• 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.
o Where the lesser sum is paid in advance and accepted by the creditor in full settlement of the debt.
o If the lesser sum is paid in the form of an object which is accepted by the creditor in full settlement of the debt.
o Where the lesser sum is at the creditor request paid at a different place and accepted in full settlement of the debt.
o If the lesser sum is at the creditor 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 Builders Ltd V. Rees.
o Where the lesser sum is paid in addition to the an object and accepted by the creditor in full settlement of the debt.
o 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.
o 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.
