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“Payment of a lesser sum of the day is satisfaction of a large sum is not sufficient consideration for the creditor's promise to accept such payment...

      

“Payment of a lesser sum of the day is satisfaction of a large sum is not sufficient consideration
for the creditor's promise to accept such payment in full settlement of the debt.” Discuss.

  

Answers

Maurice
This is one of the rules of consideration. Payment of a lesser sum by the debtor does
not extinguish the debt as he has provided no consideration for the creditors promise.

This is the rule in Pinnels case (1602) as enunciated by Brian C. J. This rule was upheld
in Foakes V. Beer (1884).

However in certain instances payment of a lesser sum extinguishes the entire debt.
These are exemptions to the rule in Pinnels case:
(i) Where the lesser sum is paid in advance and accepted by the creditor in
full settlement of the debt.

(ii) If the lesser sum is paid in the form of an object which is accepted by
the creditor in full settlement of the debt.

(iii) Where the lesser sum is at the creditor's request paid at a different place
and accepted in full settlement of the debt.

(iv) If the lesser sum is at the creditor's request paid in a different currency
and accepted in full settlement of the debt. However, payment of a lesser sum
by cheque in lieu of cash is not a different from of currency. In D and C
BuildersLtd V. Rees.

(v) Where the lesser sum is paid in addition to the an object and accepted by
the creditor in full settlement of the debt.

(vi) If the lesser sum is paid by a third party and accepted by the creditor in
full settlement of the debt. In Welby V. Drake the defendant owed the plaintiff
18 pounds. However, the plaintiff accepted 9 pounds from the defendant for
the balance. It was held that the action was unenforceable as the payment by
the defendants father had extinguished the entire debt.

(vii) If the debtor enters into an agreement with his creditors to compound his
debts whereby he agrees to pay a portion of the amount owed to each creditor,
and the creditors agree to accept the same and promise not to insist in full
payment, payment of a lesser sum by the debtor extinguishes the entire debt.
maurice.mutuku answered the question on May 3, 2018 at 07:43

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