Collier v P & MJ Wright (Holdings) Ltd
Promissory estoppel may prevent a creditor from going back on a promise to accept part payment where the debtor has relied on it by paying.
Facts
Mr Collier and his two partners were jointly and severally liable under a consent judgment to pay a creditor about £46,000 by monthly instalments. Mr Collier said that the creditor had later agreed that, if he paid his one third share of the debt, it would pursue the other partners for their shares and not look to him for the balance. Mr Collier paid his third. The other partners became bankrupt, and the creditor sought to recover the whole balance from Mr Collier, who applied to have a statutory demand set aside.
Legal principle
The Court of Appeal held that Mr Collier had a real prospect of establishing a defence of promissory estoppel, so the statutory demand should be set aside. The creditor's promise was not binding as a contract because of Foakes v Beer, but Arden LJ held that, where a creditor freely agrees to accept part payment in satisfaction of the debt and the debtor relies on that by paying, it may be inequitable for the creditor to go back on the promise, so the creditor may be estopped from claiming the balance. The decision suggests that promissory estoppel can operate to extinguish a debt where part payment has been made in reliance on the creditor's promise, but the point has been doubted and has not been finally resolved.
Related cases on consideration and promissory estoppel
- Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130
- Chappell & Co Ltd v Nestlé Co Ltd [1960] AC 87
- Combe v Combe [1951] 2 KB 215
- Currie v Misa (1875) LR 10 Ex 153
- D & C Builders Ltd v Rees [1966] 2 QB 617
- Foakes v Beer (1884) 9 App Cas 605
- Glasbrook Bros Ltd v Glamorgan County Council [1925] AC 270
- Hartley v Ponsonby (1857) 7 E & B 872
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