Part Payment Of A Debt / Promissory Estoppel Flashcards
What is the general rule regarding the part payment of debt?
The rule is that a part payment of debt without further consideration does not discharge the other party from paying the full amount due
Is paying less that what is owed good consideration?
No - you can’t pay less than the full debt owed and expect to be free from the debt - you must pay all debts in full, including anything owed under a contract.
This is the case even if the creditor states that debtor is released from their obligations - the debtor still owes the creditor
How can someone get around the rule that paying less than what is owed is not good consideration?
They can get around this by giving some consideration that involves a ‘new element’
For example agreeing to pay less early, at a difference place or with different things, like paying a £100 debt with a horse and an ice cream are valid consideration - even if the value is less than the debt
Must consideration be adequate?
No, but it must be sufficient
Must the other side agree to the part payment for it to be effective ?
Yes - it won’t work unless the other party agrees to being paid less
What was the ‘new element’ in Pinnel’s case?
A debtor paid less than the amount owed but in advance of the due date and that was seen as a new element and valid consideration
So paid less early = valid
+ horse hawk or robe
What are the elements of valid consideration when paying less than what is owed?
Creditor agrees to other side paying less
PLUS
New element (paying early or paying with something else)
EQUALS
Valid consideration - debt can be part paid
What is promissory estoppel
It is an equitable remedy available at the court’s discretion that operates as an exception to the rule that part payment of a debt is not good consideration
What is the impact of promissory estoppel being equitable?
Because it is equitable the applicant who is trying to rely on estoppel must come with clean hands and must not try and take advantage or do something dodgy with the creditor - they must act honourably
What is the rule for promissory estoppel
Where one party acts in a certain way by relying on the promise of another party and that party goes back on that promise, estoppel
Prevents that party from going back on their previous promise
What type of conduct does promissory estoppel stop?
Unconscionable conduct - where going back on the promise would be unfair
What are the 6 requirements for promissory estoppel?
1 a pre existing contractual relationship
2 a clear and unequivocal communication from A that he will not insist on his strict contract rights
3 A must have objectively intended B to rely upon that Statement or promise
4 B reasonably relied on the communication or understanding and changed their position. It’s not necessary for B to have suffered any detriment
5 A now seeks to go back on the original communication or understanding and it is inequitable for him to do so
6 it’s inequitable if it would cause B to suffer detriment having changed their position in reliance on that promise
How can promissory estoppel come to an end?
When the circumstances causing it come to an end - reasonable notice by the party giving the promise that the promise will now be ending must be given
