decision in Foakes v Beer would take precedence over the CA decision in Williams v Roffey with regard to debts. Promissory estoppel At this point it is now important to depart from the strict contract law of consideration and part payment of a debt. It has already been suggested that the rule in Foakes v Beer may not always if applied lead to a just result and although that is the rule under contract law a further area of law may be resorted to by the judiciary.

That area is of equity and the particular part of interest is promissory estoppel. The origins of the idea are not always clear but reference to the common law idea of estoppel (this though only applies to facts see Jordan v Money (1845) 5 HL cas 185) and the equitable remedy of waiver should be given (this relates to a party waiving some right under a contract see Hartley v Hymans [1920] 3 KB 475).

The real focus though and the notion of the idea of promissory estoppel comes from Lord Denning and the case Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130. The case concerned a block of flats that were let by the owners to the defendants at an annual rent of i?? 2500. The commencement of the Second World War meant that the defendants had trouble finding people to reside in the flats and so were losing money. The owners appreciating the difficulties agreed to reduce the rent by half, this arrangement continued until the end of the war.

At that point the difficulty in letting the flats ceased and the owners brought an action to return to the original terms of the lease, they also made enquiries of the court as to whether they could claim the rent lost during the war as they had received no consideration for accepting a lesser sum. Denning J as he was at this time said that the rent could be returned to the original value but that the owners would be estopped from claiming the lost rent. It must be said that this last element was really only obiter but no further action was taken by the owners thus allowing it to remain uncontested.

Denning knew he wasn't acting strictly under the rules of contract law or equity and so explained his actions thus:- "In my opinion, the time has now come for the validity of such a promise to be recognized. 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. " Denning could not just invent a new area of law he had to show support for his thinking and this he did by referring to the case of Hughes v Metropolitan Railway Co (1877) 2 App Cas 439, this is though really a case of waiver as mentioned above. The remaining problem is though that Denning was rather broad in his explanation and on face value his discussion could have weakened the role of consideration in contracts entirely.

That has not happened and what has evolved is a series of limitations upon the principle of promissory estoppel these are:- There must be an existing legal relationship There must have been detrimental reliance By this what is meant is that the party relying on it must have taken some action relying on it. The doctrine can only be used as a 'shield and not a sword' This element comes from the case Combe v Combe [1951] 2 KB 215, in other words one cannot launch an action under promissory estoppel but only defend oneself from an action.

It must be inequitable for the promising party to go back on their promise. It is for this reason that the builders were successful I gaining their full payment in D & C Builders v Rees, because the builders had agreed because of intimidation it was not inequitable to go back on their promise. Does promissory estoppel only suspend rights? One final possible limitation exists but this is debated and that is whether the principle only suspends rights or not. In High Trees the impact was to suspend rights and although any claim on the lost revenue was lost the original terms could be reinstated.

The case of Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 1 WLR 761 supports that idea and that once notice has been given to revive the original terms then it will be effective. Both of those cases though related to ongoing obligations and so it is left unanswered if in a one off situation the principle could extinguish the rights or just postpone their operation. If it could extinguish rights then it could affect greatly the issue of part payment of a debt but it is important to note that this issue was not considered in Re Selectmove.