creditor sued successfully for interest for late payment. This case was further
confirmed in Re Selectmove (see p. 55) and Ferguson v Davies (1997).
The rule in Pinnel’s case, then, still stands as good law, despite its
antiquity. However, in the case itself, apart from the general rule, it was said
that although just paying off less than the debt on the day due does not
discharge the whole debt, the addition of something else to part of the
money may do so. The following situations can therefore be regarded as
exceptions to the general rule.
- If, at the request of the creditor, something else is added to the
payment. This could arise if A owes B £200, and at B’s request pays £100
together with a piece of jewellery that A likes. In the case it was
suggested that an item such as ‘the gift of a horse, hawk or robe’. may
discharge the debt completely, provided that the other party is happy
with the arrangement. The illustration is still relevant 400 years later. If
someone owes some money, and the other party is happy to take part
payment plus a car, hi-fi system or jacket belonging to the other instead
of money, there is no reason why this should not be acknowledged as
payment. It has already been established that the court do not insist on
market value, so it is not relevant whether the article is an exact
replacement for the sum of money outstanding. - If, at the creditor’s request, the debtor pays a lesser sum before the date
on which it is due.This gives the creditor something ‘extra’ in terms of
the time, so is regarded as good consideration. If C owes D £30, to be
repaid on 15 December, but at D’s request C repays £25 on 1 December
in settlement, this will be regarded as ending the debt, and D will not be
able to go back on the agreement and sue for the other £5. - If, at the request of the creditor, the method of payment is changed.The
payment may be made at a different place, or in a different form, for
example if E owes F £100 to be paid at his office in London, and at F’s
request, E takes the money to F’s home in Swindon. However, it has been
held in D and C Builders v Rees (1965) that payment of a lesser amount
by cheque rather than cash is not a great enough difference in method of
payment to discharge the full debt. - Where there is a composition agreement with creditors.If X is declared
insolvent, and owes money to Tom, Dick and Harry, X clearly cannot
repay them all in full. However, they may then agree to accept a
Consideration 57How far should the courts go along this line? We have seen that worthless
chocolate wrappers can form good consideration.Would the same wrappers,
or one small bar of chocolate, plus five pence, be satisfaction for a large
original debt? Should it be? If so, why are the chocolate and five pence needed
at all, since they are so trivial compared to a large debt?