Fly-away Ltd are a low budget airline and operate short domestic flights between Leeds and London. Their business proves successful and they decide to expand their business by introducing a number of short-haul flights to Cyprus.
They approach Air Coach Ltd, a large manufacturer of jet engine planes and negotiate for the purchase of an aircraft. The contract price is £6,000,000 and both parties agree a payment schedule. Fly-away Ltd agrees to pay £4,000,000 upon delivery of the aircraft on 1st March 2016 and a final payment of £2,000,000 on 1st May 2016.
Air Coach delivers the aircraft to Fly-away Ltd on 1st March 2016 as per the contract. Shortly after taking delivery of the aircraft Fly-away Ltd loses a profitable contract with its largest booking agent resulting in a significant drop in demand for their Leeds to Cyprus route. Air Coach Ltd is also experiencing financial difficulties due to a number of legal actions being brought against it following the discovery of a defect in one of its executive aircraft.
Realising that Fly-away Ltd would be unable to pay the remaining £2,000,000 on 1st May 2016, Air Coach Ltd agrees to accept £500,000 in full satisfaction of the debt. Fly-away Ltd duly pays the £500,000 on 1st May 2016.
Air Coach Ltd is subsequently found liable for breaching health and safety regulations by the Health and Safety Executive and is ordered to pay substantial damages to customers of its executive aircraft.
Air Coach Ltd is unable to meet the order for damages and so brings an action on 7th June 2016 against Fly-away Ltd to recover the outstanding £1,500,000 owed. Air Coach Ltd argues it is not bound by their promise to accept the lesser amount as Fly-away Ltd had provided no consideration in return.
In the High Court, Gaffe J held that Fly-away Ltd was not liable for the outstanding payment following the principles of consideration established in Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1.
Air Coach Ltd appeals to the Court of Appeal on the grounds that Gaffe J had erred in applying Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB1 to the part-payment of a debt situation, this being inconsistent with the principle established in Foakes v Beer (1884) 9 App Cas 605.
The appeal is upheld and Fly-away Ltd now appeals to the Supreme Court, with leave, on the single ground:
1) That Gaffe J had not erred in applying the principle in Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1. The benefits obtained by the part-payment of a debt should be treated the same as those benefits obtained under a contract for the provision of goods and/or services