1. A has lent $100,000 to B to be returned in 10 months in equal instalments of $10,000 every month. B made payment for sincerely for the first three months. After 3 months, B honestly explains that she is not in a position to return the balance $70,000. Realizing the situation, A agrees to accept $50,000 in exchange of the old debt of $70,000. B pays a $50,000 accordingly.

a. Can A later insist that B still owes $20,000? Yes or No or both? [1]

b. When Yes, explain why. [2]

c. When No, explain under what conditions? [6]