PPOD & Promissory Estoppel

Question 1

What is PPOD?

Answer 1

where somebody cannot or will not pay the full amount of a debt that they owe, and they offer to pay a lesser amount (so pay only part of the debt) and that offer is accepted by the creditor.

Question 2

What is required to modify the original contract (regarding debt)?

Answer 2

a ‘fresh’ promise is made by the debtor to pay less, and a promise is also made by the creditor to accept less. This requires ‘fresh’ consideration from the debtor.

Question 3

Whcih case outlines the rules of PPOD?

Answer 3

Pinnel’s case
- entitles to full amount even if agreed to accept less - PPOD is not valid consideration for a promise to ‘write-off’ the balance. “payment of a lesser sum on the day in satisfaction of a greater sum cannot be any satisfaction for the whole.”
- ways to extinguish debt:
1 - before the due date (before the original debt was due to be paid)
2 - with a chattel (“the gift of a horse, hawk, or robe, etc. in satisfaction is good.”)
3 - to a different destination (usually a different person or to a different place).

Question 4

Which case confirmed Pinnel’s rules?

Answer 4

Foakes v Beer
- F didnt provide consideration for new promise (to only pay debt not interest) so B can sue for remaining.
- Blackburn - believed that a creditor could gain some practical benefit rather than legal benefit from part-payment of a debt.
- Criticism - Better if the rule were replaced by one that struck only at negotiations affected by duress; this upholds the principle of freedom of contract.

Question 5

Common Law limitation to the rule in Pinnel’s case

Answer 5

• Main limitations expressed in Pinnels case (3 options)
• Composition agreements - debtor who can’t pay all creditors in full induces them to agree with the debtor and all other creditors to accept part-payment in full settlement of their claims. Binding on all of the parties involved, no creditor can sue the debtor for the balance owed to him (Wood v Roberts)
• PPOD by 3rd party - Welby v Drake - debt paid by father, Creditor couldn’t recover the balance from the Debtor, by suing him, he would commit a fraud on the father.

Question 6

Promise to pay more v To accept less

Answer 6

• Williams v Roffey Bros - expansion of the concept of benefit to consider practical benefit.
• Re Selectmove - promises to pay more were distinguishable from part-payment of debt (promises to accept less), and that Williams v Roffey Bros only applies to extra-payment cases.
• MWB Business Exchange v Rock Advertising - wanted to remove diff rules, but did not overrule FvB by expanding WvR to PPOD contexts, but suggested that this may be reviewed in future.

Question 7

Equitable limitations on the rule in Pinnel’s case

Answer 7

• Promissory estoppel:
  Hughes v Metropolitan Railway -a promise by a contracting party not to enforce his strict legal rights (even where it is not supported by consideration) has effect in equity.
• operates where:
  1 - clear and unequivocal representation that strict rights will not be enforced
• Central London Property Trust Ltd v High Trees House Ltd - possibility to extend to PPOD
• Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd - HoL acknowledged use for PPOD.

Question 8

Limitation to promissory estoppel

Answer 8

• cannot be used to found a cause of action
• shield not sword - akin to defence (Combe v Combe).
• Baird Textile Holdings Ltd v Marks and Spencer plc - CoA reinforced as defence only.
• needs:
  1 - there has been a clear and unambiguous promise
  2 - detrimental reliance by promisee. (McVeigh J in Morrow v Carty).
  3 - must be inequity (The Post Chaser).

Question 9

Which case recently outlined rules for PE?

Answer 9

Collier v P and MJ Wright Holdings Ltd
1 - A clear and unequivocal promise which the promisor knew or intended the other would rely on; and
2 - A change in position by the promisee in reliance on the promise; and
3 - That it would be inequitable for the promisor to rely on the promise.