It has long been held that where a debtor owes a creditor a certain amount, both parties cannot contract to reduce the size of the debtors debt. In Penny v Cole (Pinnel’s Case) [(1602) 5 Co Rep 117a; (1602) 77 ER 237], it was found that an agreement to take a lesser sum than that which is owed, of itself, will not amount to a binding obligation.
Quoted at [32] CMA Corporation Limited v SNL Group Pty Ltd [2012] NSWCA 138