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.
If there is no genuine dispute between the parties and if the claim which is asserted by one of the parties is known by him to be groundless, the renunciation by such party of such claim is not a consideration for the promise by the adversary party.1 If the claim is liquidated, and there is no genuine dispute as to its validity, a tender of a less sum than the amount due in full of the entire amount, is, even if accepted, no consideration for an agreement to release the balance.2 In some few jurisdictions a payment in cash of an amount less than is due is a consideration for a promise to release the balance.3 This rule is in force in some states by statute.4 By some statutes, such discharge must be in writing, and if in writing, no new consideration is necessary.5 Under a statute which provided that "no action shall be maintained on a demand settled by a creditor * * * in full discharge thereof by the receipt of money or other valuable consideration, however small," some valuable consideration of some kind must be shown to -exist.6 Payment of the amount conceded to be due upon an undisputed claim under a policy of health insurance is not consideration for a release of all claims under such policy for insurance against the continuance of the same illness.7 A executed and delivered his accommodation note to B, no value therefor being given. Subsequently B threatened to bring an action against A upon such note, and in order to prevent such action, A executed and delivered to B another note in consideration of B's surrender of his rights under his first note. It was held that no consideration for the second note existed, since B had no cause of action upon the first note; and B's claim upon the first note could not be regarded as a claim which was in dispute or default.8 If the amount is liquidated and the claim is undisputed, a promise by the creditor to accept less than the entire amount in full, in consideration of the act of the adversary party in giving up such claim which is known to him to be groundless, is in legal effect a promise by the creditor to accept less than the amount due under a liquidated and undisputed claim in full satisfaction thereof, and it is governed by the principles applicable to such contracts.9 It seems to be held, however, that a promise not to interpose any defense against a valid mortgage is consideration for a promise not to take personal judgment on the note secured by such mortgage, although the mortgagor does not even believe that any defense exists.10
2McGlynn v. Scott, 4 N. D. 18, 58 N. W. 460.
1Illinois. Walker v. Shepard, 210 111. 100, 71 N. E. 422.
Iowa. Greenlee v. Mosnat, 116 la. 535, 90 N. W. 338; Watrous v. Wat-rous, 180 la. 884, 163 N. W. 439.
Minnesota. Sunset Orchard Land Co. v. Sherman Nursery Co., 121 Minn. 5, 140 N. W. 112.
Nebraska. Fitzgerald v. Fitzgerald & Mallory Construction Co., 44 Neb. 463, 62 N. W. 899.
New Jersey. Decker v. Smith, 88 N. J. L. 630, 96 Atl. 915.
Washington. Nicholson v. Neary, 77
Wash. 294, 137 Pac. 492; Farley v. Letterman, 87 Wash. 641, 152 Pac. 515. See Sec. 596.
2 Meyer v. Green 21 Ind. App. 138, 69 Am. St. Rep. 344, 51 N. £. 942; Thomas v. Gwyn, 131 N. Car. 460, 42 S. E. 904; Strandell v. Strand, 82 Wash. 59, 143 Pac. 442. See Sec. 596.
3 Clayton v. Clark, 74 Miss. 499, 60 Am. St. Rep. 521, 37 L. R. A. 771, 21 So. 565, 22 So. 189. (The creditor in this case surrendered the debtor's note.)
4 Anderson v. Granite Co., 92 Me. 429, 69 Am. St. Rep. 522, 43 Atl. 21.