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D & C Builders v Rees [1966] 2 QB 617

Contract - Consideration - Accord and Satisfaction - Threats not to pay - Equity

Facts:

The builders sought payment from Rees for building work done and materials supplied in respect of alterations and repairs completed on Rees’ shop. Rees did not pay, but the work continued and a second bill was issued. Builders started to have financial difficulties so requested the funds again. Rees offered Builders a reduced lump sum in payment of the debt and stated that if it was not accepted, they would get nothing. A cheque was issued after Builders feared they would receive no payment at all and Rees provided a receipt stating the funds were in full payment of the account. Builders brought action for the balance and Rees filed a defence stating that the work was defective and that Builders had entered into a binding agreement.

Issue:

Whether the agreement was a binding contract.

Held:

The appeal by Rees was dismissed. The agreement was invalid as there was no consideration in favour of Builders for reducing the value of the amount owing by Rees. The case of Foakes v Beer (1884) 9 App Cas 605 was applied in the fact that the payment was by cheque made no difference to the principle that late payment of a lesser amount did not equal satisfaction of the total amount owing. Builders had been under duress to accept a reduced amount due to their financial position which Rees was aware of and took advantage of. An acceptance arising from a threat does not amount to a settlement.


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