Variation of Contractual Rights
As a general rule, where a party under a contract performs or promise to perform less than his obligation in full discharge of the contract with the consent of the promisor (the other party), this does not discharge the promisee from the contract and the promisor can come back to demand performance of what is left by the promisee on the bases that no consideration for the promise was furnished by the promisee.
The principle was laid down in Pinnel’s case (1602). In that case, the defendant owed the plaintiff 8 pounds 10 shilling which was due to be paid in November. The defendant paid 5 pounds, 2 shillings 2 pence to the plaintiff in October claiming to have done so at the request of the plaintiff and with the understanding that the plaintiff had accepted this payment in full discharge of the contract.
Read also: Consideration in contract
The court gave judgment in favour of the plaintiff (pinnel) holding that the payment of a lesser sun could not discharge a debtor from the obligation to pay the full amount of debt except at the promisor request for payment is made either:
a. Before the due date
b. With a chattel instead of money
c. To a different destination to that originally specified
Judgment was still given in favour of the plaintiff (despite that he made the agent) due to flaw in the defendant’s pleadings.
The fact that what was being given as a chattel for the discharge of the contract must carry relative meaning and that the defendant must not rely on the plaintiff’s precarious situation to vary the contract was emphasized by Lord Denning in (D & C Builder v Rees). There, the plaintiffs did some renovation and reconstruction work for the defendants. The agreed fee was 482 pounds. After completion of the work and fully aware that the plaintiffs were desperate for funds, the defendants offered to pay 300 Pounds in full discharge of the debt, or nothing. The plaintiff reluctantly accepted. The defendant paid by cheque and as soon as they cashed it, the plaintiff brought an action to receiver the remaining debt.
The court held that the defendant could not rely on estoppel as there was no true agreement to accept less than the agreed sum. The document only took advantage of the precious condition of the plaintiff.
Also, it is the view of the court that the case did not create a valid exception to the rule in Pinnel’s case as “no sensible distinction can be taken between payment of a lesser sum by cash and payment of it by cheque”.
Contributed by: Adedokun Samuel