In Re Selectmove [1995]

Court: Court of Appeal

Facts: Selectmove Ltd (S) owed substantial taxes and national insurance contributions to the Inland Revenue. Mr. Ffooks, the managing director of Selectmove, proposed a repayment plan to Mr. Polland from the Inland Revenue, suggesting that future taxes would be paid as they fell due and the arrears would be cleared at £1,000 per month. Mr. Polland needed to confirm this proposal but failed to do so. Subsequently, Selectmove received a demand for £25,650 and a threat of a wind-up petition. Selectmove argued that the Revenue had agreed to the lower repayment amount, but the High Court found that Mr. Polland had not bound the Revenue, and the agreement lacked valid consideration.

Issue: Whether the doctrine of practical benefit, as established in Williams v Roffey Bros & Nicholls (Contractors) Ltd [1989], can be applied to extend to promises to accept part payment of a debt.

Held: The court held that Selectmove Ltd was liable to make the immediate payment demanded by the Inland Revenue. The promise to make future tax payments was not considered valid consideration because it was an existing obligation under fiscal legislation. Peter Gibson LJ clarified that the principle of practical benefit from Williams v Roffey Bros could not be extended to debt repayment agreements covered by the precedent set in Foakes v Beer [1884], which established that a promise to accept less than the full amount owed is not supported by good consideration.

Key Judicial Statement: Peter Gibson LJ stated that the principle of Williams v Roffey cannot be extended to circumstances covered by Foakes v Beer, highlighting that the doctrine of practical benefit does not apply to promises to accept less payment of a debt.

💡 Leveluplaw: This case reinforces the principle that practical benefit, while influential in some contract variations, does not extend to promises to accept less than the full amount of a debt. The doctrine established in Foakes v Beer prevails in such situations, demonstrating the need for adherence to established precedents in contract law when dealing with debt repayment. The case underscores the importance of valid consideration and the limits of the practical benefits doctrine in varying debt agreements.