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In English law, when is payment considered to be payment made, and accepted in full and final settlement?

In ‘full and final settlement’ of what?

Often we hear these words mentioned in disputes where a sum of money is paid and accepted, to stop any further disputes from arising whether now, or in the future. It could be the entire sum due and owing, or it could be some lesser amount. A fleeting analysis of case law over the centuries will show, the emphasis is more about whether the creditor accepted, or has been deemed to have accepted by his/her conduct that a lesser sum paid to a creditor can be an end to a financial dispute about monies owed.


It is not intended that this blogpost is to be read or relied upon as a map showing a perfect route as to whether or not reduced/discounted payment made, ends any further disputes between parties in disagreement.


The starting point is to consider Pinnel v Cole, otherwise known as Pinnel’s case [1602] 5 Co. Rep. 117a.


The general rule on such matters was set out by Lord Coke that:  payment of a lesser sum than that which is owed in satisfaction of a debt could not discharge the obligation to repay the whole amount.


However, the exception to the general rule was then set out by Lord Coke at 1117a:


“Payment of a lesser sum on the day in satisfaction of a greater sum cannot be any satisfaction of the whole…but the gift of a horse, hawk, or robe etc…in satisfaction is good. For it shall be intended that a hawk, horse, or robe, etc. might be more beneficial to the plaintiff than the money”.


Coke owed Pinnel a sum of money. Pinnel paid approximately 63% of the indebtedness a month earlier on the basis that he said that Coke had agreed a lesser sum early, to discharge the entire indebtedness.


The court accepted that Pinnel received payment of a lesser sum more beneficial to him because it was paid earlier than when a greater sum was due.

We then move more than two centuries’ forwards to Day v McLea [1889] 22 QBD 610 in which McLea issued a cheque to Day ‘in full payment’, and Day cashed the cheque.


McLea wanted to compromise the whole indebtedness by paying a lesser sum. Did Day accept payment of the lesser sum in full and final settlement of the whole of the indebtedness, or was he able to accept the lesser sum as part payment towards the whole debt, even though it was clear that McLea had intended that the sum should be received as a compromise to full payment of the whole sum being due?


The court was concerned as a question of fact, whether the creditor had by words or by conduct, agreed to that condition.


The court was concerned on a question of fact, as to whether the creditor’s intentions played a central role that there had been an agreement to compromise a disputed debt in full and final settlement, to achieve “accord and satisfaction” between the respective parties.


Lord Justice Bowen:

If a person sends a sum of money on the terms that it is to be taken if at all, in satisfaction of a larger claim; if the money is kept, it is a question of fact as to the terms upon which it is so kept. The accord and satisfaction imply an agreement to take the money in satisfaction of the claim in respect of which it is sent. If accord is a question of agreement, there must be either two minds agreeing or one of the two persons acting in such a way as to induce the other to think that the money is taken satisfaction of the claim, and according to act upon that view”.



At the time of writing this blogpost, Day v McLea remains the continued starting approach to establish whether or not there has been accord and satisfaction of payment made in full and final settlement of the whole claim.



Did the creditor cause the debtor to believe that the money was taken in full and final settlement? This is a fact-specific question.


Professor David Rosen is a solicitor-advocate with 23 years’ of experience in commercial litigation. He is principal of David Rosen & Co, a certified fraud examiner, and a full academic Professor of Professional Practice at Brunel University where he continues to lecture regularly. David is considered a master-strategist and is a member of the Royal United Services Institute, and the Society of Legal Scholars amongst others.