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Question:
Last year Katie bought a car from Oliver for £3,500 to be paid in two instalments of £1,750.
Katie did not pay the second instalment when it was due. She never disputed that she owed
Oliver this money.
Oliver felt sorry for Katie, who lost her job not long after buying his car. He told her that if
she paid him the half of what she owed him (£875) by the following Wednesday, he would
let her off with the rest.
Katie paid him the £875 on the following Tuesday. She also gave him a bottle of wine “in
consideration of his kindness”.
On the Friday Katie was notified that she had been successful in one of her job applications
and would be starting work at a much better salary than her old job on the First of the
Month.
Oliver has heard about Katie’s new job and realizes that she is likely to be earning more than
he is. He now wishes to claim the rest of the money which she had originally agreed to pay
for the car.
Advise Oliver.
Answer:
In order to advise Oliver:
1. Establish that there was a contract between Oliver and Katie for the sale of Oliver’s
car. This requires that there is an offer (that the car is for sale for £3,500) and an
acceptance (that Katie agrees to buy the car) of that offer, and that consideration for
the contract moves between the buyer and seller (the £3,500
2. While it was agreed that the consideration of £3,500 was to be paid by Katie in two
instalments, the second instalment was not paid. At this point, Katie is in breach of
the contract, she has not fulfilled her duties under the contract. This she did not
dispute.
3. At this point Oliver would have been entitled to insist on specific performance of the
contract, and insist Katie pay the full second instalment. Where a contract provides
for a specific price to be paid, the remedy available to the claimant is clear and
would not be varied by a court. This being one of the few situations where a
promisor can request full performance of the contract as a remedy
4. Nevertheless, Oliver then volunteered to accept part payment of the second
instalment, rather than the full amount, and let Katie “off with the rest
5. Where a seller accepts part payment of the debt owed to them under a contract, the
general or common law rule (as found in Pinnel’s Case and later upheld in Foakes v
Beer) is that there is nothing to prevent the seller claiming the balance due to him at
a later date. This applies where the buyer has not provided consideration to enforce
the promise of the seller to accept part payment as full satisfaction of the contract.
In Pinnel’s Case it was held that the agreement to accept part payment would be
binding if the buyer, at the seller’s request, had provided some fresh consideration
(the fresh consideration being the bottle of wine)
6. There are certainly some grounds to say Oliver can claim the balance now he
believes Katie’s financial position to have changed significantly for the better.
7. However, could Katie find a defence under the rules of equitable doctrine of
promissory estoppel? Promissory estoppel is a means of making a promise binding,
in certain circumstances, in the absence of consideration 11. If found to be applicable
promissory estoppel could mean that Oliver would have to accept part payment of
the second instalment as being his complete contractual right, as a result of
promising Katie that he would let her “off the rest”.
8. After explaining the whole concept of Promissory Estoppel we can conclude that
Oliver would be best advised that, on the balance of the facts, Katie does not have to
pay the remainder of the final instalment
