Foakes v Beer
| Foakes v Beer | ||||
|---|---|---|---|---|
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| House of Lords | ||||
| Decided on April 1, 1884 |
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| facts | ||||
| Dr Foakes owed Beer a sum of money. Mrs. Beer promised not to sue if Dr. Foakes paid the sum in installments; interest was not mentioned. Mrs. Beer later sued for interest. Was there any consideration for Mrs Beer's promise? | ||||
| Lower courts | ||||
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Queen's Bench Division (Watkin Williams J): suit upheld Court of Appeal ( Brett MR , Lindley LJ and Fry LJ ): appeal upheld |
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| decision | ||||
| CA maintained in favor of Beer | ||||
| Ratio decidendi | ||||
| Partial payments are no consideration for a promise to waive the remaining amount. | ||||
| occupation | ||||
| Majority opinion: Earl of Selborne LC | ||||
| Approving: Lord Blackburn, Lord Watson and Lord FitzGerald | ||||
| Dissent: - | ||||
| Applied laws / precedents | ||||
| Pinnel's Case (1602) 5 Co. Rep. 117a, Cumber v Wane |
Foakes v Beer (1884) 9 App Cas 605 is a decision of the House of Lords on the English contract law . In its decision, the House of Lords investigated the question of whether a creditor's promise not to claim a remaining amount is effective or whether it is void due to lack of consideration and the full amount can be demanded despite the promise. The House of Lords, confirming the rule from Pinnel's case , decided that such a promise is ineffective and the balance may be claimed.
Facts and lower courts
facts
Dr John Weston Foakes owed Julia Beer the sum of £ 2,090 19s. Mrs Beer sued the Exchequer Division for the sum and received a judgment on August 11, 1875 for payment against Dr Foakes. 16 months later, Dr Foakes had barely paid. Out of court, the two of them signed an agreement drawn up by Dr Foakes solicitor on December 21, 1876 that Mrs. Beer would not take legal action if Dr Foakes gave her from December 21, 1876 after a deposit of £ 500 on January 1 and on July 1st of each year would pay £ 150 until the £ 2,090 19s were paid off:
“Whereas, the said John Weston Foakes is indebted to the said Julia Beer, and she has obtained a judgment in Her Majesty's High Court of Justice, Exchequer Division , for the sum of £ 2090. 19s. And whereas the said John Weston Foakes has requested the said Julia Beer to give him time in which to pay such judgment, which she has agreed to do on the following conditions: Now this agreement witnesseth, that in consideration of the said John Weston Foakes paying to the said Julia Beer, on the signing of this agreement, the sum of £ 500., the receipt whereof she doth hereby acknowledge, in part satisfaction of the said judgment debt of £ 2090. 19s., And on condition of his paying to her or her executors, administrators, assigns or nominee the sum of 150 £., On the 1st day of July and the 1st day of January, or within one calendar month after each of the said days respectively in every year, until the whole of the said sum of £ 2090. 198s. shall have been fully paid and satisfied; the first of such payments to be made on the 1st day of July next, then she, the said Julia Beer, hereby undertakes and agrees that she, her executors, administrators or assigns will not take any proceedings whatever on the said judgment. "
Mrs Beer did not consider that she was entitled to 4% interest under Article 17 of the Judgments Act 1838 . In 1882 Mrs Beer asked Dr Foakes to pay interest of £ 360 after the sum was paid off.
Decisions of the lower courts
Queen's Bench Division: Watkin Williams J
On June 1, 1882, Mrs. Beer applied under Order 42 to be able to enforce Rule 19 RSC 1883 from the judgment. After the hearing, the responsible master ordered a judge to decide whether Dr Foakes owed Mrs Beer any remaining amount. On February 22, 1883, during the Hilary Sittings in Middlesex , Cave J was heard and a common jury with Dr Foakes as plaintiff and Mrs Beer as defendant. At the hearing, Mr. Mackreth, Mrs. Beers solicitor , was heard as a witness; as evidence, he presented a certified copy of the judgment of the Court of Exchequer of August 11, 1875, as well as an invoice showing the remaining amount claimed. The December 21, 1876 agreement was also tabled and Mrs Beer admitted that all installments (except for the claimed interest) had been paid. Cave J advised the jury that all installments were paid and that the agreement, notwithstanding the Court of Exchequer's judgment , prevented Mrs Beer from demanding further payments. The verdict of the jury was therefore in favor of Dr Foakes.
On March 2, 1883, Mrs. Beer obtained a rule nisi through her lawyer , so that it came to a hearing before the Queen's Bench Division . The court first issued an order to show cause to Dr Foakes to comment on why no renegotiation due to misdirection was necessary.
Dr Foakes then took through his barrister William Haworth Holl QC Position: There was no specific case of misdirection by Cave J before. A contract is then effective under English law if there is consideration . Due to numerous precedents, it is recognized as a right that consideration consists in every legal advantage or the possibility of a legal advantage. Not to enforce the agreement was therefore effective: Mrs Beer's promise to forego part of the sum (the interest) was covered by Dr Foakes' consideration to be paid at all . The instruction of the jury by Cave J was therefore correct. ABP Gaskell, who acted as barrister for Mrs Beer, countered that the court was bound by Cumber v Wane : It was recognized that, as an exception, there was no consideration if a partial amount was to be paid to satisfy the full amount:
“A man may give in satisfaction of a debt of £ 100, a horse of the value of £ 5, but not £ 5. Again, if the time or place of payment be different, the one even may be a satisfaction for the other . Let us, then, apply these principles to the present case. If for money you give a negotiable security, you pay it in a different way. The security may be worth more or less: it is of uncertain value. That is a case following within the rule of law I have referred to ”
According to the agreement of December 21, 1876, Dr. Foakes was to pay the amount without interest to satisfy the full sum including interest; in the absence of consideration , this agreement is ineffective.
Watkin Williams J , whose judgment Matthew J followed shortly, refused to renegotiate because of misdirection : Missing consideration had not been brought forward in the proceedings before Cave J. Even if this were the case, this argument did not succeed , since Cumber v Wane was basically binding, but had to be differentiated in the given case. Consequently, the rule nisi should be repealed ( Beer v Foakes 11 QBD 221).
Court of Appeal: William Brett MR
Mrs Beer then appealed to the Court of Appeal , which was heard on June 23, 1883, before Sir Baliol Brett MR , Lindley and Fry LJJ . Mrs Beer was again represented by Barrister ABP Gaskell , Dr Foakes by WH Holl QC and Winch. Both presented their legal opinion again.
Brett LJ curtly granted Mrs. Beer’s appeal ; Lindley and Fry LJJ joined him. Due to the judgment of the Court of Exchequer , Dr Foakes was obliged to make immediate payment. Through the agreement, he asked for time for the payment. Mrs Beer had granted him this, but was not obliged to do so. Contrary to the opinion of the High Court, he did not see the contract covered by consideration : Dr Foakes had only committed himself to something that he was already legally obliged to do ( Beer v Foakes 11 QBD 224).
Decision of the House of Lords
Oral proceedings before the House of Lords took place on March 31 and April 1, 1884 after Dr Foakes appealed against the decision of the Court of Appeal . Dr Foakes was again represented by WH Holl QC , which Winch joined. Holl underlined again in his lecture that the contract on the deferral of payment was effective. Consideration is given, since it is often a great advantage for the creditor to receive a partial sum immediately instead of having to get involved in the lengthy process of foreclosure in the danger of driving the debtor into insolvency. It is precisely because of this advantage that the creditor would conclude the contract. He then went into the binding effect of Cumber v Wane ; the court was not bound by this, since its ratio decidendi had already been undermined by the court through numerous exceptions and - with reference to John William Smith's The Law of Contract - recognized as wrong in legal doctrine. Carrying out the doctrine of Cumber v Wane to its end results in payment by check or bill of exchange being effective, but not by cash. Cumber v Wane would be contrary to the generally accepted daily practice of merchants to accept partial amounts as the repayment of the whole debt. So he concluded:
"By overruling it [ Cumber v Wane ] the House will only declare the universal practice to be good law as well as good sense."
Henry Mason Bompas, QC, joined by ABP Gaskell, led the process for Mrs. Beer, explaining that his legal opinion in the contract never mentions waiver of interest. But even if this were the case, the contract would be ineffective for lack of consideration . It had long been recognized in the law of England that there could be no consideration of what the law already imposed as a duty (for example Stilk v Myrick ). The alleged scooping out put forward by Holl, QC did not exist: In the cases mentioned, the ratio of Cumber v Wane was not questioned, but the cases were differentiated on the basis of their facts.
The House of Lords asked for a cooling off period after the hearing. On May 16, 1884, it dismissed Dr Foakes' appeal and upheld the judgment of the Court of Appeal. Lord Selborne justified this with the fact that the court felt bound by Pinnel's case (1602).
Earl of Selborne LC
In his judgment, the Earl of Selborne , then Lord Chancellor , first discussed the question of whether the agreement gave Mrs Beer a right to payment of interest. However, since that said a certain amount, namely £ 2090 19s, without referring to interest, it must be assumed that only the agreed amount was to be paid without interest. According to the law of England, a contract can only develop effects without consideration if it is either concluded under seal as deed or is of the type accord and satisfaction . This is excluded here.
Consideration was given in Mrs Beer’s agreement by not taking legal action. Dr Foakes, on the other hand, does not commit himself to anything that he is not obliged to do anyway. The question that the House now had to ask itself was whether an exception should be made in this case, as a departure from the traditional view of what the law of England was like:
"It might be (and indeed I think it would be) an improvement to our law, if a release [...] were held to be, generally, binding"
In his judgment, however, the Lord Chancellor refers to an obiter dictum by Sir Edward Cokes in Pinnel's case from 1602, in which the classical doctrine was first handed down:
"Payment of a lesser sum on the day in satisfaction of a greater, cannot be an satisfaction for the whole, because it appears to the Judges, that by no possibility a lesser sum can be a satisfaction to the plaintiff for a greater sum."
Regardless of the existing criticism of this decision, it was never called into question by the courts as a binding precedent. The same applies to the decision in Cumber v Wane of 1718. Thus Dr Foakes is obliged to pay the interest and to confirm the judgment of the Court of Appeal .
Lord Blackburn
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Lord Blackburn initially wanted to give a special vote, but ultimately agreed with the majority opinion. Nevertheless, his judgment is marked by clear and much-cited criticism of the decision:
"All men of business [...] do every day recognize and act on the ground that prompt payment of a part of their demand may be more beneficial to them than it would be to insist on their rights and enforce payment on the whole."
reception
The judgment is one of the most controversial in all of common law. The overwhelming majority rejects his ratio decidendi .
Pinnel's case as a binding precedent ?
Ames considers his peculiar ratio ultimately to be the result of the excessive respect for Lord Coke's overwhelming authority, that it was - especially with Lord Blackburn - fell against one's own convictions. It also seemed particularly absurd that, according to Lord Coke, Ames' view was actually in Bagge v Slade, 3 Bulst. 162, who took the contrary view:
“And if a man be bound to another by a bill in £ 1000 and her pays unto him £ 500 in discharge of this bill, the which he accepts of accordingly, and doth upon this assume and promise to deliver up unto him the said bill of £ 1000, this £ 500 is no satisfaction of the £ 1000, but yet this is good and sufficient to make a good promise and upon a good consideration, because he hath paid money, sc. £ 500 and he hath no remedy for this again. "
Accordingly, a precise distinction must be made as to whether the partial payment should be a consideration for the entire obligation or for the promise not to demand the rest: The obligee can thus proceed against the debtor from the original contract and demand full payment, but the debtor acquires the the original contract, in return, a claim for breach of the promise, which leads to cross-action processing . In Foakes v Beer , the House would have led to its replacement by supposedly adhering to Lord Cokes' dictum. Ultimately, the decision was caused by the fact that Dr Foakes did not rely on Bagge v Slade . Others point out that Pinnel's case was an action of debt for which consideration was not a requirement at all.
Actus contrarius theory
To justify the decision, it was argued that it only extended the recognized actus contrarius theory to cases of renunciation. According to this theory, the same prerequisites are required for a performance-increasing change in an obligation as for its justification. The basis for this is the Roman law sentence: "eisdem modis dissolvitur obligatio, quae nascitur ex contractu vel quasi, quibus contrahitur." This requirement, which was actually intended for formal requirements, was only consequently extended to the consideration requirement in the case of waiver.
However, serious objections were raised against this view in the literature: Historically, consideration was only intended for the establishment of obligations. Furthermore, the formal view of consideration does not do justice to many situations; it must be understood as a material requirement to protect against rush. This haste protection is not necessary in the case of renunciation: the "sense of present deprivation" ('feeling of giving up something') is sufficient in the case of renunciation, especially since this - in contrast to the establishment of obligations - is limited to existing assets.
Substantive legal protection purpose
The decision is generally seen as the outcome of the pre-existing duty rule. The rule comes from the Stilk v Byrick decision (1809) and states that there can be no consideration , which the debtor is obliged to do anyway. An important exception was found in Williams v Roffey Bros & Nicholls (Contractors) Ltd (1991): In this case, the defendant contracted a third party to build a house with an agreement of a contractual penalty. The defendant transferred some work to the plaintiff. When the latter got into financial difficulties and threatened to stop the work, the defendant promised to pay an extra sum for each completed section. When the plaintiff had completed the work, however, he received only part of the agreed special payment. The plaintiff then brought an action; The defendant pleaded that the special payments were promised without consideration and consequently could not be sued: The plaintiff had only promised the completion of the apartments, but he was already obliged to do so under the original contract, i.e. under the pre-existing duty rule no consideration was given. The defendant won the case. The Court of Appeal ruled that there was consideration here : Avoiding the contractual penalty and completing the house on time through the special payment was a “practical benefit or avoidance of disbenefit”, which was sufficient as consideration . Stilk v Myrick has been reinterpreted as a case of economic duress .
In consistent application of this rule would also for the constellation in Foakes v Beer consideration be: Whether the promise is there is more to pay or less to accept would make no difference. This argument was made to the Court of Appeal in Re Selectmove (1995). He refused because of the doctrine of binding precedent :
Foakes v. Beer was not even referred to in [ Roffey ], and it is impossible in my judgment, consistently with the doctrine of precedent, for this court to extend the principle of [ Roffey ] to any circumstance governed by the principle of Foakes v Beer. If that extension is to be made, it must be the House of Lords or, perhaps even more appropriately, by Parliament after consideration by the Law Commission.
Janet O'Sullivan argues that Roffey and Foakes could very well be arranged together. The decisive difference is that in Foakes it is a matter of repaying a loan, in Roffey, however, it is an ordinary work contract. In the latter case, in the event of a breach of contract, the obligee of the claim for damages has an obligation to mitigate the damage. However, if there is an additional obligation, this is avoided by the special payment and there is therefore consideration given for the promise of the special payment. However, when it comes to loan repayment, this rule is obviously pointless. Another aspect is that, according to Hadley v Baxendale's (1854) rule, damage will not be compensated if it cannot be foreseen (“too remote”). This also shows that the fulfillment of the contract and compensation for damages are not equivalent and that an advantage arises from the fulfillment of the contract. However, this rule is also not applicable to loan repayments. Because of these differences, the different treatment of cash refunds and other exchange contracts can be explained and justified.
Value theoretical aspects
One of the sharpest criticisms of Foakes' ratio is the simple fact that the creditor has consented to the waiver and is most likely to judge the equivalence ratio . If the contract is not to his advantage, it is up to him not to conclude it. It is difficult to deny that it is far more difficult for him to get the money if, for example, the debtor becomes insolvent.
Janet O'Sullivan counters this by stating that the debtor's insolvency means contesting the payment according to s. 239 and p. 340 of the Insolvency Act 1986 as preferences and consequently still leave the creditor empty. However, if the debtor does not become insolvent, there is no advantage for the creditor, since in this case he can receive his money. In addition, the theoretical value consideration that money differs from normal goods weighs more heavily. Money is the universal standard of value for all other goods. It follows that the value of money is objective and constant. If £ 1000 were not always £ 1000, this would undermine the entire market economy system. In the law of restitution , money is recognized as an incontrovertible benefit , i. H. the recipient of money can never claim that it was of no value to him; any devaluation of what has been received by a subjective standard is thereby excluded. This objective standard must consequently continue to apply in contract law. An appeal by the creditor that he would accept £ 800 as fulfillment for £ 1000 implicitly contained the irrational claim that 'money is worthless to me'. This could not accept the law for the reasons mentioned. This is the only way to explain why, conversely, fulfillment through a commodity other than money, "the gift of a horse, hawk, or robe", is possible: For these goods, the objective yardstick for money does not apply and subjective preferences have to be taken into account .
Continued validity and reform through statute law
In Ontario , in response to the judgment in p. 6 of the Administration of Justice Act 1885 (Stats. Ont. 1885, c 13; today p. 16 of the Mercantile Law Amendment Act ) states:
"Part performance of an obligation either before or after a breach thereof when expressly accepted by the creditor in satisfaction or rendered in pursuance of an agreement for that purpose, though without any new consideration, shall be held to extinguish the obligation."
In the United States, the rule has been adopted by most courts and has found its way into sections 73, 273 of the Restatement (Second) of Contracts :
“Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration; but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain. "
literature
- James Barr Ames: Lord Coke and Pinnel's Case . In: Harvard Law Review . tape 11 , no. 5 , December 1897, p. 330-331 .
- E. Allan Farnsworth: Changing Your Mind. The Law of Regretted Decisions . Yale University Press, New Haven / London 1998, ISBN 0-300-07305-4 , Chapter Fifteen - Relinquishment by Renunciation, p. 148-153 .
- Michael Furmston: The Law of Contract . 3. Edition. LexisNexis, 2006, ISBN 978-1-4057-1241-5 , 2.87 Consideration and the part payment of debts, pp. 322-333 .
- Merton L. Ferson: The Rule in Foakes v. Beer . In: The Yale Law Journal . Vol. 31, No. 1 , November 1921, p. 15-23 .
- Grant Gilmore: The Death of Contract . Ohio State University Press, Columbus 1974, pp. 30-34, 118-120 .
- Jens Kleinschmidt : The waiver in the law of obligations: contract principle and unilateral legal transaction in German and US law . Mohr Siebeck, Tübingen 2004, ISBN 978-3-16-148225-0 , p. 86 ff .
- Michael Lobban: Foakes v Beer (1884) . In: Charles Mitchell, Paul Mitchell (Eds.): Landmark Cases in the Law of Contract . Hart Publishing, 2008, ISBN 978-1-84113-759-9 , pp. 223-268 .
- Joseph M. Perillo: Calamari and Perillo on Contracts . 5th edition. Thomson West, 2003, ISBN 978-0-314-26485-5 , § 4.10 Part Payment Cannot Satisfy a Debt, p. 195-198 .
- BJ Reiter: Courts, Consideration, and Common Sense . In: The University of Toronto Law Journal . Vol. 27, No. 4 (autumn), 1977, p. 439-512 .
- Max Rheinstein : The structure of the contractual obligation in Anglo-American law . Walter de Gruyter, Berlin / Leipzig 1932, p. 65 sqq .
- Janet O'Sullivan: In Defense of Foakes v. Beer . In: The Cambridge Law Journal . Vol. 55, No. 2 , July 1996, p. 219-228 .
- Kevin M. Teeven: A History of the Anglo-American Common Law of Contract . Greenwood Press, New York / Westport CT / London 1990, ISBN 0-313-26151-2 (67-80, p. 95 footnote 62, p. 96 footnote 74, p. 226 sq., 254 sq).
- Kevin M. Teeven: Promises on prior obligations at common law . Greenwood Publishing Group, Westport, Connecticut / London 1998, ISBN 0-313-30652-4 , I. Preexisting Duty Rule and Its Reform, p. 11-70 .
- Guenter Treitel: Some landmarks of twentieth century contract law . Oxford University Press, Oxford 2002, ISBN 978-0-19-925575-7 .
- Alexander Trukhtanov: Foakes v Beer: Reform of Common Law at the Expense of Equity . In: The Law Quarterly Review . tape 124 , 2008, ISSN 0023-933X , p. 364-368 .
- Stephen Waddams: Cases and materials on contracts . 3. Edition. Emond Montgomery Publication, 2005, ISBN 978-1-55239-166-2 , pp. 280 .
Web links
- Judgment text (English)
Individual evidence
- ^ Judgments Act 1838 in the English language Wikisource
- ↑ RW Andrews, Arbuthnot B. Stoney: The Supreme Court of Judicature acts, and the Appellate jurisdiction act, 1876, with rules of court and forms issued in July, 1883, annotated so as to form a manual of practice, containing a comprehensive selection of cases from the modern reports, and all the most recent decisions, together with references to the earlier authorities where such seemed advisable. Reeves and Turner, London 1883 ( Text Archive - Internet Archive )
- ↑ James Barr Ames: Lord Coke and Pinnel's Case . In: Harvard Law Review . tape 11 , no. 5 , December 1897, p. 330-331 .
- ↑ Cf. Jens Kleinschmidt: The waiver in the law of obligations: contract principle and unilateral legal transaction in German and US law . Mohr Siebeck, Tübingen 2004, ISBN 978-3-16-148225-0 , p. 91 .
- ↑ Cf. Jens Kleinschmidt: The waiver in the law of obligations: contract principle and unilateral legal transaction in German and US law . Mohr Siebeck, Tübingen 2004, ISBN 978-3-16-148225-0 , p. 89 f .
- ↑ Cf. Jens Kleinschmidt: The waiver in the law of obligations: contract principle and unilateral legal transaction in German and US law . Mohr Siebeck, Tübingen 2004, ISBN 978-3-16-148225-0 , p. 89 f .
- ↑ a b c Janet O'Sullivan: In Defense of Foakes v. Beer . In: The Cambridge Law Journal . Vol. 55, No. 2 , July 1996, p. 219-228 .
- ^ BJ Reiter: Courts, Consideration, and Common Sense . In: The University of Toronto Law Journal . Vol. 27, No. 4 (autumn), 1977, p. 503 .
- ↑ Taylor v. Central of Georgia Railway Co. , 108 SE2d 103 (Georgia 1959); Levine v. Blumenthal 186 at 457,458 (New Jersay Law 1936); Graham v. New York Life Insurance Co. , 47 P.2d 1029 (Washington 1935).