Introduction

Consideration is one of the basic elements in contracts. Without consideration, an agreement is

void, not legally binding and are not enforceable at the court. Consideration means the mutual
exchange of promises between two parties in return for the benefits gained from the other’s
promise. In other words, consideration simply means one party must give something or benefits
in return for what is gained from the other party. Based on the Angelina’s case, the principle
being applied on that case is part payment of debt. Part payment of debt means the debtor paying
a lesser amount of sum to the creditor in order to satisfy the full debt. Does part payment of a
debt amount to a good consideration? Is Angelina contracted to pay the remaining balance of
RM 20 to Laura? We are going to discuss upon this based on the Malaysia position and the
English position with relevant clauses and case laws.

In the Malaysia position

Part payment of a debt in satisfaction of the full debt is acceptable under Section 64 of Contract
Act 1950 and it is considered as a good consideration. Section 64 of Contract Act 1950 provided
that:
“Every promise may dispense with or remit, wholly or in part, the performance of the
promise made to him, or may extend the time for such performance, or may accept instead of it
any satisfaction which he thinks fit.”
Therefore, part payment of a debt can satisfies the whole debt and end the liability for the
balance owing in the Malaysia position. The cases below explains the principle of part payment
debt in the Malaysia position.
Under Malaysia law, part payment of a debt can discharged the full amount of debt even the
payment is done through a third party. It was stated in illustration (b) of Section 64 of Contract
Act 1950. The case below is the example of illustration (c)

Kerpa Singh v Bariam Singh

[1966] 1 MLJ 38

Bariam Singh owed RM8,869.94 to Kerpa Singh. A letter was written by Bariam Singh’s son to
Kerpa Singh, offering to pay a part payment of RM4,000 to KS in satisfaction of the full debt
owed by his father. Bariam Singh’s son endorsed a cheque and it was stated in the letter that if
KS refuse to accept that part payment, he has to return the cheque. This indicates that once Kerpa
Singh or any other authorized people on his behalf signed or accepted the cheque, the part
payment would have discharged the full debt. Kerpa Singh’s legal advisers accepted the cheque
and retained the money. However, Kerpa Singh intended to claim the remaining sum of the debt
by issuing a bankruptcy notice to BS.

The Federal Court held that since the cheque was cashed and the money was retained by Kerpa
Singh, it indicates the acceptance of the cheque by Bariam Singh’ son in full settlement of the
debt owed by his father. Hence, Kerpa Singh lost the lawsuit and failed to claim the remaining
balance of the debt. By referring to this case, it is able to determine that Angelina is not
contracted to pay Laura RM 20 as Laura had accepted Angelina’s offer of RM 80 voucher in
settlement of the full debt.

(Add one more Malaysia case)

In the English position

Payment of a lesser sum cannot satisfy the whole debt under the English common law. This is
because the general rule of the English common law is that payment of a lesser sum by the
debtor to the creditor in satisfaction of the full amount of debt is usually not an adequate
consideration to support the creditor’s promise not to sue for the full debt. Hence, part payment
of debt cannot discharge the debtor from the full amount of debt and is not considered as a good
consideration. However, there are exceptions on the general rule of the English common law
which was stated in the Pinnel’s Case and was restated in Foakes v Beer which would will be
discussed further below.

Pinnel’s case

The first exceptional example of part payment of debt under English common law is Pinnel’s
case. Cole owned Pinnel a total debt of £8 10s and he is asked to pay for it. Pinnel made an
agreement with Cole stating that the rest of the debt will be discharged if Cole paid £5 2s 6d.
Cole paid the sum as agreed but then Pinnel brought the case to the court and sued him for the
remaining amount. In his defense, the defendant, Cole argued that he had paid part of the debt
and the plaintiff, Pinnel had agreed on the part payment of debt as a satisfaction of total sum.

The court held that part payment in satisfaction of greater sum is not allowed in English common
law. Part payment is not a good consideration even both parties have agreed to this and it cannot
become consideration for an agreement to discharge the balance of debt. However, it was
sufficient for Cole to waive his debt since he had paid the part of the debt to Pinnel before the
due date. In this situation, Lord Coke stated that payment of lesser sum cannot be satisfaction of
the whole unless the defendant provided some benefits other than the money to the plaintiff, such
as a gift of horse, hawk, robe and etc. Otherwise, the agreement is not valid as there was no
consideration from their agreement. Therefore, Cole was not entitled to pay the remaining debt
as he had provided good consideration in the agreement by paying part of the debt early. From
this case, it was concluded that a smaller sum can satisfy a larger sum as a whole debt if and only
if it is payable at different place, the payment made before the deadline, or it is paid in different
mode. With this, Angelina has to pay the remaining debt as he does not provide other form of
considerations such as gifts to Laura.
Foakes v Beer

The second example is Foakes v Beer. Dr Foakes owned Beer a total sum of £2090 19s. Beer
brought an action against Dr Foakes when he was unable to pay the debt She obtained a
judgement in the court where Dr Foakes had to pay the amount to settle his debt. Later, Beer and
Dr Foakes went into an written agreement that Beer agreed to give Dr Foakes some time in order
to pay £2090 19s. Dr Foakes provides his consideration by giving initial amount of £500 as a
partial satisfaction of the judgement debt. Besides, the agreement also stated that Dr Foakes had
to pay the remaining amount of debt for six month payment of £250 in terms of instalments. As a
return, Beer promised not to sue him as long as she received the full payment. The agreement did
not specified whether Dr Foakes liable to the interest of the judgement debt or not.

Dr Foakes made the instalment payments according to the agreement for six month until the
entire amount was repaid. However, he did not pay the interest of the judgement debt, which he
thought the interest was no under the agreement. Beer received the payment and claimed for the
interest. She brought back the case to the court to sue Dr Foakes for the interest. In his defense,
Dr Foakes argued that he was not entitled to the interest as Beer promised not to enforce her
judgement against him and the interest was under the judgement debt. Some more, he stated that
he had provided consideration by giving an initial amount of £500 to Beer. In Beer’s defense, she
applied the rule in Pinnel’s case whereby the part payment cannot be satisfaction of whole. She
claimed that Dr Foakes did not provide any consideration as he did his part according to what he
had contractually bound to do.

The House of Lords applied the decision of Pinnel’s case and held that the agreement between
them was not a legal binding agreement. Payment of lesser sum did not contribute any
consideration to the agreement and it was unable to be satisfaction to whole amount. Hence,
Beers was entitled to claim back the interest of judgement and Dr Foakes would had to paid for
it. By referring this case, it is able to conclude that Angelina is entitled to pay the remaining
amount of RM20 as part payment of debt cannot satisfy the whole amount of debt. Angelina
does not provides any benefits to Laura which resulting in no consideration in the agreement.
D&C Builders Ltd v Rees

[1966] 1 QB 617, CA

Mr. Rees had instructed the D&C builders to do some renovations and repairs at his shop and the
amount of pay for the building works is £746. Mr. Rees then paid £250 and received a discount
of £14 from D&C builders, leaving Mr. Rees with a remaining debt of £482. Mr. Rees did not
make the remaining payment for a period of time. When D&C builders started to have financial
issue and were desperate for money, they request for the funds again by issuing a second bill to
Mr. Rees. Mrs. Rees, being aware of the crisis D&C buildings are facing, made complaints about
the building works and offered to pay a part payment of £300 in satisfaction of the full debt owed
by Mr. Rees. D&C buildings refuse to accept the offer made by Mrs. Rees. D&C buildings stated
that they would accept the £300 and the remaining balance of the debt are given a year of time
for her to pay off. However, Mrs. Rees remained persistent and stated that only £300 would be
paid by her to the D&C builders and requested them to provide a receipt stating that the part
payment was in satisfaction of the whole debt owed by Mr. Rees. Otherwise, D&C builders
would get nothing from her. Under such circumstances, D&C builders have no choice but to
reluctantly agreed to fulfill the request by Mrs. Rees and accepted the money as they were on the
verge of bankruptcy and were in the need of money. D&C builders then brought an action
against Mrs. Rees for the remaining sum of debt. Mrs. Rees then filed a defense stating that the
building works done by D&C builders at the shop was defective and they had entered into a
binding agreement. In the end, D&C builders successfully claim the remaining balance and the
appeal by Mrs. Rees was dismissed.

The court held that under The English common law, payment of a lesser sum in satisfaction of
the whole sum are not acceptable unless consideration is provided. Besides, the agreement
between D&C builders and Mrs. Rees was void and invalid because there was no consideration
in the part of Mrs. Rees. Moreover, D&C builders accepted the reduced payment under duress.
They accepted it due to their poor financial position which Mrs. Rees took advantage of. By
viewing this case in the perspective of general rule in English common law, it can be determined
that Angelina is contracted to pay Laura RM 20. This is because the general rule in English
common law stated that part payment of a debt in satisfaction of the full amount is not acceptable
and would not discharged the whole debt even both parties may have agreed upon this.

Conclusion