MWB Business Exchange Centres Ltd: The Practical Benefit Doctrine Marches On

Publication Date01 Mar 2017
AuthorMarcus Roberts
DOIhttp://doi.org/10.1111/1468-2230.12257
MWB Business Exchange Centres Ltd: The Practical
Benefit Doctrine Marches On
Marcus Roberts
In MWB Business Exchange Centres Ltd vRock Advertising Ltd the Court of Appeal held that
when an ongoing contract is varied so that one party’s obligation to pay money is reduced,
the variation is binding as long as the other party receives a practical benefit. In doing so, the
Court of Appeal effectively confined the rule in Foakes vBeer to one-off payments. This raises
serious questions about the continued survival of Foakes vBeer. On the other hand, the Court
of Appeal ensured that Foakes vBeer would not be killed off via equity by moving away from
the suggestion in Collier vP & M J Wright (Holdings) Ltd that an agreed part-payment of a debt
by a debtor will always raise an estoppel preventing the creditor from demanding the remainder
of the debt.
INTRODUCTION
In the latter part of the nineteenth century the House of Lords decided in
Foakes vBeer that the payment of part of an existing debt by a debtor was
not in itself good consideration to support an agreement not under seal to
release the debtor from the balance of that debt.1This decision has not been
free from criticism. Its inception was marred by Lord Blackburn’s near-dissent
in Foakes vBeer itself. His Lordship was concerned that ‘men of business’
recognise that prompt payment of part of their debt ‘may be more beneficial
to them than it would be to insist on their rights and enforce payment of the
whole’.2Leading academics have attacked the decision as unnecessary and as
an impediment to the enforcement of agreements that ‘are perfectly fair and
reasonable transactions’.3Others have noted not only its lack of commercial
sense but also its misreading of the historical grounds upon which it was built,
namely Pinnel’s Case.4However, the decision has stood for over 100 years and
even Lord Denning was not prepared to depart from it (at least at common
law).5
Then in 1989 the Court of Appeal expanded the definition of consideration
for the purposes of variation agreements to include practical benefits that arose
from the re-promise to perform the original contract. Williams vRoffey Bros
Senior Lecturer in Law, The University of Auckland. I would like to thank the anonymous referee
for their insightful comments.
1Foakes vBeer (1884) 9 App Cas 605.
2ibid, 622.
3E.Peel,Treitel: The Law of Contract (London: Sweet & Maxwell, 14th ed, 2015) at [3-101].
4 J. Adams and R. Brownsword, ‘Contract, Consideration and the Critical Path’ (1990) 53 MLR
536, 540. Pinnel’s Case (1601) 5 Coke Reports 117a; 77 ER 237.
5D & C Builders Ltd vRees [1966] 2 QB 617 (CA) 623.
C2017 The Author. The Modern Law Review C2017 The Modern Law Review Limited.
(2017) 80(2) MLR 325–351 339
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