“Part payment of debt cannot discharge larger debt without fresh consideration”
The House of Lords held that Mrs Beer was entitled to claim interest. The agreement to forego interest was not supported by consideration since payment of an existing debt cannot constitute consideration for a promise to accept less than what is owed.
Mrs Beer obtained judgment against Dr Foakes for £2090. They agreed that if Foakes paid £500 immediately and the remainder by instalments, Beer would not take enforcement proceedings. Foakes paid as agreed but Beer later claimed interest on the judgment debt, which Foakes had not paid.
Whether an agreement to accept part payment of a debt in satisfaction of the whole debt is binding without fresh consideration, and whether such an agreement can prevent a creditor from claiming statutory interest.
The court applied the rule in Pinnel's Case that payment of a lesser sum on the due date cannot satisfy a greater sum. The mere agreement by the debtor to pay what was already legally owed provided no fresh consideration to support the creditor's promise to forego the interest.
This case established a fundamental principle in contract law regarding consideration and created what became known as the 'rule in Foakes v Beer', though it has since been subject to equitable exceptions through promissory estoppel.
An agreement to accept part payment of a debt in full satisfaction is not binding without fresh consideration. Payment of a smaller sum cannot discharge a larger debt.
The House of Lords decided in favor of Mrs Beer, ruling that she could claim interest despite agreeing not to, as the agreement lacked consideration.
It reinforced the strict approach to consideration doctrine and established important precedent for debt settlement agreements, though it has been modified by promissory estoppel.
Lord Blackburn doubted the rule's commercial sense, observing that all men of business recognise that prompt payment of part of a demand may be more beneficial than insisting on the whole, while Lord FitzGerald accepted the rule as long settled and 'not now within our province to overturn'.
OSCOLA Citation
Foakes v Beer (1884) 9 App Cas 605 (HL)
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[2026] UKSC 1
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