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Review Your SQE 1 Practice Records

Examination Timing: 00H00M22S

Henry initiated a county court action against Rufus to recover a debt initially stated at £450. Rufus sent Henry a cheque for £150, accompanied by letters to both Henry and the court stating that the cheque was in settlement of his debt, acknowledging that he owed Henry money but disputing the total amount claimed. Henry cashed the cheque but informed Rufus that he would continue the action until full payment was received. 

Which option best states the applicable law under these circumstances?

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There was no consideration for Henry's alleged agreement to abandon his claim. Accepting a lesser sum from Rufus than the amount claimed could not constitute accord and satisfaction unless Henry received some additional benefit by way of consideration. Under the principles established in Foakes v Beer (1884) 9 App Cas 605, part payment of a debt without any additional consideration does not discharge the entire debt. Rufus's open admission of liability by sending the cheque for £150 does not provide any additional benefit to Henry, and thus no binding accord and satisfaction was formed. 

Key Point: In English contract law, part payment of a debt does not constitute full settlement unless additional consideration is provided. This ensures that creditors do not lose out on the remaining debt unless they receive something extra in return for accepting a lower amount.

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