This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
The question of payment of part of a debt that is due, as consideration for a new promise, has been confused with its effect as discharge of the entire debt. The early cases regarded payment of part of a debt under an agreement whereby it was to be taken in full satisfaction, as a consideration sufficient to support such promise,1 though not as satisfaction of the debt,2 the remedy of the promisee being an action upon such promise. A promise by
14 Trustees v. Stewart, 1 N. Y. 581. 15Byrd v. Hickman, 167 Ala. 351, 52
16 Eastman v. Miller, 113 la, 404, 85 N. W. 635. A promise by the creditor, made after the debt is incurred, to give double credit for payments on the debt, is without consideration. Klausman Brewing Co. v. Schoenlau, 32 Mo. App. 357.
176. R. H. Robinson & Son Contract ing Co. v. Harrison, 97 Ark. 643, 133 S. W. 197.
18Weed v. Spears, 193 N. Y. 289, 86 N. E. 10.
1 Reynolds v. Pinhowe, Croke Eliz. 429. (Where it is suggested that the judgment, which was the form of the greater debt, might have been reversible for error in the record.) Pinhowe v. Reynolds, Rolle's Abr. 28 (pl. 54); Reynold v. Purchowe, Moore 412.
"If A recovers a debt and damages to 7£ against B and after A in consideration of 4£ paid him by B assumes and promises that he will forbear further to prosecute his suit, and that he will release it, and also that he and his attorney will acknowledge satisfaction of the sum recovered; though this 4£ can not be any satisfaction of the 7£ due by the record, yet the acceptance of the 4£ is a good consideration to raise this assumpsit, whereby to compel him to discharge the 7£." Pinowe v. Reynolds, 1 Viner Abr. 316 (pl. 54). See also, Bagge v. Slade, 3 Bulst. 162; Johnston v. Astill, 1 Lev. 198.
2 Anonymous, 4 Leon 81 (pl. 172); Bagge v. Slade, 3 Bulst. 162.
A, who holds a bond against B for sixty pounds, to secure payment of thirty pounds, to deliver such bond for cancellation on consideration that B would pay thirty pounds at maturity, was held to be supported by consideration, since it was possibly more beneficial to A to receive the money than to forfeit the bond; and A was bound in honesty and equity to surrender the bond on payment.3
The subsequent English cases held that payment of part of the debt due could not be satisfaction of the entire debt,4 and the doctrine of consideration was invoked as the basis of this rule.5 Reluctantly, on the ground that long-continued repetitions in dicta, of a mistaken and ill-advised rule, rendered further discussion improper, the highest court in England affirmed this rule.6
The courts of the United States are almost unanimous in holding that payment of part of an undisputed debt, the amount of which is liquidated, and which is paid in accordance with the provisions of the original contract governing the payment, except as to the amount, can not be made by any agreement of the parties to operate as a discharge of the entire debt,7 even if the original obliga-
3 Flight v. Crasden, Croke Car. 8.
4 Cumber v. Wane, 1 Strange 426. (In this case, a negotiable note was given for a debt not thus evidenced. Many jurisdictions would hold this to be a sufficient consideration. See Sec. 544.)
• Fitch v. Sutton, 5 East 230. (See a criticism of this case as being based on a misapprehension of the evidence in Steinman v. Magnus, 11 East 390, and in Foakes v. Beer, 9 App. Cas. 605.)
6Foakes v. Beer, 9 App. Cas. 605. See, Two Theories of Consideration, by James Barr Ames, 12 Harvard Law Review 515.
7 United States. Fire Ins. Association v. Wickham, 141 U. S. 564, 35 L. ed. 860.
Alabama. Abercrombie v. Goode, 187 Ala. 310, 65 So. 816.
Arizona. State v. Gregg, 18 Ariz. 121, 157 Pac. 227.
Arkansas. Reynolds v. Reynolds, 56 Ark. 369, 18 S. W. 377.
California. Rued v. Cooper, 119 Cal. 463, 51 Pac. 704.
Colorado. Weber v. Head Camp, Pa cific Jurisdiction, 60 Colo. 529, 154 Pac. 728; New York Life Ins. Co. v. Mac-Donald (Colo.), 160 Pac. 193.
Connecticut. Mitchell v. Wheaton, 46 Conn. 315, 33 Am. Rep. 24.
Florida. Jordy v. Maxwell, 62 Fla. 236, 56 So. 946.
Georgia. Blalock v. Jackson, 94 Ga. 469, 20 S. E. 346.
Illinois. Hayes v. Mass. Mutual Life Ins. Co., 125 111. 626, 1 L. R. A. 303, 18 N. E. 322; Farmers' & Mechanics' Life Association v. Caine, 224 111. 599, 79 N. E. 956; Woodbury v. United States Casualty Co., 284 111. 227, 120 N. E. 8; Janci v. Cerny (111.), 122 N. E. 507 (obiter).
Indiana. Beaver v. Fulp, 136 Ind. 595, 36 N. E. 418.
Iowa. Keller v. Strong, 104 la. 585, 73 N. W. 1071.
Kansas. St. Louis, Ft Scott & Wichita Ry. Co. v. Davis, 35 Kan. 464, 11 Pac. 421.
Kentucky. Cox v. Adelsdorf (Ky.), tion was in the form of a judgment, and satisfaction in full has been entered upon the record of such judgment.8 If rights have been fixed under a contract of insurance, and the facts claimed by the insurance company to exist do not amount to a valid defense, no consideration exists for a promise to discharge the liability of the insurance company in consideration of its paying the premiums or assessments which the insured had paid on such policy.9 An agreement that A's account against B should offset B's larger claim against A, is invalid.10 Even if the debtor is insolvent, payment by him of part of his debt may be a financial advantage, but is not a substantial consideration. His insolvency diminishes the creditor's chance of obtaining ultimate satisfaction of his claim after litigation, but it does not affect his legal right to recover. It is a motive for the creditor's promise to accept such payment in full, but not a consideration.11
51 S. W. 616; Louisville, N. A. & C. Ry. Co. v. Helm, 109 Ky. 388, 50 S. W. 323; Cunningham v. Standard Construction Co., 134 Ry. 198, 119 S. W. 765; New York Life Ins. Co. v. Van Meter, 137 Ky. 4, 121 S. W. 438; Black v. O'Hara, 175 Ky. 623, 194 S. W. 811; Call v. Pin-son, 180 Ky. 367, 202 S. W. 883.