Lachlan v HP Mercantile [2014] NSWSC 356

The borrower agreed to a settlement with the lender on terms which permitted him to pay a lesser sum by instalments in full discharge of his debt failing which the full amount of the debt then became payable. Owing to the borrower’s mistake, he failed to pay the final instalment, was apprised of his mistake, but failed to act promptly and the lender commenced recovery action for the full amount of the debt.

The court found that the lender did not contribute to the borrower’s mistake even though the lender failed to take action for many months. On the contrary the lender gave the borrower an opportunity to correct the mistake. Accordingly the court found no breach of the lender’s obligation of good faith. The court also found no penalty because it was simply an example of a situation where a present debt was owed to a creditor who agreed to accept part payment of the debt in full discharge provided certain conditions were met, but stipulated that if the conditions were not met, the full amount of the debt was payable.

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