Contract Law and Consideration – Revisiting Foakes v Beer: what role for practical benefit in a world recovering from a pandemic?

Consideration remains at the heart of contract law in England and Wales but the current crisis throws the unsatisfactory state of the law into sharp relief. Nicholas Hill and Patrick Tomison consider the current state of the law and how it might change to reflect the commercial reality of the 21^st Century.

In 2018 Lord Sumption JSC said that “[m]odern litigation rarely raises truly fundamental issues in the law of contract”. The Common law’s approach to consideration in contract law is one such issue highlighted by the current crisis.

A bird in the hand is better than two in the bush

In Revisiting Foakes v Beer, Nicholas Hill and Patrick Tomison revisit the Common law’s approach to the principle of consideration enunciated “in the rigours of seafaring life during the Napoleonic wars”. They consider when and why the law does, and does not, recognise that a bird in the hand is better than two in the bush.

Enforceable contracts (not contained in a Deed) rely on valuable consideration passing between the parties to the contract. What amounts to “consideration” is a legal fiction, which the courts have struggled to define. The long-standing question of whether a promise to make part payment of an existing debt amounts to good consideration for a creditor’s promise to accept a lesser sum in full settlement of that debt reveals a pressure point in the law. The current crisis throws the unsatisfactory state of the law into sharp relief.

The winds of change

Nick and Patrick review the development of the different lines of authority and focus on the Court of Appeal’s approach to “practical benefit”. They conclude that it is only a matter of time (and the right case) until the Supreme Court brings the various lines of authority together by departing from, or reinterpreting, Foakes v Beer and the rule in Pinnel’s Case.  They suggest that the current world health crisis may provide the catalyst for change.

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Find out more

Nicholas Hill practises in commercial litigation with a focus on pensions and financial services law. The legal directories describe him as a “fantastic advocate” (Legal 500) who is “[e]xcellent with clients and really bright…and…great in court” (Chambers and Partners).

Patrick Tomison is developing a broad practice in line with chambers’ core practice areas, including contractual disputes in both commercial and employment contexts. Prior to joining Outer Temple, he was the Judicial Assistant to the Senior President of Tribunals, Sir Ernest Ryder, in the Court of Appeal.

If you would like to discuss any of the issues covered in this article please contact Nicholas or Patrick directly or via their practice management team; Matt Sale (+44 (0)20 7427 4910) or Peter Foad (+44 (0)20 7427 0807) who would be happy to have a discussion in the strictest of confidence.

Legal Blogs 12 Jun, 2020