Payment made in respect of FULL and FINAL settlement

[Stopthethieves]

Hi,

 

After reading my credit file once more, I noticed that the halifax has said I have settled an account with a partial settlement. This is absolute rubbish, I think the account was laden with charges and they subsequently wrote it off! I will contest and come to think of it, there may just be some money!!!

 

My point though is if you settle a debt in FULL & FINAL settlement and subsequently discovered that a large chunk if not all of the remaining balance was bank charges? Can you reclaim them????

 

ANOTHER VERY IMPORTANT QUESTION.... if you pay an amount to settle a debt as FULL and FINAL payment, should this mean the debt is treated as no longer existing? i.e. The record on the Credit Reference Agency files should say SETTLED with 0 as the balance?? Also the bank records should also be 0.

 

I ask as I have a problem with NatWest, I settled a debt for 1400 by means of a one off payment of 700 to a collection agency BUT the account is still showing a balance of 700 on their records and with the credit reference agencies with no confirmation of settlement.

 

Any thoughts?

 

Regards

[zootscoot]

Part payment of a debt is not a binding settlement unless made by deed, or at the creditor's request the part payment is made either before the due date, with a chattel (a thing), or to a different destination. Also if the part payment was made as part of a composite agreement including other creditors then agreement to accept part payment in full and final settlement will be enforceable.

 

Otherwise they can theoretically chase you for the money, although in practice most settlements are adhered to by the banks... however, if you disturb the bees nest.... who knows?

 

I too have a default with Natwest and the balance is stated on credit report as being the same as at the date of default despite them selling the debt to a DCA for which I have been paying off monthly (my next project). I think the balance remains the same for the six years to show the amount you were in default for. If you subsequently pay it off it is marked as satisfied but remains there regardless.

 

Hope this helps

 

Zoot

[PhantomReclaimer]

Zoot is right, in English Law you cannot clear a debt in full by only giving part payment. A creditor can happily agree to less then the full amount and still chase you for the balance. This rule developed to prevent unscrupulous debtors from holding people to ransom over their money, ie, "Either accept 50% or you'll get nowt.". This would especially be a problem to people or businessess who were financially strapped who could not afford to turn down the part payment. Technically, by offering part payment you are creating a seperate contract and as you are giving no valuable consideration then the contract never existed.

 

Part payment of a debt will be considered full and final settlement if you give some other form of valuable consideration as well. On your debt of £1400 you may offer £700 plus a bottle of wine or, as a famous example from law a "Tom-tit, or a Canary", but part payment alone cannot clear the debt. Whatever you do offer doesn't need to equal the value of the debt financially, you could offer a peppercorn in settlement of the entire debt and if accepted that would be that, it just has to be of some economic value. Early payment is considered to be good consideration as it is of economic value to the creditor. You were paying through a debt plan so presumably your final settlement date was several years away. By offering a lower amount sooner you were giving valuable consideration to the contract. It is seen to be a benefit to the creditor to have less money sooner, rather than wait longer for the full amount. So, no, you can't be pursued for the money.

 

I'm not that up on how credit files should be marked as far as these things go but my feeling is that as long as they have accepted an amount in full and final settlement your file should be showing a £0.00 balance.

 

P.

[Stopthethieves]

Thank you for your inputs.

 

My point was that if I have made an offer of £700 in respect of £1400 in FULL and FINAL settlement of the account AND they have accepted my offer then they have entered into a contract.

 

They should now treat it as me owing £0 and all data should be recorded as such.

 

Regards

[gizmo111]

Thank you for your inputs.

 

My point was that if I have made an offer of £700 in respect of £1400 in FULL and FINAL settlement of the account AND they have accepted my offer then they have entered into a contract.

 

They should now treat it as me owing £0 and all data should be recorded as such.

 

Regards

 

AFAIK when they accept F & F they mark the CRA files as settled but with the balance not paid still outstanding, this is legal under dpa as it is true, the key is to keep proof of payment and agreement of F& F in writnig

[PhantomReclaimer]

Thank you for your inputs.

 

My point was that if I have made an offer of £700 in respect of £1400 in FULL and FINAL settlement of the account AND they have accepted my offer then they have entered into a contract.

 

They should now treat it as me owing £0 and all data should be recorded as such.

 

Regards

 

Done a bit more research on credit files. I don't think they are under an obligation to mark your account as havng a £0 balance if you have only made a partial payment in Full and Final settlement. If they said that they would do though under the terms of your early payment offer then they should as you and them have entered into a contract with that as one of it's terms.

 

They have accepted part payment as satisfaction of the account and cannot pursue you for the balance but they may still record it as having been satisfied in short.

 

P.

[jo5ephedward5]

Lender Name :Halifax plc

Account Holder Name :Mr *** ***

Account Address :******

Date of Birth :** ** ****

Accountholder Status :Normal

Start Date :23rd May 2001

End Date : 29th May 2002

Account Type :Current account Account

Status Default

Last Updated :7th May 2004

Current Balance :£0

Account Start Date :23rd May 2001

Account End Date :29th May 2002

Repayment Frequency :Monthly

Lump Payment :£0

Default Date :29th May 2002

Original Default Balance :£0

Term Balance :£0

the paymentd go like this:

 

(ps)DDDDDDDDDDDDDDD654321000000000000000000

 

this is what my halifax credit file looks like on a part settled account (see above)

 

this suggests it was in default for 12months and now is part settled - the ballance is shown as £0

 

I never gave them a partial settlement but i have been paying a DCA - i assume the DCA paid for the debt and Halifax accepted this as payment, i'm currently in dispute with the DCA in question as they have no paperwork to back up that they own the debt! (see CapQuest thread in my signature)

 

I just hope when i apply for charges back from Halifax they dont turn around and say you still owe us X thousand pounds!

[zootscoot]

My point was that if I have made an offer of £700 in respect of £1400 in FULL and FINAL settlement of the account AND they have accepted my offer then they have entered into a contract.

 

Unfortunately no. An essential element of a contract is that each party provides what is termed 'consideration'. This simply means each party must give something of value in return for something else. Their promise to accept £700 in full and final settlement amounts to their consideration, however, you have not provided any consideration in return for this. This is because you are already contractually bound to pay the £700. This applies even if this was put in writing and signed by both parties. But would be valid if made by deed.

 

Banks will usually honour these settlements but if you start digging who knows what they will do. By leaving the balance of £700 on your record it may be that they are reserving the right to reclaim this.

 

Although aside from the contractual issues it is likely that they have offset the settlement in their tax returns and may be prevented from re-opening the debt this way.

[PhantomReclaimer]

Unfortunately no. An essential element of a contract is that each party provides what is termed 'consideration'. This simply means each party must give something of value in return for something else. Their promise to accept £700 in full and final settlement amounts to their consideration, however, you have not provided any consideration in return for this. This is because you are already contractually bound to pay the £700. This applies even if this was put in writing and signed by both parties. But would be valid if made by deed.

 

Sorry, but I must take issue with you here. In this case, and in most cases involving early repaypayment to banks and the like, acceptance of the lower payment will give rise to a contract because of the circumstances under which it was made, so they can't pursue you for the balance anytime in the future.

 

Also, "consideration" dosen't necessarlity have to be something actually given or done, it can be a detriment suffered. It has to be of econimic value though.

 

As an example; you have a £5000 debt to a credit card company that you can't afford the minimum payments on and you have made an agreement with them (or a debt management company) to pay, say, £50 a month until it's paid off. You make the payments for a year or so and then have a small windfall like an inheritance, scratchcard, etc. You ring them up and say, "I'll offer you £2000 in full and final settle ment off my debt", they agree. You pay it and they mark your account as settled. They cannot then chase you for payment because you have provided some consideration.

 

Your consideration is alteration of the payment terms, the payment of a larger amount (more than your monthly £50) sooner and the benefit to them is that they have the money quicker, even though it's less than the full amount and it prevents them running the risk of you defaulting and having to take expensive legal action on money they may not actually get anyway. You have suffered a detriment as you have given a larger amount sooner and they have a benefit as they have much more money immediately as they otherwise would have.

 

An example of a situation where part payment would not prevent further action by the creditor would be if you lent me say, £100 to be paid back in 7 days. If I came to you in 7 days and said, "sorry but I'm skint, I'll give you £50 or nowt" and you accept it, you could still pursue me for the money as I have given no consideration for your acceptance of the lower amount so we have not concluded a contract together. However, if I had come to you on the 6th day and offered the £50, and you had accepted, that would be contractually enforcable and you couldn't pursue me. My paying the money early is a benefit to you and a detriment to me, so, there is valuable consideration there.

 

Also, each party to a contract dosen't have to give consideration, consideration may be given to, or by, a to third party. If my brother had come to you on the 7th day and offered £50 in full and final settlement of my debt then that would be enforcable as you would have made a contract not to pursue me with him and he (or i ) could enforce it as he had provided consideration.

 

p.

[zootscoot]

You make some valid points Phantom, although a couple of things:

 

Also, "consideration" dosen't necessarlity have to be something actually given or done, it can be a detriment suffered.

 

Each party to a contract must be both a promisor and a promisee ie they must each suffer a detriment and obtain a benefit.

 

Your anaylsis of part part of a debt would be correct if the part payment was freely offered and accepted within the time when terms of the original contract were in force. If, however, as with stopthethiefs debt, the debt is in default, the terms of the original contract no longer apply and the amount owed becomes immediately payable. The DCA is then no longer gaining a benefit by agreeing to accept less. Therefore no contract.

 

Stopthethief,

 

The upshot is that there is a slim chance the DCA (If the debt was sold to them) or Natwest (If DCA were collecting on their behalf) could chase you for the remainder as they are able to under contract law.

 

Chances of them doing so may depend on whether debt is owned by DCA or Natwest. If Natwest, chances are they have off set their loss against tax and may be prevented from claiming. If DCA unlikely they suffered a loss as would have purchased debt at substantial undervalue.

 

Incidentally if there were any charges involved you would pursue Natwest rather than DCA (Unless DCA imposed any added charges)

 

Hope your not too confused mate!

 

Zoot

[PhantomReclaimer]

You make some valid points Phantom, although a couple of things:

 

Each party to a contract must be both a promisor and a promisee ie they must each suffer a detriment and obtain a benefit.

 

Your anaylsis of part part of a debt would be correct if the part payment was freely offered and accepted within the time when terms of the original contract were in force. If, however, as with stopthethiefs debt, the debt is in default, the terms of the original contract no longer apply and the amount owed becomes immediately payable. The DCA is then no longer gaining a benefit by agreeing to accept less. Therefore no contract.

 

 

There is no requirement for the detriment/benefit to be mutual between the parties for there to be valid consideration. If A paid B to give something to C then A has provided something of value but will derive no benefit from the terms of the contract. A is still a party to the contract and can enforce it's terms. See Jones V Padavatton on this.

 

On your second point. Yes, the original debt was in default but if you have agreed a payment plan then you have created a new contract which takes precident over the first. You have provided adequate consideration in the form of different payment terms when you have agreed to the terms of the payment plan - ie; £50 a month or whatever. The alternative to the creditor is to take expensive legal action and possibly get less or nothing so they derive a benefit from the alteration of the terms of the payment. When you offer the lump sum payment, and it is accepted, you are creating a third agreement which both parties are bound by. It is the terms of this new agreement which prevents the creditors coming after the full original amount because they have agreed another set of altered payment terms.

 

P.

[zootscoot]

Jones v Padavaton was an exceptional case and is generally considered to out of line with accepted and established principles.

 

On your second point there was no new agreement for a payment plan and the offer of a lump sum can not be a third binding agreement for lack of consideration.

 

It is not really too helpful to hi- jack someone's thread to theorise on legal points. It only serves to confuse the person asking for help.

[Stopthethieves]

Hmmm... What was it I asked?... :-?

 

After doing business and finance, I can get my head around the legalities BUT not at this time of the morning.

 

The letter in question says that neither we nor our client will pursue you in relation to this debt and always acceptance of the amount as FULL and FINAL settlement.

 

Thank you very much all as I have opened a can of worms.

 

I have another conundrum regarding Intelligent Finance if I can be bothered to start writing it.

 

Regards

[PhantomReclaimer]

Jones v Padavaton was an exceptional case and is generally considered to out of line with accepted and established principles.

 

On your second point there was no new agreement for a payment plan and the offer of a lump sum can not be a third binding agreement for lack of consideration.

 

It is not really too helpful to hi- jack someone's thread to theorise on legal points. It only serves to confuse the person asking for help.

 

Jones V Padavatton wasn't an exceptoional case as regards consideration. See my example of A paying B to give something to C. It is perfectly correct legal principle. Having checked, the example given in "Contract Law, Fifth Ed" by Elliott & Quinn, at page 72 under the heading "Consideration need not benefit the promisor" is that of A paying B to give A's daughter driving lessons. It provides no benefit to A but A and B have concluded a valid contract which can be sued on.

 

The original poster said they had paid a debt recovery company so I assumed there was a payment plan in place. Actually on this point, I would be tempted to argue the toss on whether tere was a contract as regard the £700 because I would call into question whether the debt recovery company actually had any entitlement to the money anyway. The debt was run up to the bank, not the recovery company and I would arge that any agreement to pay them was an initial contract.

 

I'm not hijacking the thread at all. I was merely answering the first posters question.

 

P.

[zootscoot]

Hi Stopthethieves,

 

The letter in question says that neither we nor our client will pursue you in relation to this debt and always acceptance of the amount as FULL and FINAL settlement

.

 

Unfortunately having this on its own is not sufficient to make a binding contract. You should be aware that there is a (small) risk they could try to chase this at some time in the future.

 

Phantom

 

"Contract Law, Fifth Ed" by Elliott & Quinn, at page 72 under the heading "Consideration need not benefit the promisor" is that of A paying B to give A's daughter driving lessons. It provides no benefit to A but A and B have concluded a valid contract which can be sued on.

 

Relates to privity of contract.

 

 

The original poster said they had paid a debt recovery company so I assumed there was a payment plan in place.

 

If you do not know how DCAs work do not make assumptions.

 

I would call into question whether the debt recovery company actually had any entitlement to the money anyway.

 

Good point it would be worth doing a CCA request.

 

I would arge that any agreement to pay them was an initial contract.

 

As STT acknowledged the debt (by making payment) then the agreement to pay the 700 in full and final settlement is not binding for lack of consideration on STT's part.

 

 

Best of luck with your resits

 

Zoot

[PhantomReclaimer]

 

Relates to privity of contract.

 

 

I don't understand what you are getting at here. The title of the section is "consideration need not benefit the promisor". If I pay you to give your car to the bloke living next door to you then we have concluded a valid contract and, even though I derive no benefit from it, I can still enforce its terms.

 

Also see Hirachand Punamchand v Temple (1911) A father who's son owed money sent a cheque (for a lower amount) in payment for it and it was accepted. The money lender then tried to sue the son for the balance but the Court of Appeal held that a valid contract had been concluded with the father preventing the lender recovering the balance. The father had provided consideration in the form of the cheque but had derived no benefit from the contract.

 

It is not necessary for both parties to derive some benefit for there to be proper consideration.

 

P.

[zootscoot]

"The doctrine of privity means that a contract cannot, as a general rule, confer rights or impose obligations arising under it on any person except the parties to it." (GH Treitel, The Law of Contract)

 

See also Tweddle v Atkinson and Dunlop v Selfridge

 

There are however, numerous exceptions to this including Hirachund v Temple. Biggest exception now is provided by the Contacts (Rights of third Parties) Act 1999.

 

Where the exceptions exist, whilst it is not necessary for the parties themselves to obtain a benefit, it is necessary that the third party to the contract benefits. Although the detriment is generally suffere by the party to the contract.

 

If you need any help with the resits PM me I would be happy to help. I lecture in contract law.

 

All the best

 

Zoot;)

[PhantomReclaimer]

"The doctrine of privity means that a contract cannot, as a general rule, confer rights or impose obligations arising under it on any person except the parties to it." (GH Treitel, The Law of Contract)

 

See also Tweddle v Atkinson and Dunlop v Selfridge

 

There are however, numerous exceptions to this including Hirachund v Temple. Biggest exception now is provided by the Contacts (Rights of third Parties) Act 1999.

 

Where the exceptions exist, whilst it is not necessary for the parties themselves to obtain a benefit, it is necessary that the third party to the contract benefits. Although the detriment is generally suffere by the party to the contract.

 

If you need any help with the resits PM me I would be happy to help. I lecture in contract law.

 

All the best

 

Zoot;)

 

But that wasn't the original point of the argument. You said that both parties had to derive a benefit as part of the consideration element. Clearly they don't as my payment to you to give your car to the bloke next door is a valid contract but I haven't derived a benefit from it.

 

As to third parties. I'm not saying that a third party derives a right from it, I'm saying that the two principals have agreed a contract and they can bring action under it. If you didn't give your car to the bloke next door you would still be in breech but to me, not him.

 

Cheers for the offer, will PM you if I get stuck.

 

Trietel - bought that at first but it's seriously heavy going as a starting point for studying Contract Law.

 

P.

[JonCris]

Great chat! I think the MODs should set up a library to put all of this opinion

 

Now here's a thought.

 

If the DCA has bought the debt at considerable less than it's original value & you repaid that amount plus £1 would that be sufficient consideration to determine full & final

[zootscoot]

Phantom

 

As to third parties. I'm not saying that a third party derives a right from it, I'm saying that the two principals have agreed a contract and they can bring action under it. If you didn't give your car to the bloke next door you would still be in breech but to me, not him.

 

Correct I would be in breach to you. However, you have not suffered a loss from this beach which would preclude you from suing. This is why the neighbour needs to be able to sue otherwise your agreement with me is simply meaningless.

 

Trietel is heavy going. But Ellliot and Quinn is not too useful. Its an A level book written by the examiners for the AQA board. They also write books on criminal, tort and English Legal system thus they are not contract specialists. I find their books quite thin on case law and structure confusing which is probably where your confusion stems from. Try Jill Pooles Text book on contract for an in between the heavy going likes of Trietel and Atiyah, and flimsy nutshells/A level.

 

Joncris

 

If the DCA has bought the debt at considerable less than it's original value & you repaid that amount plus £1 would that be sufficient consideration to determine full & final

 

Absolutely! In the case of Thomas v Thomas - the purchase of a house for 1.00 was valid consideration.

[hagenuk]

Most interested in this thread and have two questions.

 

1) If payments of less than the full amount made in full and final settlement are open to question does this affect the offers made by the banks to users of this site? Many people will have been offered settlements far below their actual claim and have accepted them. Can they now claim the balance?

 

2) I had an account with NatWest, ran up countless charges, the overdraft was consolidated into a loan, which I finally settled a few years ago for much more than I had originally owed but in fact less than NatWest claimed I owed, mainly due to excessive penalty charges. I intend to claim back those penalties and would like to know if they can counter claim the balance that I did not pay?

[JonCris]

zootscoot

 

as I said enjoying you guys discuss (assuming you are guys) I asked the question half expecting what your response would be.

 

My follow up is this. If your stuck with a debt now in the possestion of DCA & say offer them 1/2 or 1/3 in full & final & they accept one must be able to assume that they are covering their costs & if so would it be right to then pay the agreed amount followed immeadietly by the sum of £1 as the consideration

[Glenn UK]

Most interested in this thread and have two questions.

 

1) If payments of less than the full amount made in full and final settlement are open to question does this affect the offers made by the banks to users of this site? Many people will have been offered settlements far below their actual claim and have accepted them. Can they now claim the balance?

 

 

i think it depends on the terms of the settlement in as much as if the settlement was dependant on all creditors accepting the part settlement offered to each then i dont believe they can pursue you for the balance.

 

Thats if i understand the situation from my previous discussions on this board.

 

However, if you havent offered them any 'consideration' in return for them accepting the settlement then they could claim the rest if they so choose. As I understand it 'the consideration can be the fact that they have benifitied from your early payment' and this can be considered the consideration, or as Jonchirs suggests send them another quid.

 

I would be pleased to have this corrected if i have misunderstood what ive been told.

 

Glenn

[zootscoot]

Hagenuk

 

1) If payments of less than the full amount made in full and final settlement are open to question does this affect the offers made by the banks to users of this site? Many people will have been offered settlements far below their actual claim and have accepted them. Can they now claim the balance?

 

Yes I have advised a few people of this but I think they ignored me assuming I'm a nutter!

 

2) I had an account with NatWest, ran up countless charges, the overdraft was consolidated into a loan, which I finally settled a few years ago for much more than I had originally owed but in fact less than NatWest claimed I owed, mainly due to excessive penalty charges. I intend to claim back those penalties and would like to know if they can counter claim the balance that I did not pay?

 

Need more details, but probably yes.

 

Joncris

 

Actually on second thoughts the example earlier regarding the extra 1.00 may not make the agreement enforceableas they purchased the debt ie the right to chase 1,400. How much they paid is irrelevant for these purposes (vitally important in negotiating a settlement!) the extr 1.00 is likely to be taken as part of the debt you already owe them. Best option would be to ask them to sign a deed for the settlement to be binding.

[PhantomReclaimer]

zootscoot

 

 

My follow up is this. If your stuck with a debt now in the possestion of DCA & say offer them 1/2 or 1/3 in full & final & they accept one must be able to assume that they are covering their costs & if so would it be right to then pay the agreed amount followed immeadietly by the sum of £1 as the consideration

 

You could agre to enter into a payment plan then offer a full and final settlement a few months down the line. Their acceptance (if they accept it) will create a binding contract because the change of payment terms is sufficient consideration.

 

P.