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D and C Builders v Rees [1965] 3 All ER 837; [1966] 2 QB 617; [1966] 2 WLR 288

By Oxbridge Law TeamUpdated 24/03/2024 15:17

Judgement for the case D and C Builders v Rees

KEY POINTS

  • Accord and satisfaction form a legal framework within contract law for resolving financial disputes between debtors and creditors.

    • In settlements, an accord is an agreement to accept a lesser sum than the originally owed amount, often formalised through accepting a cheque as payment. 

    • The validity of such accords depends on various factors, including whether the agreement was entered willingly or through intimidation. 

    • Debtor's threats to pay nothing or break a contract can raise questions about the enforceability and equity of the accord and satisfaction.

  • The principles of contract law, particularly consideration, are important in determining the binding nature of settlements. A debtor and creditor must exchange something of value to create a legally enforceable agreement. 

  • Equity considerations, such as clean hands and equitable estoppel, come into play in accord and satisfaction cases. Clean hands require parties to have acted fairly and in good faith, while equitable estoppel prevents a party from asserting a right after having led another to believe in a certain state of affairs. 

FACTS

  • ("D. & C. Builders Ltd.,") The Plaintiffs, jobbing builders, claimed £182 13s. Id. from the ("Sidney Rees") Defendant for work, labour, goods, and materials provided for alterations and repairs to Defendant's shop in May and June 1964.

    • In July 1964, with no dispute about the work, the Defendant owed £482 13s. Id.

    • However, the payment was not made. 

    • On November 13, 1964, amidst the Plaintiffs' financial difficulties, the Defendant, through his wife, offered £300 for settlement. The implication was clear: if not accepted, the Plaintiffs would receive nothing.

    • Faced with limited options, the Plaintiffs agreed, and on November 14, 1964, received a cheque for £300, accompanied by a receipt stating it was "in completion of the account." 

  • When the Plaintiffs pursued the balance, the Defendant raised defences of bad workmanship and argued for a binding settlement.

  • Judge Trapnell ruled in favour of the Plaintiffs on a preliminary issue, holding that there was no consideration to support the November 13 and 14 agreements.

  • The Defendant appealed this decision.

JUDGEMENT

  • The appeal was dismissed.

  • The court held that payment of a lesser sum than the debt, whether in cash or by cheque, did not legally settle the debt.

    • According to Winn L.J., a valid accord and satisfaction required a legally binding agreement, which could only be achieved through a seal or consideration.

    • The threat to pay nothing unless the £300 cheque was accepted negated the existence of a true accord.

    • Consequently, there was no equity to prevent the plaintiffs from recovering the full debt.

Lord Denning M.R.

  • Emphasised that inequity arises when a true accord exists, and the creditor insists on the balance.

  • However, such obligation depends on a genuine accord between the parties.

COMMENTARY

  • An accord and satisfaction in contract law focuses on settlements involving a debtor offering a lesser sum, often through a cheque.

  • The example case, "D. & C. Builders Ltd. v. Sidney Rees," illustrates a dispute over £182 13s. Id. for construction work. The Defendant's £300 settlement offer, and a clear threat led to an agreement.

  • Legal proceedings ensued, with Judge Trapnell ruling in favour of the Plaintiffs, stating there was no consideration for the agreement.

  • The dismissed appeal affirmed that payment of a lesser sum did not legally settle the debt, emphasising the need for a valid, binding accord.

    • Equity considerations were absent due to the lack of a genuine accord.

ORIGINAL ANALYSIS

  • Plaintiffs were builders who were owed money by Defendant who knew that Plaintiffs was in financial trouble. They delayed paying and then offered a lesser amount or nothing, which was accepted due to the financial trouble and Plaintiffs gave a receipt for settlement of the debt.

  • Plaintiffs then sued for the balance and CA allowed their claim. 

Lord Denning (majority approach)

  • There was no true accord/agreement since Plaintiffs was pressured into acceptance due to the threat of being paid nothing, as asserted by Defendant. Had there been a true accord then Plaintiffs could not have claimed the full amount.

  • However in this case there was no equitable reason for disentitling Plaintiffs from recovering the full amount.

Winn LJ

  • Took a different approach (not considering estoppel doctrine) but came to same conclusion. 

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