However there are three exceptions in the Pinnels case. The first being that payment of a smaller sum, before the due date at the creditor’s request, is valid consideration. Secondly, payment of a smaller sum at a different place, at creditors request is valid consideration. Thirdly, payment of a smaller sum accompanied, at creditor’s request, by delivery of a chattel, is valid consideration.
The rule in Pinnels case is seen as a harsh one and has received much criticism. However the rule was supported by the House of Lords in Foakes v Beer and confirmed recently in Ferguson v Davies. In the case of Foakes v Beer, Dr Foakes and Mrs Beer entered a written agreement that Dr Foakes would pay Mrs Beer instalments of the £2090 obtained by a judgement against Dr Foakes. Therefore Mrs Beer “would not take any proceedings what so ever of the judgment.” Every judgement debt carries interest however there was no mention of interest in their agreement. When the £2090 was finally paid Mrs Beer claimed an extra £360 interest which Dr Foakes refused to pay. When taken to court Mrs Beer argued that Dr Foakes had given no consideration and the held in favour for Mrs Beer.
If the creditor accepts part- payment and promises not to sue for the balance, at Common Law the creditor could go back on his promise. However the debtor may have a defence to an action for breech, in the form of promissory estoppel. This equitable remedy will estop the creditor going back on his promise. This doctrine stems from Lord Dennings obiter in the High Trees case. In order to use this remedy certain conditions must be fulfilled. Firstly the case must suggest that there must already be a pre existing contractual relationship between the parties before promissory estoppel can be raised. There must be an obvious and unambiguous promise not to enforce a person’s full legal rights. This promise may be implied from conduct, but silence or failure to act will not usually be sufficient. Another condition is reliance, the promise must have acted in reliance on the promise, in the sense that is must have influenced their conduct. It is not entirely clear whether or not an act of reliance has to be something which would put the promisee at a disadvantage if the promisor decided to reclaim his legal rights, or whether it could simply be some act that would otherwise not have happened. No new rights are created; promissory estoppel cannot be used to create entirely new rights or extend the scope of existing ones, only prevent the enforcements of rights already held. It has been described as being a shield not a sword. Also as an equitable doctrine, promissory estoppel will only be invoked where it would be inequitable for the promisor to go back on what was promised. Finally the Promisee must have acted equitably if he/she is to rely on the doctrine, “he who comes to equity must do so with clean hands”.
Does promissory estoppel suspend or extinguish the contractual rights? In Hughes v Metropolitan Railway; it was held that the rights of the Landlord had been suspended whilst the parties were negotiating. In the High trees case it was held that the right to the rent for 1940 – 1945 had been extinguished. The more accepted view is that with ongoing agreements the rights are only suspended and can be resigned provided reasonable notice has been given. The House of Lords held that in Tool Manufacturing v tungsten the promisor can go back on the promise provided he gives the promisee reasonable notice of such an intention.
We have seen that promissory estoppel is a way in which part- payment may, in certain circumstances, discharge the original debt. However if notice has been given the creditor may be able to restore his rights to the outstanding money.
The House of lords in Foakes v Beer had the opportunity to overrule the Pinnels case but the declined to do so. The Law Commission stated that the Common Law should be abrogated. Foakes v Beer was severely criticised on the ground that the principle conflicted with business practice, as most business people consider that accepting prompt payment of part of the demand may be more beneficial to them than insisting on their rights and enforcing payment as a whole.
The Law of consideration was brought into line with business practice in Williams v Roffey. It was held that the consideration provided by carpenters was “obviating a disbenefit”. This reasoning could apply to part payment situations. Instead of grasping the opportunity to up-date part – payment situations by applying Williams v Roffey, we have the Court of Appeals obiter decision in Re Selectmove that stated that William v Roffey does not apply to part payment situations. The Court of appeal implied that the House of Lords needs to review Foakes v Beer. We therefore need to await further developments by the House Lords.
