Foakes v. Beer


Dr. F owes Beer money, and parties agree that if Dr. F pays Beer 500 at once and gives the remained of the principal in installments, Beer would forgive the interest on the debt.  Beer brings suit again Dr. F, alleging that the agreement to forgive interest was entered without consideration, since the consideration consisted only in Dr. F doing what he was already bound to do in paying the principal of the debt.


Can a forgiveness of interest in a prearranged repayment plan lack consideration as to render the contract unenforceable?




Lord Coke:  Payment of a lesser sum on the day cannot be a satisfaction of a greater sum.


Creditors have valid reason to reduce rates and forgive interest, so as to not force their debtors into default or bankruptcy.  But debt repayment is not a valid consideration.  It is something Beer was already obligated to do under law.  The partial payment of a debt is not consideration, therefore.


Under the pre-existing legal duty rule, cases tend to fall into two distinct patterns.

Pattern I:  An increase in an original contract amount, although there is no additional work or change to the scope of performance as a result of such change.  Then the payer decides to only pay the original contract amount.

Pattern II:  exemplifies Foakes v. Beer.  A reduction in debt owed and no change in scope of performance.

Remember that if the debtor or the original payer decide to go ahead and pay the full amount, then sue for a return of their money they cannot collect under the legal-duty rule.  They are not trying to enforce a promise at this point.  Instead, they are trying to undo a completed transaction, which is not applicable.

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