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Sam agrees to accept the 70000 in full settlement of

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Sam agrees to accept the $700.00 in full settlement of the debt. On the basis of Sam’s promise, Tom manages to round up the $700.00 and pays it to Sam. The next week Sam sees Tom and demands the $300.00 balance of the loan. Sam argues that Tom has given him no new consideration for his (Sam’s) promise to let Tom off $300.00 of the debt and so his promise is not binding and cannot be enforced by Tom. Advise Tom whether he is legally obliged to pay Sam the remaining $300.00. The issue is to determine whether consideration was given when Sam promised to let Tom off $300 of the loan. Pinnels’ rule states that: “payment of a lesser sum will not extinguish a debt for a greater amount” . The rule was created in 1608 and enables a creditor to promise to accept less than the full amount owed, then change their mind. The rule was confirmed in the case of Foakes v Beer, where it was held that a promise to forego interest on a loan was not legally binding. Beer had agreed to waive the interest and then went back on her word. Foakes failed to show any consideration and hence his defence accordingly failed. This is applicable to the case of Sam and Tony as Sam agreed to let Tony off $300 of the total amount, and then went back on his word. Therefore the promise was not binding as there was no consideration given. Equity/Promissory Estoppel Equity is an area of law that can be called upon to supplement the rules of common
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law (like the rules of consideration now being discussed), or to find a way around those rules. It can be called upon in some circumstances when the implementation of common law rules would result in an unjust or unfair outcome. In this way equity is used to arrive at a fair or just result. Exercise 6.5 Read the case of Central London Property Trust Ltd v High Trees House Ltd (often referred to as the High Trees House case – Parker and Box pages 133-135). 1) What was the problem in this case that involved the rules of consideration (discussed above)? The problem was that no time was specified for payment of the reduced rental. The Trust would be estopped for going back on its promise to High Trees 2) Write down the factors that the judge said had to be established for the new defence of promissory estoppel to be used in that case. Denning L, in his obiter dicta, extended the doctrine of traditional estoppel, and created promissory estoppel. Whereas traditional estoppel only applied to statements of fact, promissory estoppel applies to statements of future intention. 3) Explain whether it was necessary for the tenant to have provided consideration. Development of the principles of promissory estoppel in subsequent cases: The High Trees House case was only the start of the development of promissory estoppel. Parties in subsequent cases attempted to argue that their cases were similar enough to High Trees House for the principles of promissory estoppel to apply to their cases.
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