In Pinnel's case [1558 - 1774] All ER Rep 612, Common Pleas, it was held that "payment of a lesser sum on the day in satisfaction of a greater, cannot be any satisfaction for the whole, because it appears to the Judges that by no possibility, a lesser sum can be a satisfaction to the plaintiff for a greater sum:..."

In Foakes v. Beer (1884) 9 App. Cas. 605, House of Lords, Mrs. Beer had sued Dr. Foakes and obtained judgment against him for £2,090 19s. They entered into a written agreement under which the doctor promised to pay the debt by instalments. When he finished paying £2,090 19s. Mrs. Beer wanted him to pay the interest (as according to law, a judgment debt accrues interest until it is fully paid). The doctor pointed to the written agreement under which he had only promised to pay £2,090 19s. Mrs. Beer sued the doctor.

In defence the doctor again pointed to the written agreement in which she had promised not to take any proceedings on the judgment. The doctor claimed that she was bound by her promise.

The court held that she was not bound by her promise, as he had not given any consideration to buy her promise. You might ask, "what about the £2,090 19s. which he had paid?"

This was held not to be sufficient consideration. Mrs. Beer was entitled to £2,090 19s + interest.
Dr. Foakes had paid only part of the debt which he owed. By paying part of the debt he was only giving Mrs. Beer what she was already entitled to get.

Earl of Selborne L.C. stated:
"The question,...is... raised...whether your Lordships are now prepared, not only to overrule,...the doctrine stated by Sir Edward Coke to have been laid down by all the judges of the Common Pleas in Pinnel's case (1602)...but to treat a prospective agreement, not under seal, for satisfaction of a debt by a series of payments on account to a total amount less than the whole debt, as binding in law, provided these payments are regularly made;...The doctrine itself,...may have been criticised as questionable in principle by some persons whose opinions are entitled to respect, but it has never been judicially overruled; on the contrary I think it has always, since the sixteenth century, been accepted as law. If so, I cannot think that your Lordships would do right, if you were now to reverse, as erroneous, a judgment of the Court of Appeal, proceeding upon a doctrine which has been accepted as part of the law of England for 280 years...If the question be...whether consideration is, or is not, given in a case of this kind, by the debtor who pays down part of the debt presently due from him, for a promise by the creditor to relinquish, after certain further payments on account, the residue of the debt, I cannot say that ...consideration is given,..."

In Ferguson v. Davies [1997] 1 All ER 315 the claimant had instituted an action in the country court for £486.50. The defendant sent a cheque for £150 to the claimant admitting liability for this amount but also stating that this was sent in full settlement of the claim. The claimant cashed the cheque but continued the county court action. He did not succeed as the county court judge held that by cashing the cheque the claimant had accepted payment in full settlement. However, the Court of Appeal held that the claimant was entitled to sue for the balance as the defendant had not provided any consideration by the payment of £150.
Common law exceptions

i. Part payment by the debtor on an earlier date at the creditor's request.
In Pinnel's case Cole owed Pinnel £8 10s. It was agreed that the date of repayment was to be on 11 November 1600. Sometime after the initial agreement Pinnel informed Cole that he wanted repayment on 1 October 1600. On 1st October Cole offered Pinnel £5 2s 9d and Pinnel accepted this part payment in full satisfaction of the £8 10s. In other words, he promised to forget about the balance. But he went back on his promise and sued Cole for the balance.

The court held that "the payment and acceptance of parcel before the day in satisfaction of the whole, would be a good satisfaction in regard of circumstances of time, for peradventure parcel of it before the day would be more beneficial to him than the whole at the day, and the value of the satisfaction is not material:..." So by making a part payment earlier than the due date, Cole had conferred a benefit on Pinnel, which in turn meant that Pinnel was bound by his promise. Unfortunately, Cole lost the case, as he had made an error in the pleadings submitted to court; but if he had submitted the correct pleadings, Pinnel would have lost the case.

ii. Part payment by the debtor at a different place at the creditor's request.
In Pinnel's case the court said: "...if I am bound in £20 to pay you £10 at Westminster and you request me to pay you £5 at the day at York, and you will accept it in full satisfaction of the whole, it is a good satisfaction for the whole: for the expenses to pay it at York, is sufficient satisfaction."

Q: What if the benefit is obtained by the creditor i.e. at a different place at the convenience of the debtor?
In Vanbergen v. St. Edmunds Properties Ltd. [1933] 2 K.B. 223, Court of Appeal, Vanbergen (the debtor) paid part of the debt in Eastbourne. The issue was whether the creditors were bound by a promise to accept this payment in full satisfaction.
Lord Hanworth said: "...it was Mr. Vanbergen who said he was going down to Eastbourne, that he was going down as part of his business, and that he did not think he would be getting back after his business on Thursday in time to pay it on Thursday, and the concession arose out of the question whether or not the debtor could be back in town in time to bring it himself, because he frankly said he was trying to get a little more time.

When the creditors found that the debtor had to go down to Eastbourne in any event, then the concession was given by the creditors. But they reaped no advantage; there was nothing moving towards them which could be deemed to be a
consideration, with the result that the case is one in which the contract is made, but remains unenforceable in
law..."

iii. When the debtor offers something other than money as payment and the creditor accepts this in full satisfaction of the debt.
In Pinnel's case the court said: "...the gift of a horse, hawk, or robe, etc in satisfaction is good. For it shall be intended that a horse, hawk, or robe, etc might be more beneficial to the plaintiff than the money, in respect of some circumstance, or otherwise the plaintiff would not have accepted of it in satisfaction."

Q: What about cheques?
Goddard v.O'Brien (1882) 9 Q.B.D. 37 a part payment by cheque is sufficient consideration to bind a creditor.
Lord Denning M.R. changed the law on this point in the case of D. & C. Builders Ltd. v. Rees [1966] 2 Q.B. 617, Court of Appeal.

The builders, in this case, had done some work for Mr. Rees, and were owed £482 13s. 1d. The builders, who were in financial difficulties (which fact was known by Mr. Rees), were pressing for payment. Several months after the initial request for payment, Mrs. Rees offered them £300 and demanded that it be accepted in full settlement. The builders accepted the money, which was paid by means of a cheque. The builders then brought an action to recover the balance amount.

Lord Denning M.R., after referring to the general rule on part payments as laid down in Pinnel and Foakes v. Beer, stated: "Now, suppose that the debtor, instead of paying the lesser sum in cash, pays it by cheque. He makes out a cheque for the amount. The creditor accepts the cheque and cashes it. Is the position any different? I think not. No sensible distinction can be taken between payment of a lesser sum by cash and payment of it by cheque. The cheque, when given, is conditional payment. When honoured, it is actual payment. It is then just the same as cash. If a creditor is not bound when he receives payment by cash, he should not be bound when he receives payment by cheque."

Lord Denning said that the case of Goddard v. O'Brien was wrongly decided.

iv. Where a third party makes a part payment to the creditor.
In Hirachand Punamchand v. Temple [1911] 2 K.B. 330, Court of Appeal, the debtor's father offered the creditor part payment of the debt in full satisfaction. The creditor accepted the part payment but sued the debtor for the balance. The debtor set up the part payment by the father as a defence. The court held that the creditor was not entitled to the balance.

Vaughan Williams L.J. cited Cook v. Lister (13 C.B.(N.S.) 543 and said: "If the judgments in that case are looked at, it will be found that Willes J. said, in explaining the grounds of his judgment that under circumstances like those of the present case, the debt is gone, because it would be a fraud upon the stranger who pays part of a debt in discharge of the whole, that an action should be brought for the debt."

Fletcher Moulton L.J. in the Hirachand Punamchand case also agreed with the view of Willes J. In Welby v Drake a creditor sued for the full sum due after accepting a lesser sum in settlement from the father of a debtor. The Court refused to allow the creditor's claim. Circuit Judge Abbott said the father was mislead. He paid the sum he did believing he would discharge his son from any further liability.

Can I pursue my debt if all creditors have agreed to accept a lesser sum?
A composition order is where a debtor cannot pay all his creditors in full and persuades them to agree to accept a lesser sum in full settlement. This is a binding agreement and the creditor cannot claim the balance from the debtor at a later date.

The Courts’ latest view on accord and satisfaction.
In Andrew Bracken, Ann Tricket v G Billinghurst [2003 EWHC 1333], the claimant made an offer to the defendant that he would accept £6000 in settlement to see an end to the matter.

The defendant rejected the offer. However, he sent a cheque to the claimant for £5000. He said the cheque was in full and final settlement and its presentation and clearance by the claimant would be acceptance of his offer. The claimant banked the cheque and later tried to recover the balance.

The Court found that the matter had been settled. The cheque was tendered in full and final settlement. The banking and clearance of the cheque was evidence the claimant accepted the offer of settlement. This was the dilemma that Andrew Bracken and Ann Trickett had to deal with when they fell out with their building contractor, Mr Billinghurst, in a case recently decided by Judge David Wilcox in the Technology and Construction Court.

Mr Bracken and Ms Trickett claimed £43,984.66 and eventually issued proceedings seeking summary judgment for that amount. Mr Billinghurst defended on the basis that the claim had already been compromised when Mr Bracken, on behalf of himself and Ms Trickett, accepted a cheque for £5,000 which had been tendered in full and final settlement.

This was the sequence of events:
• 22 August 2002: Mr Bracken wrote to Mr Billinghurst proposing that the claim would be dropped on receipt of £6,000;
• 30 August 2002: Mr Bracken wrote to Mr Billinghurst's Solicitors repeating his offer and stating that he was not prepared to accept less than £6,000;
• 6 September 2002: Mr Billinghurst's Solicitors wrote to Mr Bracken saying that there were other sums for which Mr Billinghurst should be given credit but accepting that a pragmatic approach to settlement was required. They enclosed a cheque for £5,000.

"On the strict understanding that this sum is offered to you in full and final settlement of all issues… the payment is tendered as an offer of settlement which will be deemed to have been accepted by you and therefore be contractually binding if it is presented to your bank and cleared for payment. If you are not willing to accept the payment on these terms would you please return the payment and we will assume therefore that the dispute will have to continue… This offer applies to both yourself and Ms Trickett… in the circumstances, neither of you would be entitled to pursue this matter any further upon payment in of the cheque."

• 23 September 2002: the cheque was presented for payment by Mr Bracken and/or Ms Trickett.
• 24 September 2002: the cheque cleared.
• 26 September 2002: Mr Bracken wrote to Mr Billinghurst.
"… I am writing to inform you that I hereby withdraw all previous offers of settlement made on behalf of myself and Ms Trickett. I now intend to pursue the full amount of the claim unless payment is made in full."
• 26 September 2002: Mr Bracken's Solicitors wrote to Mr Billinghurst's Solicitors saying "Our clients are not prepared to accept payment of the sum of £5,000 in settlement of their claim… [they] accept the payment of £5,000 only on account of Mr Billinghurst's indebtedness to them".

In these cases, whether an effective agreement to settle is reached depends upon the facts. The issue for the Court to determine is not what Mr Bracken intended to achieve, but what by his words and conduct he led Mr Billinghurst to believe. In a Court of Appeal case in 1974 (Stour Valley Builders v Stuart) it was said that "Cashing a cheque is always strong evidence of acceptance, especially if it is not accompanied by immediate rejection of the offer. Retention of the cheque without rejection is also strong evidence of acceptance depending on the length of delay. But neither of these factors is conclusive and it would be artificial to draw a hard and fast line between cases where payment is accompanied by an immediate rejection of the offer and cases where objection comes within a day or two days."

According to this guidance the fact that Mr Bracken banked the cheque was evidence that he intended to accept the offer; the difficulty was that he did nothing for some time to indicate the contrary, thereby leading Mr Billinghurst to believe that the offer had been accepted.

Mr Bracken retained the cheque for 16 days without saying anything, and did not write to Mr Billinghurst for a further 3 days after banking it, to indicate the basis upon which he intended to accept the cheque, by which time it had already been cleared.
Additional factors which appear to have counted against Mr Bracken were that Mr Billinghurst's Solicitors had made it very clear in their letter of 6 September 2002 that presentation of the cheque would constitute acceptance of the offer and that if Mr Bracken did not wish to accept the offer he should return the cheque to Mr Billinghurst's Solicitors. Secondly the Judge appears to have been influenced by the fact that payment was tendered by a third party, Mr Billinghurst's company. It appears that acceptance of an offer will more readily be inferred when payment is made by someone else with the express intention of discharging the
debtor's entire liability.

Thisi Article is written by Adrian Choong Ewe Lim