Application of Pinnel's rule and capacity to contract in two contract law cases

Part A
Issue: here the issue is if the rule known as the Pinnel's rule can be applied in case of the
transaction that took place between David and Rees.
Rule: in order to deal with this issue, the rule called the Pinnel's rule and its exceptions need to
be applied to the facts of this question. This rule provides that the payment of less money than
the money owed by one party to the other will not result in the complete discharge of the debt
obligations. The reason that has been given in favor of this rule is that in such cases the promise
of the credit according to which the creditor has given an assurance to the debtor that they were
not so for the balance amount is a promise that is not supported by any consideration that has
been given by the promisee in return. Therefore, the law does not allow the debtor to legally
enforce this promise. This rule was provided for the first time in Pinnel's case (1602).
The court stated in this case that by paying lesser sum on the due date and in satisfaction of a
larger sum cannot amount to the satisfaction of the complete debt. But the court stated that a "gift
of horse, hawk or robe" can be considered as the complete satisfaction of the debt. The reason
given by the court was that the gift of horse, hawk or robe would be more useful for the plaintiff
otherwise such gift would not be accepted by the plaintiff as the complete satisfaction off the
debt. However, it was also affirmed that the payment and the acceptance of a lesser amount than
the amount due, on the day before the date of repayment. As stated in the original agreement
should be considered as a valid consideration. In such cases, the premature settlement of their
debt is something more that is needed under the original agreement.

This rule was further reiterated by the court in Foakes v Beer (1884). In this case, Foakes had
obtained a judgment from the court for the recovery of debt and costs. But later on Beer agreed
that he was ready to accept 500 pounds immediately and 150 pounds in half yearly installments
until the total amount of debt has been repaid. Therefore, Beer agreed that he will not take any
further action regarding the judgment. Therefore, the amount of debt was paid by Foakes. But
later on, Beer, took action in the code for the governing interest on the judgment. Hence, the
court arrived at the conclusion that Beer can take action for recovering interest. The reasoning of
the court was that payment of smaller amount is not valid consideration in return of the promise
according to which no more action was going to be taken on the judgment.
However, the rule has to face a lot of criticism by the judges. This criticism is due to the fact that
with the help of this rule, a creditor may go back from his promise that the whole debt has been
discharge and as a result, the creditor may still decide to claim the balance amount. Due to this
reason, the rule became quite unpopular. The result was that certain exceptions were created by
the court regarding the rule. Therefore, the exceptions to this rule provide that the whole debt has
been discharge if:
The creditor has accepted a smaller amount as well as something different in kind (for example,
chattel)
The payment of smaller amount has been made before their debt is due, provided the payment
has been made at the request made by the creditor.
The payment of smaller amount at different place on different currency, made at the request of
creditor
Any other act that the creditor was not bound to perform

In case of fraud on third-party,
Promissory estoppel
The traditional estoppel was applicable only in cases related representations that have been made
regarding existing facts. Therefore, it did not cover the representations that have been made
concerning future intentions. But the traditional notion of estoppel was extended so that it may
cover the representations related with future intentions (Central London Property. v High Trees.
1947). In view of this decision, the doctrine has been called promissory estoppel.
Application: the facts of this case are that $100,000 have been borrowed by David from Rees.
According to the agreement, David was going to repay the amount within 120 days. The rate of
interest was 14%. However after the expiry of 120 days, David tells Rees that the development
did not sell as expected, and as a result, he was not in a position to pay the full amount. As a
result, David meeting of according to which he was going to pay $90,000 as the full payment of
the debt. This offer was accepted by Rees, but later on he initiated action in the code to claim the
rest of the amount of $10,000 as well as interest on the whole amount. In such a case it is argued
by David that he had already paid the debt as a result of the exception present to the rule
provided in Foakes v Beer. According to this exception, if the debt has been repaid in different
currency, it can be considered as the full repayment of debt. But in this case, David had not paid
in different currency but he had made the payment by cheque. This cannot be treated as payment
in different currency. The result is that Rees can still claim the remaining amount of $10,000 and
interest on the whole amount. On the other hand, David cannot rely on the promise made by
Rees where he accepted that $90,000 will be the complete repayment of the debt.
Part B