• In the case of D C Builders v Rees 1966 2 QB 617, it was held there is no legal accord and satisfaction where a creditor accepts form his debtor his cheque for a lesser amount in full satisfaction of a larger debt.

Facts of the Case

  • A firm of builders (c) was engaged by Ds (Mr and Mrs Rees)
  • Ds paid only £250 with a remaining balance of £683
  • C got into financial difficulty of which Ds was aware.
  • As a result of being aware, Ds threatened to break the contract unless their offer of £300 for a full settlement of the balance was accepted.
  • C accepted this but later brought an action for the balance
  • D argued that promissory estoppel applied

Issues in D C Builders v Rees 1966 2 QB 61

  • Did promissory estoppel apply

Held by Court of Appeal

  • Claim dismissed.

Lord Denning MR

  • Held that the pressure prevented any true accord and there was no defence to the action.
  • An acceptance of a lesser amount for settlement of debt is not binding.
  • Promissory estoppel can only be applied to suspend strict legal rights but also to preclude enforcement of them.
  • “In my judgment it is an essential element of a valid accord E and satisfaction that the agreement which constitutes the accord should itself be binding in law, and I do not think that any such agreement can be so binding unless it is either made under seal or supported by consideration. Satisfaction, viz., performance, of an agreement of accord, does not provide retroactive validity to the accord, but depends for its effect upon the legal validity of the F accord as a binding contract at the time when it is made: this I think is apparent when it is remembered that, albeit rarely, existing obligations of debt may be replaced effectively by a contractually binding substitution of a new obligation”.  pg. 632