Facts[]
Selectmove Ltd. had failed to submit payroll deductions from employees to the Crown. A tax collector met with the manager on July 15, 1991 and discovered the company was in financial difficulty. The company proposed it would pay the current deductions as they came due and £1,000 per month effective February 1, 1992 on the arrears. The collector indicated he would have to get approval from his superiors. On October 9, 1991 the Crown demanded payment in full of £24,650.
Between August and November 1991 the company submitted its current obligations in part and made seven £1,000 payments in 1992. In October 1991 it laid off all of its employees and sold the work-in-progress to another company. In September 1992 the Crown sought a liquidation order for the company and the payment of the arrears in the amount of £17,466.60. Selectmove argued that the Crown had accepted the agreement in July 1991.
Issue[]
- Was there sufficient consideration in the partial payment of the existing debt to find a binding contract?
- Whether the tax collector had an authority to bound an agreement?
Decision[]
Ask judge Gibby LJ
Reasons[]
The Crown argued that Foakes v Beer was the appropriate precedent for this case and that the agreement to pay less could not be consideration. Selectmove argued that Williams v Roffey Bros. & Nicholls (Contractors) Ltd. was the appropriate precedent as the Crown would have a practical benefit for waiting to retrieve the money owed as it would generate more money from an operating company rather than forcing a sale immediately. While Gibson, writing for the court, appreciates the argument made by Selectmove, he feels bound by Foakes and therefore dismisses the
Ratio[]
Even in a case where there may be a practical benefit to accepting a lesser amount in payment of a debt, this is not sufficient consideration to find a binding contract. Selectmove’s attempt to use the notion in Williams v Roffey Bros [1990] failed as it was held that it was only arpplicable only where the existing obligation which is pre-promised is to supply one with goods or services, not where it is an obligation to pay money.