Re Selectmove Ltd [1995] 1 WLR 474 holds that the “practical benefit” principle from Williams v Roffey does not extend to the part-payment of debts, which remains governed by Foakes v Beer.

Facts of the Case

In July 1991, Selectmove Ltd owed the Inland Revenue substantial arrears of income tax (PAYE) and national insurance. The managing director met a collector of taxes, Mr Polland, and proposed a payment plan: pay all future liabilities as they fell due, and clear the existing arrears at £1,000 per month from February 1992. Polland said he lacked authority to agree and would have to seek approval from his superiors, saying he would “revert” if the proposal was unacceptable. The Revenue did not make contact again until October 1991, when it demanded immediate payment of the full arrears (£24,650) and threatened a winding-up petition. The company argued an agreement had been reached through the Revenue’s silence.

Key Legal Issues and Decision

1. Acceptance by silence and authority

The Court of Appeal held that no agreement had been concluded. While silence can amount to acceptance in “exceptional circumstances” — specifically where the offeree suggests their own silence should be taken as consent — that did not apply. Polland had made clear he lacked actual authority, and he also lacked ostensible authority, as the Revenue had made no representation that he could bind it through silence.

2. Consideration: the pre-existing duty rule

The company argued that its promise to pay by instalments gave the Revenue a “practical benefit” (more likely to recover from a trading company than a liquidated one), relying on Williams v Roffey. Peter Gibson LJ held that Foakes v Beer (a House of Lords decision) remained the governing authority for debts: a promise to pay a sum already legally due is not good consideration. He confined Williams v Roffey to contracts for goods and services, since extending it to debts would leave Foakes with no application.

3. Promissory estoppel

  • Because Polland lacked authority to make the agreement, he also lacked authority to make a promise capable of founding an estoppel.
  • Selectmove had not kept up its September 1991 payments — failing to honour even its own proposed plan — so it was not inequitable for the Revenue to resile.

Academic Discussion and Implications

  • “Increasing” vs. “decreasing” pacts: under Williams v Roffey a promise to pay more for the same service is enforceable on practical benefit; under Selectmove (following Foakes) a promise to accept less of a debt is not, even on an identical benefit.
  • The “bird in the hand” rationale: Adams and Brownsword argue the law should recognise that instalment payments from a struggling debtor are often worth more than the right to sue an insolvent one.
  • Judicial restraint: the court was sympathetic to the practical-benefit argument but felt bound by precedent; Peter Gibson LJ said any extension to debts must come from the Supreme Court or Parliament.
  • Future impact: the wall between debt modification and services modification was only partially breached later in MWB v Rock Advertising, where an additional practical benefit (keeping the property occupied) was found beyond mere payment.