The plaintiff builders had been chasing payment of their undisputed invoice. Knowing that the builders were in financial difficulties, the defendant offered rather less, saying that if it was not accepted, she would pay nothing. She made the payment in full and final satisfaction of the debt.
Held: The claim for the balance succeeded. The pressure applied had been improper, and there was no ground in equity to disentitle the plantiff recovering the rest.
When a debtor offers to pay only that which he admits he is already due to pay, that is not something which can amount to good consideration for the creditor abandoning the rest, save possibly in certain special circumstances. The doctrine of promissory estoppel only applies when it is inequitable for the creditor (or other representor) to insist on his full rights.
Lord Denning MR said: ‘This principle [the principle of promissory estoppel] has been applied to cases where a creditor agrees to accept a lesser sum in discharge of a greater. So much so that we can now say that, when a creditor and a debtor enter upon a course of negotiation, which leads the debtor to suppose that, on payment of the lesser sum, the creditor will not enforce payment of the balance, and on the faith thereof the debtor pays the lesser sum and the creditor accepts it as satisfaction: then the creditor will not be allowed to enforce payment of the balance when it would be inequitable to do so. This was well illustrated during the last war. Tenants went away to escape the bombs and left their houses unoccupied. The landlords accepted a reduced rent for the time they were empty. It was held that the landlords could not afterwards turn round and sue for the balance, see Central London Property Trust Ltd. v. High Trees House Ltd. This caused at the time some eyebrows to be raised in high places. But they have been lowered since. The solution was so obviously just that no one could well gainsay it.
In applying this principle, however, we must note the qualification: The creditor is only barred from his legal rights when it would be inequitable for him to insist upon them. Where there has been a true accord, under which the creditor voluntarily agrees to accept a lesser sum in satisfaction, and the debtor acts upon that accord by paying the lesser sum and the creditor accepts it, then it is inequitable for the creditor afterwards to insist on the
Danckwerts LJ said that the case of Foakes v Beer: ‘settled definitely the rule of law that payment of a lesser sum than the amount of a debt due cannot be a satisfaction of the debt, unless there is some benefit to the creditor added so that there is an accord and satisfaction.’
Judges:
Lord Denning MR, Dankwerts LJ
Citations:
[1966] 2 QB 617, [1965] EWCA Civ 3, [1965] 3 All ER 837, [1966] 2 WLR 28
Links:
Jurisdiction:
England and Wales
Citing:
Cited – Central London Property Trust Ltd v High Trees House Ltd KBD 18-Jul-1946
Promissory Estoppel Created
The plaintiff leased a block a flats to the defendant in 1939, at an annual rental of pounds 2500. High Trees had difficulty in filling the flats because of the war, and the parties agreed in writing in 1940 to reduce the rental to a half. No time . .
Cited – Hirachand Punamchand v Temple CA 1911
The defendant, a British army officer in India, had given a promissory note to the plaintiff moneylenders. Unable to pay, he suggested they apply to his father, Sir Richard Temple. In reply, Sir Richard Temple’s solicitors wrote saying they were . .
Cited by:
Cited – Bradford and Bingley Plc v Rashid HL 12-Jul-2006
Disapplication of Without Prejudice Rules
The House was asked whether a letter sent during without prejudice negotiations which acknowledged a debt was admissible to restart the limitation period. An advice centre, acting for the borrower had written, in answer to a claim by the lender for . .
Cited – Collier v P and M J Wright (Holdings) Ltd CA 14-Dec-2007
Agreement for payment by joint debtor not contract
The claimant appealed against refusal of an order to set aside a statutory demand. He said that he had compromised a claim by the creditors. He argued for an extension to the Rule in Pinnel’s case, so that where a debtor agrees to pay part of a . .
Cited – In Re Selectmove Ltd CA 21-Dec-1993
Promisse to Pay Tax due is not Consideration
The company appealed against an order for its winding up, saying that the debt was disputed, an accomodation having been reached with the Revenue.
Held: The court declined to regard a promise to the Revenue by a company to pay its existing . .
Lists of cited by and citing cases may be incomplete.
Contract, Estoppel
Updated: 25 September 2022; Ref: scu.243135