Accord and Satisfaction Essentials

Inside Accord and Satisfaction
Accord and Satisfaction General Nature and Essentials

o Distinction from Novation or Substituted Contract
o Distinction from Payment or Release
o Subject Matter
o Distinction Between Liquidated and Unliquidated Claims
o Effect of Counterclaim or Setoff
o Effect of Suit or Appeal
Parties
o Agents
o One of Several Joint Debtors, Creditors, or Tortfeasors
o Creditor and Third Person
Formation of Contract; Offer and Acceptance
o Debtors Offer
o Creditors Acceptance
o Creditors Cashing of Check Offered in Full Satisfaction as Acceptance
o Uniform Commercial Code
o Certification of Check as Acceptance
o Retention of Check as Acceptance
o What Constitutes Unreasonable Period of Retention
o Part Payment by Agent or Fiduciary
o Qualified Acceptance or Protest by Creditor
o Effect of Fraud, Mistake, Duress
o Necessity of Tender Back of Amount Received
o Multiple Claims Between Parties
Consideration
o Sufficiency
o Part Payment Liquidated and Undisputed Claims
o Effect of Giving Release or Receipt in Full
o Effect of Debtors Insolvency
o Judgments
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o What Constitutes Sufficient New or Additional Consideration Under Part
Payment Rule
o Different Medium of Payment, Generally
o Payment in Property
o Change of Place of Payment
o Payment Before Maturity
o Giving Security
o Payment by Third Person
o Part Payment-Unliquidated or Disputed Claims
o What Constitutes Disputed Claim
o Payment of Undisputed Portion of Claim
o Claims by or Against Government
o Federal Government
o State, County, or Municipal Government
Execution of Accord
o Necessity of Execution Where Accord Involves Something Other Than
Payment in Money
o Part Performance
o Tender of Performance
o Acceptance of Promise as Satisfaction of Original Obligation
Effect of Accord and Satisfaction; Executory Accord
o Where Executory Accord is Breached
Pleading and Proof
o Burden of Proof; Presumption
o Admissible Evidence
o Questions for Jury

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Accord and Satisfaction General Nature and Essentials
An accord and satisfaction contemplates an agreement between parties to
give and accept something different from that claimed by virtue of the
original obligation. Both the giving and acceptance constitutes the essential
elements on an accord. The validity of such an agreement is dependent
upon the same basic factors and principles that govern contracts generally.
An accord and satisfaction results when the parties mutually intend to
effect a settlement of an existing dispute by entering into a superseding
agreement, and there is actual performance in accordance with the new
agreement. Compliance with the new agreement discharges the prior
obligations of the parties.[i]
The doctrine of accord and satisfaction is based on contract principles.
[ii]An accord and satisfaction should have all the elements of a contract
namely, offer, acceptance, and consideration.[iii] Thus, the burden of
proving accord and satisfaction is simply the burden of proving a
contract.[iv]
An accord and satisfaction is a contract and thus requires a meeting of the
minds of the two parties before it is valid and binding. Accord and
satisfaction occurs where the parties, by a subsequent agreement, have
satisfied the former agreement, and the latter agreement has been
executed.[v] For instance, in Hinley, 169 Ga. App. 529, the debtor was
married to the creditors daughter and he borrowed money from the
creditor and executed promissory notes for the indebtedness. The debtor
subsequently divorced the creditors daughter. During the divorce
negotiations, the debtor accepted less than his share in the marital home
based on his wifes assurance that she would get her father to forgive the
promissory notes. However, the debtor and creditor never discussed the
matter. The creditor later demanded payment of the notes, but the debtor
claimed accord and satisfaction. The court held that accord and satisfaction
required a meeting of the minds of the parties to the contract, but the
creditor and debtor never spoke regarding the cancellation of the
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promissory notes. The court concluded that there was not sufficient
evidence to show that the wife acted as an agent for the creditor based only
on her relationship with him and her employment as his secretary.
A valid accord and satisfaction requires four elements, which include (1)
proper subject matter; (2) competent parties; (3) a meeting of the minds of
the parties; and (4) consideration.[vi]
In fact, an accord and satisfaction is a new contracta contract complete in
itself.[vii] When the debtor tenders a draft in full payment of a debt,
acceptance by the creditor creates a settlement contract binding on both
parties.[viii] Absent an express reservation of rights, such a settlement
constitutes a complete accord and satisfaction of all claims.[ix]
Courts have held that as long as the basic requirements to form a contract
are present, there is no reason to treat such an accord differently from other
contracts which are binding. This is consistent with the public policy
dictating that courts should look with favor upon the compromise or
settlement of law suits in the interest of efficient and economical
administration of justice and the lessening of friction and acrimony.[x]
[i] Martinez v. South Bayshore Tower, L.L.L.P., 979 So. 2d 1023 (Fla. Dist.
Ct. App. 3d Dist. 2008)
[ii] In re MCI Telecommunications Complaint (Worldcom Network
Services, Inc. v. Public Service Comn), 255 Mich. App. 361 (2003)
[iii] Helms v. University of Missouri-Kansas City, 65 Ark. App. 155 (Ark.
Ct. App. 1999)
[iv] Id. See also Wilson v. Builders Transport, Inc., 330 S.C. 287, 498
S.E.2d 674 (Ct. App. 1998) (the essential elements of accord and
satisfaction are an agreement to settle a dispute and consideration which
supports the agreement.)
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[v] Hinely v. Barrow, 169 Ga. App. 529, 530 (Ga. Ct. App. 1984)
[vi] OConnor v. United States, 308 F.3d 1233 (Fed. Cir. 2002)
[vii] Or. Mut. Ins. Co. v. Barton, 109 Wn. App. 405 (Wash. Ct. App. 2001)
[viii] Hynes v. Hynes, 28 Wn.2d 660 (Wash. 1947)
[ix] Or. Mut. Ins. Co., 109 Wn. App. 405.
[x] City Of Cincinnati ex rel. Ritter v. Cincinnati Reds, 150 Ohio App. 3d
728, 745-746 (Ohio Ct. App., Hamilton County 2002)

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Distinction from Novation or Substituted Contract
The essential difference between an accord and a novation rests on the
intention of the contracting parties.[i] An accord and satisfaction is a
substitute contract for settlement of a debt by some alternative other than
full payment. The consideration for an accord is the resolution of a disputed
claim.[ii] While in a novation, the new promise itself satisfies the
preexisting claims, in an accord it is the performance of the new promise
that satisfies the preexisting duty. The distinctive feature of an accord and
satisfaction is that the obligee does not intend to discharge the existing
claim merely upon the making of the accord. S/he can do so only upon
performance or satisfaction. If the satisfaction is not tendered, the obligee
may sue under the original claim or for breach of the accord. On the other
hand, novation bars revival of the preexisting duty. Burden of proving the
extinguishment of preexisting duty is upon the party asserting a
novation.[iii]
If the parties may intend that a new agreement, though executory, will
immediately discharge the existing obligation, such an agreement is called a
substituted agreement.[iv]
In situations where the full performance of the revised contract terms is
necessary to extinguish or discharge claims arising under an old contract,
the revised contract is called an executory accord and performance is called
a satisfaction, while in cases where mutual promises in a revised contract
are held by themselves to discharge all claims arising under the earlier
contract, the revised contract is called a substituted contract.[v]
[i] Paramount Aviation Corp. v. Agusta, 178 F.3d 132 (3d Cir. N.J. 1999)
[ii] Id. At 147-148
[iii] Id. At 148
[iv] Chappelow v. Savastano, 195 Misc. 2d 346 (N.Y. Sup. Ct. 2003)
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[v] Community Builders v. Indian Motocycle Assocs., 44 Mass. App. Ct.
537 (Mass. App. Ct. 1998)

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Distinction from Payment or Release
Payment is the discharge of a pecuniary obligation by the debtor by
delivering a specific sum of money or the equivalent of a specific sum. The
delivery can be actual or constructive and is made for the purpose of
extinguishing an obligation. Payment requires delivery by the debtor and
acceptance by the creditor, both with common purpose.[i]
An accord and satisfaction is generally defined as an agreement to
discharge a debt or claim by some performance other than that which was
originally due.[ii] Accord and satisfaction is contractual in nature, and
hence the intent of the parties is mandatory. Thus, a transaction will
constitute an accord and satisfaction of a claim only where both parties
intend it. Absent such intent, a claim for a specific sum of money cannot be
satisfied by partial payment. When a payment of less than what is claimed
is offered and accepted, it will not constitute an accord and satisfaction of
the entire claim unless it can be demonstrated that the creditor intended to
accept it as full satisfaction. In the absence of such intent, the partial
payment will operate as a discharge of only the amount paid, and the
creditor will be entitled to maintain an action to recover the balance of his
claim.[iii] To determine the intent of the parties, it is necessary to examine
the language of the order of satisfaction and release in light of the
circumstances existing at the time of the transaction.[iv]
An accord and satisfaction is distinguishable from release. A release is a
relinquishment of a right, which may be given gratuitously or for
inadequate consideration, while an accord and satisfaction is the discharge
of a debt or claim by the acceptance of some payment which is agreed to
constitute full satisfaction.[v] Thus, consideration is not a mandatory
element for a release as in the case of accord and satisfaction.
An accord and satisfaction has the same effect as that of a release in its
impact on third persons. Since there can be but a single satisfaction for an
injury or wrong, an accord and satisfaction made by one of two or more
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joint tortfeasors will operate to discharge the others. However, where a
payment made by one joint tortfeasor is not intended to constitute
satisfaction in full, it will not result in a discharge of the others, although it
will operate as a partial satisfaction to be credited to any recovery against
the remaining tortfeasors.[vi]
[i] Parnell v. Sherman, 899 S.W.2d 900 (Mo. Ct. App. S.D. 1995)
[ii] Holman v. Simborg, 152 Ill. App. 3d 453, 456 (Ill. App. Ct. 1st Dist.
1987).
[iii] Id.
[iv] Hulke v. International Mfg. Co., 14 Ill. App. 2d 5 (Ill. App. Ct. 2d Dist.
1957)
[v] Holman, 152 Ill. App. 3d 453, 456.
[vi] Id. At 457

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Subject Matter
Accord and satisfaction is a method of discharging a contract or cause of
action, whereby the parties agree to give and accept something in
settlement of the claim or demand of the one against the other, and
perform such agreement, the accord being the agreement, and the
satisfaction its execution or performance. [i]An accord and satisfaction is
distinct from a compromise. While a compromise should be based on a
disputed claim, an accord and satisfaction may be based on an undisputed
or liquidated claim.[ii] The scope of accord and satisfaction is relatively vast
and all claims relating to the person or to personal property may be the
subject of an accord and satisfaction.[iii]
Accord and satisfaction is based on the doctrine of equity. Although the
doctrine of accord mostly concerns monetary settlements of debts or
liabilities, other settlements not involving an exchange of funds can be as
equally binding as an accord and satisfaction. For instance, a partnership
dispute could be resolved by accord and satisfaction.[iv]
A claim or demand founded on a tort, or contract is a subject of accord and
satisfaction.[v] Any claim arising out of contract, express or implied, may
be the subject matter of an accord and satisfaction. However, the contract
should be a legally enforceable one.[vi]
In a criminal case, once monetary compensation to the victim of an assault
and battery or other misdemeanor is acknowledged and accepted, the
payment is referred to as an accord and satisfaction.[vii] To effectuate an
accord and satisfaction in a criminal case, the victim need only produce a
written acknowledgment that s/he received satisfaction for his/her injury
and requests that the charges be dropped.[viii]
Accord ands satisfaction can also arise in the context of real property
agreements,[ix] breach of warranty[x] and employment contracts. In the
context of an employment contract, a substitute agreement may be used to
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resolve good faith disputes between an employer and employee over the
amount of commissions, overtime, salary, or other compensation.[xi]
Any claim arising out of contract, express or implied, may be the subject
matter of an accord and satisfaction, provided the contract is not
illegal.[xii] Accord and satisfaction, as a defense to a claim based upon a
contract, exists when the parties have entered into a new contract, express
or implied, which discharges the obligations under the original contract in a
manner otherwise than as originally agreed. The new agreement need not
explicitly state that it is intended to be an accord and satisfaction. Rather,
the court may look to the surrounding circumstances of the new agreement
to determine if there has been an agreement to discharge the original
obligation.
[i] Automobile Trade Asso. v. Harold Folk Enterprises, Inc., 301 Md. 642,
665 (Md. 1984)
[ii] Eastern Steel Products Corp. v. Chestnutt, 252 N.C. 269 (N.C. 1960)
[iii] Id.
[iv] Adams v. Wilson, 264 Md. 1 (Md. 1971)
[v] Belrose v. Kanitz, 284 Mich. 497, 502 (Mich. 1938)
[vi] Indiana Lumbermens Mut. Ins. Co. v. State, 1 S.W.3d 264 (Tex. App.
Fort Worth 1999)
[vii] Commonwealth v. Henderson, 434 Mass. 155, 157 (Mass. 2001)
[viii] Id.
[ix]Small v. Chemlawn Corp., 584 F. Supp. 690 (W.D. Mich. 1984),
judgment affd, 765 F.2d 146 (6th Cir. 1985)
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[x] Womco, Inc. v. Navistar Intl Corp., 84 S.W.3d 272 (Tex. App. Tyler
2002)
[xi] Erickson v. Am. Golf Corp., 194 Ore. App. 672 (Or. Ct. App. 2004)
[xii] Indiana Lumbermens Mut. Ins. Co. v. State, 1 S.W.3d 264 (Tex. App.
Fort Worth 1999)

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Distinction Between Liquidated and Unliquidated Claims
An accord is an agreement in which the parties agree to discharge a
preexisting obligation by giving and accepting a substituted consideration
in settlement of the claim and the execution of the agreement is called
satisfaction.[i] Intent of the parties is crucial for an accord and satisfaction
and both the debtor and the creditor must concur that the substituted
consideration is an accord and satisfaction of a preexisting claim.[ii] If the
creditor is aware of the fact that substituted consideration was intended as
an accord and satisfaction, such knowledge serves as proof of the creditors
intent.[iii]
In some states, accord and satisfaction only applies to unliquidated
claims.[iv] An unliquidated claim means the amount involved is not
definite and exact. A claim is said to be unliquidated if there is a genuine
dispute regarding either the amount due or the debtors liability.[v] Thus,
when the debtor tenders part payment of an unliquidated debt in full
satisfaction of the debt and the creditor accepts the same, it will be deemed
to be an accord and satisfaction of the existing debt.
On the other hand, in a liquidated claim, the subject matter, whether it is
monetary consideration or otherwise, is definite and fixed and therefore is
clearly ascertainable. For instance, if there was no dispute as to prices of
material or hours of labor in a service agreement, and the basis of
computation is provided in the agreement, the claim is deemed to be a
liquidated one.[vi]
If there is a good faith dispute regarding the sum due or in a situation
where one of two sums is due, but there is a dispute as to which is the
proper amount, the claim is unliquidated.[vii] Another example is where
the claim is pertaining to the amount of wages earned for a specified time,
and it is admitted by the creditor and debtor that one of two specific sums
is the correct amount, but the parties are in dispute as to which amount is
correct, the claim is disputed and hence unliquidated. [viii]
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In certain states, even the part payment of a liquidated claim will not
constitute an accord and satisfaction, even if the creditor accepts it as full
payment. In such a situation, courts may require some additional or
collateral consideration to the partial payment for making such an
arrangement a valid accord and satisfaction.
[i] Seidler v. Vaughn Oil Co., 468 N.W.2d 474, 475 (Iowa App. 1991)
[ii] Id. at 477
[iii] Id.
[iv] Id. at 476
[v] Seidler, 468 N.W.2d 474, 476
[vi] Eastover Co. v. All Metal Fabricators, Inc., 221 Md. 428 (Md. 1960)
[vii] Schultz v. Farmers Elevator Co., 174 Iowa 667, 675 (Iowa 1916)
[viii] Winter Wolff & Co. v. Co-op. Lead & Chemical Co., 261 Minn. 199
(Minn. 1961)

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Effect of Counterclaim or Setoff
An accord and satisfaction is the result of an agreement, and law stipulates
that an accord and satisfaction must be consummated by a meeting of the
minds of the parties. Controversy can arise as to settlement of claim on the
basis of accord and satisfaction where a counterclaim or set-off is claimed
as a part payment of the liquidated and undisputed debt. An initially
liquidated claim becomes unliquidated when, by reason of a counterclaim
or setoff, the actual amount due on the balance has been put in doubt
between the parties.[i] Under such circumstances, an accord and
satisfaction may result from the payment of a lesser sum than the creditors
claim, even a sum not in excess of the balance concededly due. Thus, a
liquidated claim due a creditor is rendered unliquidated, when the debtor
in good faith asserts a disputed counter-claim or set-off, and in such a case
an accord and satisfaction may result from the payment by the debtor of an
amount less than the creditors claim and no greater than the amount
which the debtor concedes to be due. For instance, in H.L. Brownie
Choate, Inc. v. Southland Drilling Co., Inc., 441 S.W.2d 672 (Tex. Civ. App.
San Antonio 1969), plaintiff creditor, who was the service provider to the
defendant debtor caused significant damage to defendants drilling rig. In
accordance with their past practice, defendant recovered the damage
amount by deducting it from the amount it owed to plaintiff for services
rendered. Plaintiff filed suit to recover the deducted amount. The court held
that when the amount due was in dispute, and the debtor tendered a check
for less than the amount claimed by the creditor while expressing his
intention that the check was offered in full settlement, the retention and
cashing of the check by the creditor was regarded as an acceptance of the
offer, and such action on the part of the creditor operated as a full
satisfaction. The court found that plaintiffs acceptance of a lesser amount
constituted an accord and satisfaction of the debt. Majority of jurisdictions
follow this view although there is authority to the contrary.[ii]
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[i] Harr Iron Co. v. Melas Theatre Corp., 181 N.E.2d 726 (Ohio Ct. App.,
Columbiana County 1961)
[ii] B. Mifflin Hood Co. v. Lichter, 106 F. Supp. 220, 231 (D. Tenn. 1950).
(A counter or additional claim in dispute does not render the principal
obligation unliquidated where such principal obligation is itself not in
dispute. An accord and satisfaction in such cases would not be applicable.)

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Effect of Suit or Appeal
When a claim is disputed, parties generally approach a court of law. The
filing of a suit ordinarily indicates that the claim is unliquidated or
disputed. If the debtor tenders an amount less than the entire claimed
amount in full satisfaction of the claim and the creditor accepts the same, it
may lead to a valid accord and satisfaction. For instance, an action was
pending in the court and the plaintiff agreed to release the defendant from
the claim sued on upon defendants payment of the costs of the action, and
if the defendant makes the payment as agreed, such payment amounts to
an accord and satisfaction, and will serve as a good defense against the
further prosecution of the action by the plaintiff.[i]
[i] Baum v. Buntyn, 62 Miss. 110 (Miss. 1884)

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Parties
Accord and satisfaction refers to the purchase by one party to a contract of
a release from his obligations under it when the other party has already
performed his side of the bargain.
It is a method of discharging a claim whereby the parties agree to give and
accept something in settlement of the claim and perform the agreement. In
such cases, the accord is the agreement and the satisfaction is its execution
or performance.
Since the accord agreement is transacted on a new agreement, it must
therefore have the essential terms of a contract, (parties, subject matter,
time for performance, and consideration).
Therefore all requirements necessary to constitute a valid agreement are
also required for the formation of a valid accord. This includes factors like
competent parties, valid subject matter, consideration etc. A person is
competent to enter into an accord and satisfaction agreement if they have
the power and capacity to enter into the formation of a valid contract.
An accord and satisfaction requires competent parties. In the case of
OConnor v. United States[i], it was observed by the court that a valid
accord and satisfaction requires four elements:
(1) proper subject matter;
(2) competent parties;
(3) a meeting of the minds of the parties; and
(4) consideration.
In its most common form, an accord and satisfaction exists as a mutual
agreement between the parties in which one pays or performs and the other
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accepts payment or performance in satisfaction of a claim or demand which
is a bona fide dispute.[ii]
Since accord and satisfaction requires the parties to be competent, an
accord and satisfaction agreement cannot be held binding on a minor. The
general principle that an infant may avoid all contracts he or she makes,
with the exception of contracts for necessities, may permit an infant to
avoid a contract for an accord and satisfaction.[iii] Therefore, an executed
accord and satisfaction cannot be held to be binding on a minor.[iv]

[i] 308 F.3d 1233 (Fed. Cir. 2002)
[ii] Nev. Half Moon Mining Co. v. Combined Metals Reduction Co., 176
F.2d 73, 76 (10th Cir. 1949).
[iii] Russell v. Buck, 116 Vt. 40, 68 A.2d 691 (1949).
[iv] Bromley b. n. f. v. School District, 47 Vt. 381

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Agents
Accord and satisfaction is the method of discharging a claim whereby the
parties agree to give and accept something in settlement of the claim and
perform the agreement. Generally, an agreement for accord and satisfaction
is entered into by the parties themselves. However, there may be cases
wherein the parties are not personally present to enter into an accord and
satisfaction agreement. In such cases, the parties can enter into such an
agreement through their authorized agents.
However, when the agent enters into an agreement for accord and
satisfaction, there are various things to be kept in mind. The first
requirement in such cases is that the agent must have been duly authorized
by the principal to enter into the agreement. In the alternative, the
principal must ratify the accord and satisfaction agreement entered into on
his behalf by the agent. Therefore, in order for an agent to bind a principal
to an accord and satisfaction, the agent must have been authorized to enter
into the contract on behalf of the principal, or the alleged principal must
have ratified the agreement.[i]
In the case of Homemakers Finance Service, Inc. v. Ellsworth[ii], the
borrowers gave a deed to their lenders employee which stated that the deed
was given and accepted in full satisfaction of the borrowers obligations to
the lender, and the employee told the borrowers that he had no authority to
accept it but would forward it to the lenders counsel who then informed the
borrowers that the deed and release provisions were unacceptable,
possession of the deed and the keys to the property did not constitute an
acceptance of an accord. Therefore in this case, the lender was not
precluded from bringing an action based on the borrowers original
obligation.

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[i] Mil-Spec Contractors, Inc. v. U.S., 835 F.2d 865 (Fed. Cir. 1987); Eckert-
Fair Const. Co. v. Capitol Steel & Iron Co., 178 F.2d 338 (5th Cir. 1949);
Kuehne & Nagel, Inc. v. U.S., 17 Cl. Ct. 11, 1989 WL 49849 (1989).
[ii] 177 Ind. App. 640, 380 N.E.2d 1285 (1st Dist. 1978).

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One of Several Joint Debtors, Creditors, or Tortfeasors
Generally, a debtor is bound to pay his debt personally, and all the estate he
possesses or may acquire, is also liable for his debt. Debtors may be joint or
several. They are joint when they all equally owe the debt. They are several
when each promises severally to pay the whole debt.
A tortfeasor is a person who commits a tort. If the court determines that the
defendants tort has caused the plaintiff to suffer loss or harm, then the
defendant is deemed legally responsible to compensate the plaintiff. There
may also be cases wherein more than one tortfeasor may be involved in
contributing to a tort. Joint tortfeasors are responsible for the same
wrongful act which results in a tort.
Generally, an accord and satisfaction agreement between a creditor and a
debtor will discharge all other jointly and severally liable debtors from
further liability on the claim.[i]
Therefore, in the case of 1629 Joint Venture v. Dahlquist, it was observed
that where directors of a dissolved corporation were jointly and severally
liable for breach of a lease, satisfaction of the judgment against one of the
directors who voted to distribute the corporations assets in liquidation
without providing for the payment of the lease installments discharged the
obligation against the other directors who also voted for the distribution.
As in cases wherein an accord and satisfaction agreement between a
creditor and a debtor will discharge all other jointly and severally liable
debtors from further liability on the claim, likewise, each of several joint
creditors has power to discharge the entire claim by an accord and
satisfaction.[ii]
In the case of Slusher v. Jack Roach Cadillac, Inc., it was observed that in
case of a husband and wife who were joint purchasers of a car and who
brought an action for damages for fraud against the car dealer, each had an
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interest in the entire claim sued upon and therefore each had the power to
discharge the dealers obligation by accord and satisfaction.
As a general rule, an accord and satisfaction between a person injured and
one of several cotortfeasors responsible for the injury will discharge the
other tortfeasors from further liability to the person injured.[iii] However,
if an injured party receives a part of damages from one co-tortfeasor, and
receipt of that part is not understood to constitute a full satisfaction of the
injury, the injured party does not thereby discharge the others from
liability.[iv] The latter transaction is in the nature of a release, reserving the
right to sue the other tortfeasors, or a covenant or agreement not to sue the
tortfeasor from whom the partial satisfaction was received.[v]

[i] Collection Professionals, Inc. v. Logan, 296 Ill. App. 3d 959, 231 Ill. Dec.
225, 695 N.E.2d 1344 (3d Dist. 1998)
[ii] Forbes v. First Camden Nat. Bank & Trust Co., 25 N.J. Super. 17, 95
A.2d 416 (App. Div. 1953); Singer v. Ritter, 167 Pa. Super. 154, 74 A.2d 520
(1950); Bede v. Tondre, 86 R.I. 92, 134 A.2d 122 (1957)
[iii] Wallner v. Chicago Consol. Traction Co., 245 Ill. 148, 91 N.E. 1053
(1910); Arrowood v. McMinn County, 173 Tenn. 562, 121 S.W.2d 566, 119
A.L.R. 855 (1938); First & Merchants Nat. Bank of Richmond v. Bank of
Waverly, 170 Va. 496, 197 S.E. 462, 116 A.L.R. 1156 (1938)
[iv] Luxenburg v. Can-Tex Industries, 257 N.W.2d 804 (Minn. 1977)
[v] Hicklin v. Anders, 201 Or. 128, 253 P.2d 897 (1953); City of Coleman v.
Kenley, 168 S.W.2d 926 (Tex. Civ. App. Eastland 1943)

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Creditor and Third Person
Accord and satisfaction is a method used to settle disputes in which there is
a meeting of the minds with intent to compromise. It is a new contract
substituted for an old contract which is thereby discharged, or for an
obligation or cause of action which is settled, and must have all of the
elements of a valid contract. An accord and satisfaction is generally entered
into by the parties involved in the earlier contract. However in some cases,
the accord and satisfaction agreement may be entered into by the creditor
and third person.
There may occur cases in which a third person may give something in
satisfaction of a partys debt. In such a case, an accord and satisfaction is
effected only if the creditor accepts the offer and the debtor authorizes,
participates in, or later agrees to, the transaction.
Generally, in accord and satisfaction agreements, the acceptance as a full
discharge of a promissory note or endorsement of a third person, even for a
less sum, may constitute accord and satisfaction. Therefore, where a
creditor accepts from a third person an amount less than that which is due
in full satisfaction of a debt, and the payment is made at the request of the
debtor, there is an accord and satisfaction which discharges the debtors
entire debt.[i]
In the case of Goetz v. Selsor[ii], it was observed that where a creditor
accepted from a stranger less than the amount due in full satisfaction of the
debt and that payment was made at the request of the debtor, there was an
accord and satisfaction that discharged the entire debt.
Payment by a third party where the estate alleges accord and satisfaction is
sufficient to be considered payment from the estate itself. In such cases, the
requirement of privity of contract for accord and satisfaction does not exist.
Further, receipt of payment from a third party by the creditor is the
ratification of accord and satisfaction by the creditor himself. Although
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payment by a stranger be not a legal discharge, yet acceptance in
satisfaction is. Where the creditor has actually received and accepted the
contribution in satisfaction of the debt, s/he cannot be allowed to maintain
an action on the same debt afterwards.[iii]

[i] Goetz v. Selsor, 628 S.W.2d 404 (Mo. Ct. App. S.D. 1982); Surber v.
Woodruff, 10 Ohio Misc. 2d 1, 460 N.E.2d 1164 (C.P. 1983); Hollem &
Truitt Lumber Co. v. Medicine Park Corp., 1947 OK 77, 198 Okla. 555, 180
P.2d 152 (1947).
[ii] 628 S.W.2d 404 (Mo. Ct. App. S.D. 1982)
[iii] Surber v. Woodruff, 10 Ohio Misc. 2d 1, 460 N.E.2d 1164 (C.P. 1983)

30
Formation of Contract; Offer and Acceptance
An accord may be an express agreement or it may be implied from the
circumstances surrounding the transaction. An accord and satisfaction
need not be in writing.
A mutual assent or agreement or a meeting of the minds is required for a
valid accord and satisfaction between two parties. The thing agreed to be
given or done in satisfaction must be offered and intended by the debtor as
full satisfaction, and accepted as such by the creditor. There will not be
accord and satisfaction where there is no agreement to settle all matters in
dispute.

31

32
Debtors Offer
In applying the statutory doctrine of accord and satisfaction, common law
principles regarding the nature of the offer are relevant.[i] A debtors offer
must be made in full satisfaction of the creditors claim. The offer must be
accompanied by such acts or declarations amounting to a condition that if
the offered performance is accepted, it is to be in full satisfaction.
Moreover, the offer must be of such a character that the creditor is bound to
understand it was made subject to that condition.[ii] As long as the
statement that the offer is intended as full satisfaction is clear, full, and
explicit and not susceptible to any other interpretation, the debtor is not
required to use any set language in making an offer of full settlement.[iii]
[i] Gelles & Sons General Contracting, Inc. v. Jeffrey Stack, Inc., 264 Va.
285, 569 S.E.2d 406, 48 U.C.C. Rep. Serv. 2d 1429 (2002).
[ii] Fort Smith Service Finance Corp. v. Parrish, 302 Ark. 299, 789 S.W.2d
723 (1990)
[iii] Indiana Lumbermens Mut. Ins. Co. v. State, 1 S.W.3d 264 (Tex. App.
Fort Worth 1999).

33

34
Creditors Acceptance
Generally, a creditor who receives a remittance must either accept or reject
such remittance. If it clearly appears that the remittance was sent upon the
condition that it be accepted in full satisfaction, the creditors unconditional
acceptance results in an accord and satisfaction. The creditor must accept
the offered payment with the intention that it constitutes a settlement of
the claim, in order to establish an accord and satisfaction. However, the
acceptance which completes an accord and satisfaction may be express or
implied from the circumstances.

35

36
Creditors Cashing of Check Offered in Full
Satisfaction as Acceptance
When a debtor tenders a check or draft with a written notation indicating it
is in full settlement of all claims, and the claimant accepts the tender, an
accord and satisfaction is present.[i] By negotiating a check, which the
debtor offers as a full payment for an unliquidated or disputed debt or
obligation, acceptance of the check constitutes accord and satisfaction
discharging the claim.[ii] Thus, in order for acceptance of a check to create
an accord and satisfaction, the notation on the check or an accompanying
writing must express in plain, definite, and certain terms that the debtor is
giving such check in full satisfaction of the debt and that acceptance thereof
discharges the debt.[iii]
[i] Oregon Mut. Ins. Co. v. Barton, 109 Wash. App. 405, 36 P.3d 1065 (Div.
3 2001)
[ii] Valley Asphalt, Inc. v. Stimpel Wiebelhaus Associates, 3 Fed. Appx. 838
(10th Cir. 2001)
[iii] Strother v. Strother, 136 Idaho 864, 41 P.3d 750 (Ct. App. 2002).

37

38
Uniform Commercial Code
According to the Uniform Commercial Code, U.C.C. 3-311, if a person
against whom a claim is asserted proves that:
that person in good faith tendered an instrument to the claimant as
full satisfaction of the claim;
the amount of the claim was unliquidated or subject to a bona fide
dispute; and
the claimant obtained payment of the instrument
then under U.C.C. 3-311(b), unless other law applies, the claim is
discharged if the person against whom the claim is asserted proves that the
instrument or an accompanying written communication contained a
conspicuous statement to the effect that the instrument was tendered as full
satisfaction of the claim. However, a claim is not discharged if either:
the claimant, if an organization, proves that within a reasonable
time before the tender, the claimant sent a conspicuous statement
to the person against whom the claim is asserted that
communications concerning disputed debts, including an
instrument tendered as full satisfaction of a debt, are to be sent to a
designated person, office, or place, and the instrument or
accompanying communication was not received by that designated
person, office, or place; or
the claimant, whether or not an organization, proves that within 90
days after payment of the instrument, the claimant tendered
repayment of the amount of the instrument to the person against
whom the claim is asserted.
Furthermore, a claim is discharged if the person against whom the claim is
asserted proves that within a reasonable time before collection of the
instrument was initiated, the claimant, or an agent of the claimant having
39
direct responsibility with respect to the disputed obligation, knew that the
instrument was tendered in full satisfaction of the claim.

40
Certification of Check as Acceptance
A creditors certification of a check clearly expressing that it is offered in
full payment of a disputed claim generally constitutes sufficient acceptance
and use of the check to result in an accord and satisfaction.[i] However,
certification may negate an acceptance of an offer of accord under
circumstances such as:
where the creditor merely intends to obtain certification for the
limited purpose of security, rather than to discharge the underlying
obligation;[ii]
where the creditor lacks an intelligent appreciation of the possible
consequences of certification;[iii] or
where the debtor has waived the condition that the check be
accepted as full payment.[iv]
[i] Kreutz v. Jacobs, 39 Ill. App. 3d 515, 349 N.E.2d 93 (3d Dist. 1976)
[ii] Melick v. Nauman, Vandervoort, Inc., 393 Mich. 774, 224 N.W.2d 280
(1974)
[iii] Kasco Mills, Inc. v. Ferebee, 197 Va. 589, 90 S.E.2d 866 (1956)
[iv] Cline v. Zappettini, 131 Cal. App. 2d 723, 281 P.2d 35 (1st Dist. 1955)

41

42
Retention of Check as Acceptance
Retention of a check offered as payment in full sometimes constitute assent
to an accord and satisfaction.[i] Where a creditor receives a check
purporting to be in full payment of a debtors disputed obligation, the
creditor should return it promptly in order to avoid an accord and
satisfaction.[ii]
An unexplained retention of a check for an unreasonable period of time
may operate as an accord and satisfaction where the creditor does not cash
or otherwise use the check and does not indicate a refusal to accept the
check as an accord and satisfaction. Where the debtor fails to
unambiguously condition the tendered check as payment in full, a creditors
retention of a check may not support an accord and satisfaction. Moreover,
there is no accord and satisfaction where acceptance is explicitly
conditioned on the creditors endorsement or negotiation of the check. An
accord and satisfaction may be precluded where the creditor notifies the
debtor that the check is not accepted as payment in full.
A significant factor in determining whether the creditors retention
constitutes an accord and satisfaction is whether the debtor has requested
that the creditor return the check, if s/he does not elect to accept it as
payment in full.[iii] However, when a check is retained merely for the
purpose of collecting evidence, it may or may not effect a settlement of the
underlying obligation by means of an accord and satisfaction.[iv]
[i] Valley Asphalt, Inc. v. Stimpel Wiebelhaus Associates, 3 Fed. Appx. 838
(10th Cir. 2001)
[ii] Fidelity & Cas. Co. of New York v. C. E. B. M., Limited, 116 Ga. App. 92,
156 S.E.2d 467 (1967)
[iii] Kelly v. Kowalsky, 186 Conn. 618, 442 A.2d 1355, 33 U.C.C. Rep. Serv.
801, 42 A.L.R.4th 111 (1982)
43
[iv] Fidelity & Cas. Co. of New York v. C. E. B. M., Limited, 116 Ga. App. 92,
156 S.E.2d 467 (1967)

44
What Constitutes Unreasonable Period of Retention
When a creditor retains a check offered as payment in full can constitute
assent to an accord and satisfaction sometimes[i]. When a creditor receives
a check purporting to be in full payment of a debtors disputed obligation,
the creditor should return it promptly in order to avoid an accord and
satisfaction[ii].
However, it was also observed that a mere retention of check without any
negotiation by the creditor will not cause an accord and satisfaction[iii].
The period of retention is one of the significant factors that determine
whether an accord and satisfaction has resulted. If the check has been
retained for an unreasonable period of time unexplained, it can operate as
an accord and satisfaction[iv].
Similarly, if the debtor has requested the creditor to return the check back if
s/he does not opt to accept it as payment in full will also be considered as a
significant factor in determining whether the creditors retention
constitutes an accord and satisfaction[v].
However, retention becomes unreasonable depending upon the facts and
circumstances of each case. For example, in some cases retention of two
weeks or less[vi] was held reasonable and in some cases retention more
than a year was held unreasonable[vii].
Whereas, in a particular case law, it was held that a period of more than
three and one half years was held reasonable where such retention followed
notice that the check was not accepted as payment in full[viii].
In Morris v. Aetna Life Ins. Co[ix]., an additional insured met with an
accident while operating a car owned by his mother who was the insured.
The insurer paid all claims submitted by the additional insured except the
claim involving a medical bill which was denied because the additional
insured refused to give medical examination. After the additional insured
45
brought an action, the insurer paid the claim. The check which was not
negotiated was returned to the insurer.
The court observed that the additional insured was bound by the provision
in the policy that enabled the insurer to require medical examinations even
though the additional insured did not sign the policy. The court also found
that the insurers agents exercised reasonable judgment and acted in good
faith in delaying payment of the disputed claim because the insurer had the
right to require the medical examination. In addition, the additional
insureds breach of the contract by refusing the examination entitled the
insurer to withhold payment entirely.
[i] Valley Asphalt, Inc. v. Stimpel-Wiebelhaus Assocs., 3 Fed. Appx. 838
(10th Cir. Utah 2001)
[ii] Besco Enterprises, Inc. v. Carole, Inc., 274 Cal. App. 2d 42 (Cal. App.
1st Dist. 1969)
[iii] Hoeppner Constr. Co. v. United States, 273 F.2d 835 (10th Cir. Colo.
1960)
[iv] Kelly v. Kowalsky, 186 Conn. 618 (Conn. 1982)
[v] Id.
[vi] Service Fire Ins. Co. v. Ledbetter, 112 Ga. App. 333 (Ga. Ct. App. 1965)
[vii] Morris v. Aetna Life Ins. Co, 160 Ga. App. 484 (Ga. Ct. App. 1981)
[viii] Kelly v. Kowalsky, 186 Conn. 618 (Conn. 1982)
[ix] 160 Ga. App. 484 (Ga. Ct. App. 1981)

46
Part Payment by Agent or Fiduciary
If an agent collects money that belongs to his/her principal and only pays a
part of it retaining the balance, then the principals acceptance and
retention of the amount paid will not constitute an accord and
satisfaction[i]. The principal can take subsequent action to recover the
balance due from the debtor irrespective of the fact that the debtor has paid
the amount to the agent.
Whereas, if there is exists a fiduciary relationship between the parties, then
the principles governing the determination of accord and satisfaction will
be enforced with greater strictness[ii]. If the alleged accord and satisfaction
arises out of an agreement with a fiduciary, the defendant asserting the
defense must show the accord was an express agreement made upon full
revelation[iii].
However, a fiduciary relationship is not an absolute bar preventing an
accord and satisfaction. It is only a fact that has to be considered along with
other circumstances[iv].
In Greenberg v. Pine Hollow Standardbred Sale & Management Corp[v],
defendants were a stud farm and its officers and plaintiff was the owner of a
horse. By an oral contract, plaintiff engaged the stud farm to sell his
undivided four share interest in a horse standing at the stud farm. Upon
sale of the owners share of the horse, the stud farm retained a commission.
The plaintiff filed an action for breach of contract. The court gave judgment
in favor of the plaintiff finding that the stud farm had improperly made a
unilateral modification of the contract as their initial agreement did not
mention anything about assessing commission to find a buyer for the
plaintiff.
[i] Mayrath Co. v. Helgeson, 258 Iowa 543 (Iowa 1966)
[ii] Avery v. Schuman Co., 159 F. Supp. 906 (D. Cal. 1958)
47
[iii] Jones v. Allstate Ins. Co., 146 Wn.2d 291 (Wash. 2002)
[iv] Indianapolis v. Domhoff & Joyce Co., 69 Ohio App. 109 (Ohio Ct. App.,
Hamilton County 1941)
[v] 94 A.D.2d 836 (N.Y. App. Div. 3d Dept 1983)

48
Qualified Acceptance or Protest by Creditor
When a partial payment of a disputed or unliquidated claim is tendered as
payment in full, and if the creditor is aware of this condition, then the
creditors acceptance of the tender results in accord and satisfaction. Even
if the creditor protests that s/he has not accepted the amount in full
satisfaction, it will amount to accord and satisfaction[i].
Under the common law rule, the seller can refuse or accept the check
subject to the condition stated by the buyer. However, the seller cannot
accept the check and refuse to be bound by the condition[ii]. This rule
applies only to a disputed or unliquidated claim in good faith by the
buyer[iii].
In Ex parte Meztista[iv], parties formed a partnership and agreed to divide
the assets and liabilities equally. After the partnership lost its sole contract,
the partnership tendered a check to the partner in full satisfaction of her
partnership interest, which she cashed with a restrictive endorsement. The
partner sought dissolution of the partnership and an accounting of the
partnership profits.
The court observed that the partners act of depositing the check completed
an accord and satisfaction. The court added that there was consideration
and meeting of minds regarding the subject matter.
[i] Air Van Lines v. Buster, 673 P.2d 774 (Alaska 1983)
[ii] U.C.C. 3-311
[iii] Id.
[iv]Ex parte Meztista, 845 So. 2d 795 (Ala. 2001)

49

50
Effect of Fraud, Mistake, Duress
The satisfaction of a debt obtained by fraud or misrepresentation will not
be considered a contract of accord or satisfaction. A contract of accord and
satisfaction obtained through mutual mistake, supervening illegality, or
frustration of purpose can be partly or completely set aside. If a contract is
agreed upon misrepresentation or without proper knowledge of facts, such
contract cannot be considered as a contract of accord and satisfaction. If
one of the parties to a contract is ignorant about the law in place and the
other has a better knowledge, such contract cannot be considered as a
contract of accord and satisfaction. Contracts made over economic pressure
will not be considered contracts of accord and satisfaction. If a party, by his
or her financial constrain is forced to accept a lesser amount than the
amount claimed, it does not constitute a contract of accord and satisfaction.
In Kucel v. Walter E. Heller & Co., 813 F.2d 67 (5th Cir. Tex. 1987), a lien
on the plaintiffs plane was released by the defendant lender in furtherance
to plaintiffs prepayment of the promissory note on the plane. However,
defendant refused to provide an accounting of the payoff amount. This
resulted in an action against the defendant for over payment of the loan.
The amount of overpayment, interest and attorneys fees on plaintiffs claim
of money had and received was awarded by the trial court. The appellate
court affirmed the trial courts decision and contended that the defendant
was liable for overpayment. However, the awarded amount was vacated
stating that the trial court had misread the amortization schedule in
calculating the overpayment amount. The award of attorneys fees to
plaintiff, and the sanction imposed on defendants attorney was reversed.

51

52
Necessity of Tender Back of Amount Received
An accord and satisfaction occurs when parties to a contract agree that the
debt is discharged in a manner other than in accordance with the terms of
their original contract. The accord is the new agreement and satisfaction is
the discharge of the obligation. The debt is discharged only if debtor and
creditor agree that amount paid by debtor to creditor fully satisfies the
entire claim. In order to repudiate a transaction in full satisfaction of claim
creditor should return the tendered draft.[i] A tender back of payment is a
necessary prerequisite for filing suit where a valid accord and satisfaction is
established. If a landlord wants to file suit to collect rent owed by the tenant
the tender back of commercial tenants payment is a necessary prerequisite.
However if the amount paid in satisfaction is accepted to be due in any
event, the creditor need not tender back the amount paid prior to bringing
an action on the original obligation.[ii] Also if a creditor wants to avoid a
contract of accord on the ground of want of consideration or fraud, the
creditor need not tender back the amount paid prior to bringing an action
on the original debt.
[i] Metromarketing Servs., Inc. v. HTT Headwear, Ltd., 15 S.W.3d 190
(Tex. App. Houston 14th Dist. 2000)
[ii] Faith Reformed Church v. Thompson, 248 Mich. App. 487 (Mich. Ct.
App. 2001)

53

54
Multiple Claims Between Parties
An accord and satisfaction occurs when parties to contract agree that the
debt is discharged in a manner other than in accordance with the terms of
their original contract. The acceptance of a check which states that it is in
satisfaction of full demand is an accord and satisfaction of whole demand.
An essential element of accord and satisfaction is an agreement, or a
meeting of the minds of the parties. Accord and satisfaction agreement
should have all the essentials of a contract and may be express, or implied
from the circumstances. Essential to accord is the identity of the claim, or
claims, account, or accounts, to be satisfied by acceptance of the accord. In
Roberts v. Finger,[i] court held that an accord and satisfaction is not
completed by the tender and acceptance of a check with the words account
in full. If payee reasonably understands that a particular account is
intended to be satisfied, there is no accord and satisfaction of another
account or claim. An accord is reached when the creditor accepts the
debtors payment in satisfaction of all claims of the creditor.[ii] If a check is
accompanied by a letter stating that check represents the amount due in
full to complete recent buy-back on your account, the acceptance of the
check did not constitute an accord and satisfaction. When there is more
than one claim or account against a debtor, the creditor may reasonably
assume that payment for the exact amount of one claim or billing was
intended to settle that claim alone. Such payment will not satisfy all claims
unless the debtor specifically expresses such intention.[iii]
[i] Roberts v. Finger, 227 Miss. 671 (Miss. 1956)
[ii] United States use of Glickfeld v. Krendel, 136 F. Supp. 276 (D.N.J. 1955)
[iii] Daube & Cord v. La Porte County Farm Bureau Co-Operative Assn,
454 N.E.2d 891 (Ind. Ct. App. 1983)

55

56
Consideration
Accord and satisfaction deals with a debtors offer of payment and a
creditors acceptance
of a lesser amount than the creditor originally purported to be owed. It is a
method of discharging a claim by settlement of the claim and performing
the agreement. The accord is the agreement and the satisfaction its
execution or performance. A new contract is substituted for an old contract
thereby discharging an obligation or cause of action, which is settled, and
must have all of the elements of a valid contract.
In an accord contract it is typical that the consideration supplied is less
than bargained for in the original contract. In accord contracts that require
an amount of consideration that is less than the original, the consideration
must be of a different type, i.e. instead of money, debtor offers something in
kind. Consideration is the value given in return for a promise. It has two
elements: (1) there must be a bargained-for exchange between the parties
(2) what is bargained for must have legal value.
Accord and satisfaction is a settlement of an unliquidated debt. In an
unliquidated debt consideration, when the amount of the debt is in dispute,
acceptance of a lesser sum discharges the debt. Consideration is given by
the parties by giving up a legal right to contest the amount of debt.
Whereas, in a liquidated debt, acceptance of less than the entire amount of
a liquidated debt is not satisfaction, and the balance of the debt is still
owed. No consideration is given by the debtor, because the debtor has a
preexisting obligation to pay the entire debt.
For example, a builder is contracted to build a homeowner a garage for
$35,000. The contract called for $17,500 prior to starting construction, to
disburse $10,000 during various stages of construction, and to make a final
payment of $7,500 at completion. At completion, the homeowner
complained about inferior work quality and refused to make the final
payment. After a mutual settlement agreement, the builder accepted
57
$4,000 as full payment. Thereby, a new contract was formed by offer,
acceptance, and consideration. The consideration is that for a $3,500
savings, the homeowner gives up that which he is entitled, a well-
constructed garage. The builder gives up his right to full price to avoid suit
for inferior performance. When accord and settlement has occurred, the
homeowner and builder have given up his right to sue for more money
under this settlement agreement.

58
Sufficiency
creditors acceptance of a lesser amount than the creditor originally
purported to be owed. It is a method of discharging a claim by settlement of
the claim and performing the agreement. The accord is the agreement and
the satisfaction its execution or performance. A new contract is substituted
for an old contract thereby discharging an obligation or cause of action,
which is settled, and must have all of the elements of a valid contract.
Something legally sufficient must be given in exchange for a promise. It
may be a return promise. If it is performance, that performance may be an
act or forbearance. Whatever it is, it must be either legally detrimental to
the promise or legally beneficial to the promisor. Legally detrimental is not
always economically detrimental. A person can incur legal detriment by
doing or promising to do something that he or she had no prior legal duty
to do or refraining from or promising to refrain from doing something that
he or she had no prior legal duty to refrain from doing.

59

60
Part Payment Liquidated and Undisputed Claims
he or she had no prior legal duty to refrain from doing
Although the common law part payment rule has been criticized and
condemned by some courts. Generally, the agreement of a creditor to
discharge the whole debt immediately due in consideration of the payment
of part is unsupported by sufficient consideration. In other words, part
payment of an undisputed, liquidated claim even if the creditor accepts it as
full payment, it does not constitute a valid accord and satisfaction of the
unpaid balance unless such settlement was supported by some
61
consideration which is additional or collateral to the partial payment. A
benefit or detriment different from that involved in the creation of the debt
is sufficient consideration to support an accord and satisfaction discharging
that debt. There can be no accord and satisfaction without the intentional
relinquishment of a known right.

62
Effect of Giving Release or Receipt in Full
he or she had no prior legal duty to refrain from doing
Although the common law part payment rule has been criticized and
condemned by some courts. Generally, the agreement of a creditor to
discharge the whole debt immediately due in consideration of the payment
of part is unsupported by sufficient consideration. In other words, part
payment of an undisputed, liquidated claim even if the creditor accepts it as
full payment, it does not constitute a valid accord and satisfaction of the
unpaid balance unless such settlement was supported by some
63
consideration which is additional or collateral to the partial payment. A
benefit or detriment different from that involved in the creation of the debt
is sufficient consideration to support an accord and satisfaction discharging
that debt. There can be no accord and satisfaction without the intentional
relinquishment of a known right.
A receipt does not in and of itself constitute an accord and satisfaction,
although it is admissible as evidence to that effect. More specifically, partial
payment of a fixed and certain demand that is due and not in dispute does
not constitute a satisfaction of the entire debt even where the creditor
agrees to receive a partial payment for the whole debt and gives a receipt
for the whole demand. However, there is some authority for the view that
where an agreement to discharge a debt by the payment of a smaller sum is
fully executed, and a written receipt evidences the discharge for the lesser
sum in full satisfaction of the greater, it is a valid and irrevocable act.

64
Effect of Debtors Insolvency
purported to be owed. In an accord contract it is typical that the
consideration supplied is less than bargained for in the original contract.
In accord contracts that require an amount of consideration that is less
than the original, the consideration must be of a different type, i.e. instead
of money, debtor offers something in kind. Where the creditor knows that
the debtor is insolvent and, in consideration of that fact, accepts part
payment of a liquidated demand in full satisfaction, there is an accord and
satisfaction. Further, an agreement by a debtor to forgo the right to file a
petition in bankruptcy if the individual creditor agrees to discharge his or
her claim upon the payment of a lesser amount, will also support a valid
accord and satisfaction.
However, in Prather v. Citizens Nat. Bank of Dallas, 582 S.W.2d 903 (Tex.
Civ. App. Waco 1979) an accord and satisfaction was not established where
there was no evidence that the creditor knew of the guarantors alleged
insolvency or regarded the alleged insolvency as consideration for an
agreement to release the guarantor from the entire debt.

65

66
Judgments
A judgment ordering the payment of a lesser amount than demanded can
be accompanied by accord and satisfaction only if there is some
circumstance or act that has to be fulfilled in addition to part payment
sufficient to constitute consideration. In undisputed liquidated claims that
are not restricted by statutory limitations, the general rule that part
payment alone is not sufficient consideration for an accord and satisfaction
of a liquidated demand applies.
The acceptance of a part payment decided by a judgment does not amount
to an accord and satisfaction of the entire claim and such judgment can be
appealed. There can be no accord and satisfaction of a judgment which will
accrue in the future.
Acceptance of a criminal restitution order does not reflect an accord and
satisfaction and it cannot be considered as a waiver of civil remedies.
In Schwartz v. California Claim Service, Ltd., 52 Cal. App. 2d 47 (Cal. App.
1942), the creditors attorney signed the debtors offer to make a partial
payment on an indebtedness as full accord and satisfaction and the creditor
proceeded to institute collection efforts. Enforcement of the agreement
signed by the creditors attorney to accept partial payment as satisfaction
was sought by the debtor. The trial Court granted judgment favoring the
creditor. Upon appeal, the appellate Court reversed the trial Courts
judgment stating that the complaint alleged sufficient facts to constitute a
valid accord and satisfaction of the debt. The court further stated that
partial performance by an obligor when expressly accepted in writing by a
creditor extinguishes the obligation.

67

68
What Constitutes Sufficient New or Additional
Consideration Under Part Payment Rule
In full discharge of demand, additional consideration to support a
transaction as an accord and satisfaction will lie upon acceptance of a
liquidated demand by a creditor in a different medium from that called for
by the contract between the parties. In such situations, courts will hold the
debt satisfied and will not inquire into the adequacy of the consideration. A
demand of liquidated money may be discharged in accord and satisfaction
by delivering property or part money and part property. However, it should
be received as full discharge of the debt. If the creditor has any right over
the property, the delivery of the property cannot be considered as full
discharge of the debt.
If part payment is made before the debt is due, or at another place, or in a
different medium than that required by the contract, it can be considered as
good discharge of a debt. When an amount less than the entire liquidated
claim is paid by a debtor to a creditor before the debt is due or the maturity
of obligation and the creditor accepts the early payment in full satisfaction
of the entire claim, that payment is a sufficient consideration to support an
accord and satisfaction of the claim.[i]
Providing additional security which the creditor has no right to demand can
be taken as a sufficient consideration to support an agreement by the
creditor to accept less than the full amount of the liquidated debt. If the
payment is made by a third person can be accepted as sufficient
consideration for the creditors acceptance of a lesser amount than the
amount of a liquidated claim. It creates an accord and satisfaction.
However, if the payment is made by a check is issued by the debtors
attorney shall not be considered adequate third-party payment discharging
the remainder of the debt.[ii]
[i] Thielen v. Thielen, 88 Haw. 191 (Haw. Ct. App. 1998)
69
[ii] King Metal Products, Inc. v. Workmens Compensation Bd., 20 A.D.2d
565, 245 N.Y.S.2d 882

70
Different Medium of Payment, Generally
If a creditor accepts payment of liquidated demand not as per the contract
agreed between the parties but in a different medium, there will be
adequate new or additional consideration to support the transaction as an
accord and satisfaction. However, the liquidated demand accepted must be
in full discharge of the demand. Where a creditor accepts the payment
made by debtor as payment in full, courts will hold that the debt is satisfied.
Even if the medium of payment benefits creditor more than the payment
contemplated by the contract, the courts will not inquire into the adequacy
of the consideration.
Under common law, the acceptance of a smaller sum for a debt due will not
effect the satisfaction of the total debt even if agreed and expressed to be
payment in full, since there is lack of consideration. Under the doctrine of
accord and satisfaction, the liquidated demand accepted less than as agreed
but in full satisfaction, is not invalid for lack of consideration and bears all
the elements of a contract.[i]
In Thielen v. Thielen,[ii] court held that the payment of a smaller sum in
full discharge of an unliquidated or disputed claim is a good accord and
satisfaction supported by sufficient consideration.
[i] In re Zerodec Mega Corp., 47 B.R. 304 (Bankr. E.D. Pa. 1985)
[ii] 88 Haw. 191 (Haw. Ct. App. 1998)

71

72
Payment in Property
A liquidated money demand can be discharged by an accord and
satisfaction by delivery of property, or by providing part money and part
property to the creditor. For discharge of debt by payment in property there
should be consent of the parties as to full discharge of the indebtedness. If
the creditor is otherwise entitled to the property given by the debtor at the
time when the property is delivered, the debt will not be discharged.
In, Tremont Electric Co. v. Lang,[i] court held that, if the debtor gives to
the creditor certain property in full satisfaction and the value of the
property is not as agreed between the debtor and creditor, and the creditor
accepts such property without objection, he cannot thereafter complain that
the property taken was in fact worth less than the amount of the balance
due.
In Casper Natl Bank v. Woodin,[ii] the mortgage agreement between the
parties provided that in case of default the mortgagee may take immediate
possession of the mortgaged property and sell it. The mortgagor was in
default at the time of the accord agreement. The court held that there is no
accord and satisfaction of a debt for which a chattel mortgage is given.
[i] 16 Misc. 2d 983 (N.Y. Mun. Ct. 1959)
[ii] 68 Wyo. 232 (Wyo. 1951)

73

74
Change of Place of Payment
The payment of a smaller sum in satisfaction of a larger amount is not a
good discharge of a debt. However the debt is discharged if part payment is
made;
before the debt is due, or
at another place, or
in a different medium than that required by the contract. [i]
In Thielen v. Thielen,[ii] defendant husband did not pay spousal support to
plaintiff wife after their divorce. He entered into an agreement where he
paid the arrearage plus sums that were not due and owing in exchange for a
discharge from the remainder of his obligation. The court held that, the
debt is discharged when part payment is made at another place than that
required by the contract.
[i] Thielen v. Thielen, 88 Haw. 191 (Haw. Ct. App. 1998)
[ii] 88 Haw. 191 (Haw. Ct. App. 1998)

75

76
Payment Before Maturity
When a debtor pays the creditor an amount less than the entire liquidated
claim before the debt is due and the creditor accepts the early payment in
full satisfaction of the claim, such payment is sufficient consideration to
support an accord and satisfaction.[i]
Under the common law, the acceptance of a smaller sum for a debt due,
though agreed and expressed to be payment in full, will not effect the
intended satisfaction of the total debt since the agreement lacks
consideration.[ii] However as per doctrine of accord and satisfaction if the
debtor pays the debt amount in full satisfaction of claim before the debt is
due and the creditor accepts it, the debt will be discharged.
In, First Hartford Realty Corp. v. Ellis,[iii] court held that although part
payment of a debt does not operate to discharge the whole if the creditor
does not assent to receive it as such; part payment prior to maturity is
consideration for a promise to discharge the entire debt and it constitutes
satisfaction of the debt if the creditor accepts it as such.
[i] Crow v. Gore, 85 F.2d 291 (D.C. 1936)
[ii] In re Zerodec Mega Corp., 47 B.R. 304 (Bankr. E.D. Pa. 1985)
[iii] 181 Conn. 25 (Conn. 1980)

77

78
Giving Security
If a debtor gives additional security which the creditor has no right to
demand, then the debt will be discharged in full. The additional security is
an adequate consideration for the creditor to accept lesser amount than due
and it discharges the debt in full.[i]
In Lewis v. Akerberg,[ii] court held that, a liquidated claim may be the
subject of an accord and satisfaction. If a collateral benefit, such as specific
security, is received by the creditor, then such benefit even though less than
the amount due discharges the claim. The security constitutes legal
consideration for discharge of claim.
[ii] 118 N.E.2d 166 (Ohio C.P. 1953)

79

80
Payment by Third Person
An accord is a contract in which a person promises to accept a stated
performance in satisfaction of the other persons existing duty.
Performance of accord discharges the original duty.[i] If the payment of
debt is made by a third person and the creditor accepts the debt in full, then
the debt will be discharged. Payment in full settlement of a liquidated debt
by or with the aid of a third person discharges in full the entire original
debt. [ii] A payment or other performance by a third person and accepted
by creditor, as full or partial satisfaction of his claim, discharges the debt of
the debtor. Payment by a third person of a sum less than the amount due,
with the understanding that it is in full satisfaction is a valid accord and
satisfaction. A check issued by the debtors attorney is not a third party
payment that discharges the debt of the debtor.[iii]
[ii] Bealkowski v. Powers 310 Ill. App. 662 (Ill. App. Ct. 1941)
[iii] King Metal Products, Inc. v. Workmens Compensation Board, 20
A.D.2d 565 (N.Y. App. Div. 2d Dept 1963)

81

82
Part Payment-Unliquidated or Disputed
Claims
Accord and satisfaction is a method of discharging a claim whereby the
perform the agreement. Accord is the agreement and satisfaction is its
execution or performance. It is a new contract substituted for an old
contract thereby discharging an obligation or cause of action which is
settled, and must have all of the elements of a valid contract.
With regard to an unliquidated debt, accord and satisfaction can occur
when a creditor accepts part payment of an unliquidated debt which the
debtor tenders in full satisfaction of the debt and the creditor accepts that
offer[i].
An accord and satisfaction requires certain elements such as a bonafide or
good faith dispute, an unliquidated claim, consideration, a shared and
mutual intention to compromise the claim, and a valid contract that was
performed[ii].
A claim is said to be disputed where there exists a bona fide dispute[iii]
asserted in good faith[iv] and where the subject matter is reasonably
doubtful. A claim or defense becomes reasonably doubtful when there is an
uncertainty about the facts or the law to determine whether forbearance on
the claim or defense will serve as consideration for an accord and
satisfaction[v].
However, it is not essential that the matter must be really in doubt to
render a valid compromise agreement in an accord and satisfaction if the
claim is honest and not fraudulent[vi]. Similarly, the bona fide dispute
must be a dispute between the parties and not that is confined to the mind
of the sender of the check.

83
[i] Sedona Dev. Group, Inc. v. Merrillville Rd. Ltd. Pship, 801 N.E.2d 1274
(Ind. Ct. App. 2004)
[ii] Sims-Madison v. Inland Paperboard & Packaging, Inc., 379 F.3d 445
(7th Cir. Ind. 2004)
[iii] Texas Water Supply Corp. v. Reconstruction Finance Corp., 204 F.2d
190 (5th Cir. Tex. 1953)
[iv] Wickman v. Kane, 136 Md. App. 554 (Md. Ct. Spec. App. 2001)
[v] Id
[vi] Potter v. Pacific Coast Lumber Co., 37 Cal. 2d 592 (Cal. 1951)

84
What Constitutes Disputed Claim
execution or performance.
A claim is said to be disputed where there exists a bona fide dispute[i]
asserted in good faith[ii] and where the subject matter is reasonably
doubtful. A claim or defense becomes reasonably doubtful when there is an
uncertainty about the facts or the law to determine whether forbearance on
the claim or defense will serve as consideration for an accord and
satisfaction[iii].
However, it is not essential that the matter must be really in doubt to
render a valid compromise agreement in an accord and satisfaction if the
claim is honest and not fraudulent[iv]. Similarly, the bona fide dispute
must be a dispute between the parties and not that is confined to the mind
of the sender of the check.
However, there will be no bona fide dispute for purposes of an accord and
satisfaction, if it is clear about the amount owed and the dispute is only
upon whether the debt is owed or not[v]. A person cannot create a dispute
sufficient to make a basis for an accord and satisfaction by creating a
situation which changes the vested rights of the parties[vi].
In Hayes v. Alexander[vii], a teacher and her late husband gave money to
the accountant to invest in two businesses. No return was received on the
investments, and the teacher demanded a return of her money. The
accountant agreed in writing to pay back a portion of the money. When the
accountant failed to make the required payments on the promissory note,
the teacher filed the suit. Court rejected the accountants claim that there
was no consideration for the promissory note. The court also rejected the
84 A
accountants claim that the agreement was unenforceable because there
was no meeting of the minds. Court observed that the essential elements of
accord and satisfaction were met.
[i] Texas Water Supply Corp. v. Reconstruction Finance Corp., 204 F.2d
190 (5th Cir. Tex. 1953)
[ii] Wickman v. Kane, 136 Md. App. 554 (Md. Ct. Spec. App. 2001)
[iii] Id
[iv] Potter v. Pacific Coast Lumber Co., 37 Cal. 2d 592 (Cal. 1951)
[v] Sedona Dev. Group, Inc. v. Merrillville Rd. Ltd. Pship, 801 N.E.2d 1274
(Ind. Ct. App. 2004)
[vi] Fichter v. Milk Wagon Drivers Union, 382 Ill. 91 (Ill. 1943)
[vii] 264 Ga. App. 815 (Ga. Ct. App. 2003)

84 B
Payment of Undisputed Portion of Claim
In some jurisdictions, when a part of a single claim is conceded and only
the balance is disputed, then the payment of the conceded portion of the
claim can furnish sufficient consideration for an accord and satisfaction of
the entire claim[i].
However, other jurisdictions follow the view that there can be no accord
and satisfaction of a claim for payment of the amount which is admitted to
be due will not furnish consideration for an accord and satisfaction of the
entire claim[ii].
Generally, payment of an undisputed claim will not constitute sufficient
consideration for an accord and satisfaction of another independent
liquidated and undisputed claim[iii]. In other words, an accord and
satisfaction can settle one or more claims, or a portion of a claim, without
prejudicing the remaining claims[iv].
In Cuddy v. A&E Mech[v], a subcontractor claimed against two general
contractors. The general contractor made two payments together which was
less than the amount billed by the subcontractor. The second check
included a statement which made clear that it was the final payment for all
work completed till date. Court observed that the general contractor met
with the burden to show the occurrence of accord and satisfaction.
[i] Flagel v. Southwest Clinical Physiatrists, P.C., 157 Ariz. 196 (Ariz. Ct.
App. 1988)
[ii] Cuddy v. A&E Mech., 53 Mass. App. Ct. 901 (Mass. App. Ct. 2001)
85
[iii] Occidental Life Ins. Co. v. Eiler, 125 F.2d 229 (8th Cir. Mo. 1942)
[iv] Hosp. Auth. v. Pyrotechnic Specialties, Inc., 263 Ga. App. 886 (Ga. Ct.
App. 2003)
[v] 53 Mass. App. Ct. 901 (Mass. App. Ct. 2001)

86
Claims by or Against Government
Generally, an executed bilateral modification of a government contract that
contains no reservation of rights constitutes an accord and satisfaction[i].
Whereas, if a person has an unliquidated or disputed claim against a state,
county, or municipality and accepts part payment of the claim with
knowledge that the claim has not been allowed in full, the payment
amounts to a satisfaction of the claim[ii].
The Secretary of the Treasury can compromise any claim arising under
custom laws upon a report by a customs officer, United States attorney, or
any special attorney if such action is recommended by the General Counsel
for the Department of the Treasury[iii].
Likewise, the Secretary of the Treasury can compromise any civil or
criminal case arising under the internal revenue laws. The Attorney General
or his/her delegate can compromise any such case after referring to the
Department of Justice for prosecution or defense[iv].
In Mil Spec Contractors, Inc. v. United States[v], plaintiff submitted claims
for additional costs incurred after finishing its work under a government
contract. Plaintiff did not receive contingency funds. Plaintiff reached an
oral settlement agreement with a negotiator and it was told that the
plaintiff will receive the money directly. Contracting officer mailed a
prepared contract modification to plaintiff, but plaintiff did not accept. The
Armed Services Board of Contract Appeals denied plaintiffs claim for
additional compensation on the ground that an oral agreement to settle the
claims constituted an accord and satisfaction. On appeal, the court reversed
the earlier judgment holding that there was no valid oral agreement
87
because the negotiator did not have authority to bind the government, and
the modification was not signed by plaintiff.
In KanagIq Constr. Co. v. United States[vi], a contractor entered into a
contract with the United States Department of Health and Human Services
to perform architectural and electrical repairs and renovations on a health
service building. The contractor sought additional money for rerouting
some wires due to asbestos located in the building. The court observed that
the contractors letter to the government constituted a claim regarding the
rerouting of certain wires under the Contract Disputes Act. But the court
added that the letter did not constitute a claim for delay costs.
[i] KanagIq Constr. Co. v. United States, 51 Fed. Cl. 38 (Fed. Cl. 2001)
[ii] Chandler v. State Highway Board, 61 F.2d 601 (5th Cir. Ga. 1932)
[iii] 19 U.S.C.A. 1617.
[iv] Id
[v] 835 F.2d 865 (Fed. Cir. 1987)
[vi] 51 Fed. Cl. 38 (Fed. Cl. 2001)

88
Federal Government
Generally, an executed bilateral modification of a government contract that
contains no reservation of rights constitutes an accord and satisfaction.[i]
The Secretary of the Treasury can compromise any claim arising under
custom laws upon a report by a customs officer, United States attorney, or
any special attorney if such action is recommended by the General Counsel
for the Department of the Treasury[ii].
Likewise, the Secretary of the Treasury can compromise any civil or
criminal case arising under the internal revenue laws. The Attorney General
or his/her delegate can compromise any civil or criminal case after
referring to the Department of Justice for prosecution or defense[iii].
In KanagIq Constr. Co. v. United States[iv], a contractor entered into a
contract with the United States Department of Health and Human Services
to perform architectural and electrical repairs and renovations on a health
service building. The contractor sought additional money for rerouting
some wires due to asbestos located in the building. The court observed that
the contractors letter to the government constituted a claim regarding the
rerouting of certain wires under the Contract Disputes Act. But the court
added that the letter did not constitute a claim for delay costs.
[i] KanagIq Constr. Co. v. United States, 51 Fed. Cl. 38 (Fed. Cl. 2001)
[ii] 19 U.S.C.A. 1617.
[iii] Id.
[iv]KanagIq Constr. Co. v. United States, 51 Fed. Cl. 38 (Fed. Cl. 2001)
89

90
State, County, or Municipal Government
If a person has an unliquidated or disputed claim against a state, county, or
municipality and accepts part payment of the claim with knowledge that the
claim has not been allowed in full, the payment amounts to a satisfaction of
the claim[i]. Similarly, if a state has a disputed claim against a party, and if
the state accepts part payment of the claim even under protest to agree the
payment in full, the party will be excluded from paying the balance
amount[ii].
In Indiana Lumbermens Mut. Ins. Co. v. State[iii], appellant challenged a
judgment that permitted the state to recover under performance issued by
appellant as surety. On appeal, the court reversed the judgment that
permitted the state to recover under a performance bond issued by
appellant. The stipulated facts and the findings of the trial court established
that the parties disputed the amount owed by appellant under the bond.
The appellant paid in full a certain amount but the state refused appellants
condition as payment in full but accepted the payment.
Court observed that a disputed money demand can be discharged by the
acceptance and negotiation of a check by the creditor for an amount less
than the claim given on the condition that its acceptance is in full and final
satisfaction of the claim. However, if such acceptance by the creditor even
under protest will be binding on the creditor and precludes recovery for any
unpaid amount. Therefore, an accord and satisfaction took place.
[i] Chandler v. State Highway Board, 61 F.2d 601 (5th Cir. Ga. 1932)
[ii] Indiana Lumbermens Mut. Ins. Co. v. State, 1 S.W.3d 264 (Tex. App.
Fort Worth 1999)
91
iii] Id.

92
Execution of Accord
The failure to make a payment or otherwise perform an act required by an
agreement entered into in satisfaction of a claim leaves such an agreement
a mere executory accord, except where the rule has been changed by
statute.[i] Such an executory accord is unenforceable and will not bar an
action on the original obligation.[ii]
Generally, an unexecuted accord is not a satisfaction. The original
obligation is not discharged unless it is fully performed.[iii] The defense of
accord and satisfaction fails if there is no performance under the new
agreement, since there is no satisfaction.[iv]
[i] Condo v. Mulcahy, 88 A.D.2d 497, 454 N.Y.S.2d 308
[ii] Zenith Drilling Corp. v. Internorth, Inc., 869 F.2d 560 (10th Cir. 1989)
[iii] Kalman v. Perry, 1999 Mass. App. Div. 1, 1999 WL 16327 (1999).
[iv] Wolowitz v. Thoroughbred Motors, Inc., 765 So. 2d 920 (Fla. Dist. Ct.
App. 2d Dist. 2000).

Execution of Accord: Related Pages
Necessity of Execution Where Accord Involves Something Other
Than Payment in Money
Part Performance
Tender of Performance
Acceptance of Promise as Satisfaction of Original Obligation

93

94
Necessity of Execution Where Accord Involves
Something Other Than Payment in Money
Generally, the terms of a new agreement with respect to payment must be
fully performed in order for an accord and satisfaction to result, where the
satisfaction contemplated by the accord involves payment in something
other than money.[i]
The intent of the parties determines whether or not there is an accord and
satisfaction by the delivery and receipt of a debtors note, without payment
of the note. Furthermore, in the absence of an express or implied
agreement to take a check or note in satisfaction of a debt, there is no
extinguishment of the claim on the theory of accord and satisfaction until
the instrument is paid.[ii]
The accord and satisfaction is not executory and not binding when a party
cannot retain a major portion of the proceeds of the accord and satisfaction
and return only a minor portion of the consideration.[iii]
[i] Corrigan v. Payne, 312 Mass. 589, 45 N.E.2d 829 (1942)
[ii] Arkansas Farmers Assn v. Yohe, 227 Ark. 670, 300 S.W.2d 589 (1957)
[iii] Rosenfeld v. Glickstein, 159 So. 2d 670 (Fla. Dist. Ct. App. 1st Dist.
1964).

95

96
Part Performance
The performance must be full and complete where the performance of an
accord is necessary to satisfy the original claim and constitute a valid
accord and satisfaction.[i] The whole accord fails if part of the agreed
consideration is not performed. The rule that a partially performed accord
does not constitute a settlement did not apply when a party unilaterally
attempted to return a portion of the consideration two or three weeks after
agreement was been reached, but did not see fit to tender a return of the
entire consideration.
However, delay in performance not depriving of any benefits, constitutes
substantial performance of the accord and satisfaction.[ii] If full
performance is prevented by the creditor, part performance may also be
sufficient.[iii]
[i] Rosenfeld v. Glickstein, 159 So. 2d 670 (Fla. Dist. Ct. App. 1st Dist. 1964)
[ii] Associated Builders, Inc. v. Coggins, 1999 ME 12, 722 A.2d 1278 (Me.
1999)
[iii] National Old Line Ins. Co. v. Brown, 107 N.M. 482, 760 P.2d 775
(1988)

97

98
Tender of Performance
Generally, an unaccepted tender of performance is insufficient to create a
binding accord and satisfaction.[i] In Taylor v. Central of Georgia Ry. Co.,
the court opined that the judgment creditors promise to accept a lesser
amount does not become binding upon him/her until the whole of such
lesser amount is paid and accepted. Under such circumstances tender will
not take the place of performance. An unperformed promise cannot
constitute a satisfaction unless such promise amounts to a novation, and
takes the place of the original obligation.
[i] Taylor v. Central of Georgia Ry. Co., 99 Ga. App. 224, 108 S.E.2d 103
(1959)

99

100
Acceptance of Promise as Satisfaction of
Original Obligation
An agreement for the future discharge of an existing claim by a substituted
performance is known as an executory accord. [i] Where the parties agree
that a mere promise of a new performance will satisfy the prior obligation,
the executory accord is enforceable. Thus, an executory accord is
unenforceable and will not bar enforcement of the original obligation
unless the creditor has clearly accepted the new promise of the future
performance as satisfaction. However, the new agreement must be based
upon new consideration.[ii]
[i] Collection Professionals, Inc. v. Logan, 296 Ill. App. 3d 959, 231 Ill. Dec.
225, 695 N.E.2d 1344 (3d Dist. 1998)
[ii] Bruce Tile Co. v. Copelan, 185 Ga. App. 469, 364 S.E.2d 603 (1988)

101

102
Effect of Accord and Satisfaction; Executory Accord
There is an accord and satisfaction when an executory accord is fully
performed, and the previously existing claim is discharged, extinguished, or
barred.
As long as there has not been a justification for the creditors change of
position due to the prospective nonperformance of accord, the executory
accord may suspend the right to enforce the original obligation.
Furthermore, the validity of an antecedent claim does not affect the
enforceability of an accord and satisfaction. Thus, a valid accord and
satisfaction renders a consideration of the defense of the statute of frauds
or of any defense on the merits to items which were originally in dispute.

Effect of Accord and Satisfaction; Executory Accord:
Related Pages
Where Executory Accord is Breached

103

104
Where Executory Accord is Breached
A material breach of an accord is the non-performance of a duty that
justifies the injured party in regarding the whole transaction as at an end.[i]
An accord is enforceable as a contractual agreement in its own right.[ii] An
action may be maintained against the party in default for the breach or
nonperformance of an accord under ordinary contracts principles.[iii] The
obligee may enforce either the original duty or any duty pursuant to the
accord, if the obligor materially breaches the accord.
i] Associated Builders, Inc. v. Coggins, 1999 ME 12, 722 A.2d 1278 (Me.
1999).
[ii] Oregon Mut. Ins. Co. v. Barton, 109 Wash. App. 405, 36 P.3d 1065 (Div.
3 2001).
[iii] Brown v. Noland Co., 403 S.W.2d 33 (Ky. 1966)

105

106
Pleading and Proof
According the general rules of pleading, in responding to a
pleading, a party must affirmatively state any avoidance or
affirmative defense. Accord and satisfaction is an affirmative
defense.[i] Therefore a defense of accord and satisfaction must be
specifically pleaded by the party raising it.[ii]
In the case of Mass v. Melymont[iii], it was observed that an
accord and satisfaction arising from a motorists negotiation of an
automobile insurers settlement drafts following his collision with
insured was an affirmative defense required to be raised by the
insurer in the motorists action seeking the difference between
those drafts and amount charged by the body shop to repair his
car.

Where the defense of accord and satisfaction is not pleaded or
expressly or impliedly consented to between the parties, it will be
considered waived.[iv] However, the plaintiff is required to negate
a claim of accord and satisfaction only when the defendant raises
it. Therefore a person who asserts a claim does not need to
anticipate the defense of accord and satisfaction and negate it in
the initial pleading.[v]
In the case of Dugan & Meyers Const. Co., Inc. v. State of Ohio
Dept. of Administrative Services[vi], it was observed that a state
university which failing to plead accord and satisfaction in its
answer and to make a request to amend its answer during the trial
was taken to have waived the defense of accord and satisfaction to
a lead contractors claim for recovery of cumulative impact costs.
In the case of South Carolina Farm Bureau Mut. Ins. Co. v.
Kelly[vii], proceedings were instituted by the insurer for
reimbursement of claims paid for house fires, which was later
107
determined to have been deliberately started by the insureds son.
The court in this case held that the insured waived the possible
defense that the insurers policy release was an accord and
satisfaction by failing to plead accord and satisfaction in his
answer.
In pleading a defense of accord and satisfaction, the essential
elements of accord and satisfaction should be set forth in the plea
or answer.[viii] However, generally pleadings of accord and
satisfaction tend to be construed liberally by courts.[ix] Therefore
where facts are alleged which, given their proper force and effect,
point to an accord and satisfaction, they may be so regarded even
if not expressly pleaded as constituting an accord and
satisfaction.[x]
In the case of Williams v. Johnson[xi], the answer alleged that an
accord had been reached between the parties consisting of an
agreement between them to settle the claims set forth in the
complaint. It was also pointed out in the answer that the
satisfaction consisted of the payment of the consideration agreed
upon. The court therefore held in this case that the essential
elements of an accord and satisfaction were set forth in the
answer.
An answer sufficiently pleads accord and satisfaction when it
contains or presents all of the elements of an accord and
satisfaction, even if it does not use the terms accord and
satisfaction and even if it could have been more technically or
artfully drawn.[xii]
However where local practice provides for a replication or reply to
a plea or answer setting up an affirmative defense, and an accord
and satisfaction is pleaded, the plaintiff may attack the accord and
satisfaction for fraud[xiii], duress, or mutual mistake by way of
replication or reply[xiv].
108
The plaintiff can also not avoid an accord and satisfaction on the
ground of mistake where mistake was neither pleaded nor
proved.[xv]

[i] Sims-Madison v. Inland Paperboard and Packaging, Inc., 379
F.3d 445 (7th Cir. 2004)
[ii] Waide v. Tractor and Equipment Co., 545 So. 2d 1327 (Ala.
1989)
[iii] 1 Misc. 3d 906(A), 781 N.Y.S.2d 625 (Dist. Ct. 2003)
[iv] Wolowitz v. Thoroughbred Motors, Inc., 765 So. 2d 920 (Fla.
Dist. Ct. App. 2d Dist. 2000)
[v] Landers v. State, 56 A.D.2d 105, 391 N.Y.S.2d 723 (3d Dept
1977)
[vi] 2003-Ohio-3709, 2003 WL 21640882 (Ohio Ct. Cl. 2003)
[vii] 345 S.C. 232, 547 S.E.2d 871 (Ct. App. 2001).
[viii] U.S. v. Lundstrom, 139 F.2d 792 (C.C.A. 9th Cir. 1943)
[ix] Frame v. State ex rel. Comrs of Land Office, 1945 OK 338, 196
Okla. 292, 164 P.2d 865 (1945)
[x] Riskas v. De La Montanya, 145 Cal. App. 2d 636, 302 P.2d 821
(1st Dist. 1956)
[xi] 244 S.C. 406, 137 S.E.2d 410 (1964)
[xii] Cass Const. Co., Inc. v. Brennan, 222 Neb. 69, 382 N.W.2d
313, 42 U.C.C. Rep. Serv. 1591 (1986)
109
[xiii] Weesner v. Leased Transp., 95 Cal. App. 2d 414, 213 P.2d 26
(2d Dist. 1949)
[xiv] Deibel v. Kreiss, 38 Ohio L. Abs. 587, 50 N.E.2d 1000 (Ct.
App. 8th Dist. Cuyahoga County 1943)
[xv] Dickson v. Stockman, 411 S.W.2d 610 (Tex. Civ. App.
Texarkana 1966)

Pleading and Proof: Related Pages
Burden of Proof; Presumption
Admissible Evidence
Questions for Jury

110
Burden of Proof; Presumption
Accord and satisfaction is an affirmative defense. Therefore the burden of
proving all the elements[i] by either clear or convincing evidence[ii] or by a
preponderance of the evidence[iii] is on the proponent.
In case of accord and satisfaction, the claimant is also duty bound to show
that the alleged accord is supported by sufficient consideration. This can be
done either by proving that the claim was unliquidated or disputed.[iv] In
the alternative, the claimant may also prove that the claim was liquidated
but was supported by consideration additional or collateral to the
accord.[v]
The question of whether an accord and satisfaction has been proved is a
question of fact. The burden of proving that a valid accord and satisfaction
was reached is on the defendants.[vi]
Essentially the elements involved in an accord and satisfaction agreement is
that of offer, acceptance and consideration. In the case of Helms v.
University of Missouri-Kansas City[vii], it was observed that the burden of
proving an accord and satisfaction is simply the burden of proving a
contract: offer, acceptance, and consideration. In the case of Webb Business
Promotions, Inc. v. American Electronics & Entertainment Corp.[viii], it
was observed by the court that once the statutory requirements for accord
and satisfaction are met, mutual agreement of the parties to enter into an
accord and satisfaction is presumed as a matter of law. However, this
presumption may be rebutted where the party challenging the accord and
satisfaction can demonstrate, for example, some ambiguity in the language
of the instrument or the accompanying communication. This presumption
is therefore rebutted in circumstances wherein it can be shown that a
reasonable person would not have understood that payment was meant to
discharge the obligation.[ix]
111
Since an accord and satisfaction is basically the substitution of one contract
for another, the debtor must prove that the creditor definitely assented to
the new arrangement.[x] Generally, there is a presumption that parties to
an accord and satisfaction intend that performance of the accord, rather
than the new agreement itself, satisfy the original obligation. Therefore in
order to rebut this presumption, there must be clear evidence that the
parties intended the new agreement as satisfaction.[xi] In other words, the
presumption exists that the intention to relinquish a debt in return for a
mere promise to pay a lesser amount, rather than for the performance of
that promise, is unusual and is not to be implied in the absence of language
compelling that result. In the case of Cullen v. Valley Forge Life Ins.
Co.[xii], it was observed that establishing an accord and satisfaction as a
matter of law requires evidence that permits no reasonable inference to the
contrary and that shows the unequivocal intent of one party to make and
the other party to accept a lesser payment in satisfaction of a larger claim.
Moreover, in accord and satisfaction cases, payment is a matter of
affirmative defense, and the burden of proof lies with the defendant.[xiii]

[i] Sims-Madison v. Inland Paperboard and Packaging, Inc., 379 F.3d 445
(7th Cir. 2004)
[ii] Wallace v. United Mississippi Bank, 726 So. 2d 578 (Miss. 1998)
[iii] Premier Capital, Inc. v. Doucette, 2002 ME 83, 797 A.2d 32, 47 U.C.C.
Rep. Serv. 2d 1409 (Me. 2002)
[iv] In re Marriage of Malec, 205 Ill. App. 3d 273, 150 Ill. Dec. 207, 562
N.E.2d 1010 (1st Dist. 1990)
[v] First Nat. Bank, Lexington, Tenn. v. U.S., 12 Cl. Ct. 719 (1987)
[vi] Williams v. B & K Medical Systems, Inc., 49 Mass. App. Ct. 563, 732
N.E.2d 300 (2000)
112
[vii] 65 Ark. App. 155, 986 S.W.2d 419, 133 Ed. Law Rep. 615 (1999)
[viii] 617 N.W.2d 67, 42 U.C.C. Rep. Serv. 2d 534 (Minn. 2000)
[ix] Webb Business Promotions, Inc. v. American Electronics &
Entertainment Corp., 617 N.W.2d 67, 42 U.C.C. Rep. Serv. 2d 534 (Minn.
2000)
[x] Beard v. George, 135 Idaho 685, 23 P.3d 147 (2001)
[xi] Arkansas Val. Feed Mills, Inc. v. Fox De Luxe Foods, Inc., 171 F. Supp.
145 (W.D. Ark. 1959)
[xii] 161 N.C. App. 570, 589 S.E.2d 423 (2003)
[xiii] Community Builders v. Indian Motocycle Assocs., 44 Mass. App. Ct.
537 (Mass. App. Ct. 1998)

113

114
Admissible Evidence
The general rule is that the party alleging discharge of the debt by accord
and satisfaction must prove the same by cogent evidence. Though clear and
cogent evidence is required, even evidence that tends to prove the existence
of circumstances and conditions which make it more or less likely that the
parties agreed to an accord and satisfaction is admissible in an action to
prove an accord and satisfaction.[i]
Generally, a receipt does not in and of itself constitute an accord and
satisfaction although it is admissible as evidence to that effect.
In the case of Sherman v. Stewart Co.[ii], it was observed that where an
action is brought upon an itemized account and the defendant claims an
accord and satisfaction, testimony as to the amount owing by the defendant
is competent as to the issue of accord and satisfaction; such evidence bears
upon whether the plaintiff would have accepted and the defendant would
have paid the amount claimed in settlement.
In case of accord and satisfaction, parol evidence is admissible to show the
situation of the parties and the circumstances under which the instrument
was made.[iii] In the case of Myers v. American Finance System of
Decatur, Inc.[iv], 615 F.2d 368 (5th Cir. 1980 it was observed by the court
that parole evidence is admissible to determine whether a creditor assents
to a recital in a document of accord and satisfaction.
In the case of Union River Associates v. Budman,[v] it was observed by the
court that the evidence of the parties settlement negotiations was relevant
to establish the existence of an accord and satisfaction. The appellate court
therefore held that in a forcible entry and detainer action the lower court
went wrong in excluding the tenants offer of such evidence.
If the intent as to whether a new agreement abrogates a former contract
cannot be determined expressly or impliedly from the contract provisions,
the court may consider evidence of the surrounding circumstances to
115
determine if an accord and satisfaction exists.[vi] Therefore, in order to
determine the intent of the parties to an accord and satisfaction, a court
engages in an external interpretation of the partys or parties intent. This is
manifested by, among other things, actions, words, prior practice between
the parties, and practices in the trade or profession.[vii]
Evidence of want of consideration, fraud, duress, illegality[viii], or
rescission of the accord contract may be introduced to defeat a claim of
accord and satisfaction.[ix]
[i] Collins v. Gaskill, 359 Mo. 171, 221 S.W.2d 181 (1949)
[ii] 216 Miss. 549, 62 So. 2d 876 (1953)
[iii] Nauman v. McCoy, 84 Ga. App. 131, 65 S.E.2d 853 (1951)
[iv] 615 F.2d 368 (5th Cir. 1980)
[v] 2004 ME 48, 850 A.2d 334 (Me. 2004)
[vi] CitiSteel USA, Inc. v. Connell Ltd. Partnership, 758 A.2d 928 (Del.
2000)
[vii] Weaver v. American Power Conversion Corp., 863 A.2d 193 (R.I.
2004)
[viii] Scheanwald v. Economy Sav. & Loan Co., 117 Ohio App. 29, 23 Ohio
Op. 2d 1, 189 N.E.2d 731 (6th Dist. Lucas County 1960).
[ix] Di Maria v. Mitchell, 112 Cal. App. 2d 691, 247 P.2d 60 (1st Dist. 1952)

116
Questions for Jury
Accord and satisfaction is an affirmative defense and therefore the claimant
is duty bound to show that the alleged accord is supported by sufficient
consideration. This can be done either by proving that the claim was
unliquidated or disputed.[i] In the alternative, the claimant may also prove
that the claim was liquidated but was supported by consideration
additional or collateral to the accord.[ii]
In the case of Premier Capital, Inc. v. Doucette[iii], the court observed that
the existence of an accord and satisfaction is a question of fact unless it is
evidenced by a clear and unambiguous writing.
Therefore the question of whether an accord and satisfaction has been
proved is a question of fact[iv] and is therefore for the jury to decide.[v]
However, the issue becomes one of law if the requisite controlling facts are
undisputed and clear.[vi]

In the case of Owens v. Noble[vii], it was observed by the court that the
determination of whether there is a bona fide or genuine dispute as to the
amount of a claim for which a partial payment has been offered as an
accord and satisfaction is a question for the jury to resolve.
One crucial element for the occurrence of a valid accord and satisfaction is
the aspect of meeting of minds. In the case of M.J. Daly & Sons, Inc. v. City
of West Haven, the court observed that to prove an accord and satisfaction,
the proponent must show that at the time of the agreement there was a
good faith dispute over the existence of a debt. Moreover, it should also be
shown that the debtor and the creditor negotiated a contract of accord to
settle the claim. The proponent must also be able to show that there was a
meeting of the minds, that the offer by the debtor was clearly tendered as
full satisfaction of the debt, and that the payment was knowingly accepted.
To be a valid accord, there must be a meeting of the minds, and whether a
meeting of the minds has occurred is a factual determination.
117
[i] In re Marriage of Malec, 205 Ill. App. 3d 273, 150 Ill. Dec. 207, 562
N.E.2d 1010 (1st Dist. 1990)
[ii] First Nat. Bank, Lexington, Tenn. v. U.S., 12 Cl. Ct. 719 (1987)
[iii] Premier Capital, Inc. v. Doucette, 2002 ME 83, 797 A.2d 32, 47 U.C.C.
Rep. Serv. 2d 1409 (Me. 2002)
[iv] Fassero v. Weinstock & Scavo, P.C., 261 Ga. App. 631, 583 S.E.2d 485
(2003), cert. denied, (Oct. 6, 2003);
[v] Newson v. Protective Industrial Ins. Co. of Alabama, 890 So. 2d 81
(Ala. 2003);
[vi] Pritchett v. Asbestos Claims Management Corp., 332 Ill. App. 3d 890,
266 Ill. Dec. 207, 773 N.E.2d 1277 (5th Dist. 2002)
[vii] Owens v. Noble, 77 Cal. App. 2d 209, 175 P.2d 241 (3d Dist. 1946)

118
State Laws on Accord and Satisfaction
Accord and satisfaction is a concept in contract law dealing with the
purchase of a release from a debt obligation. The accord is the agreement to
discharge the obligation, and the satisfaction is the legal consideration
which binds the parties to the agreement. The negotiated payment is
typically less than what is owed. It is not paid by the actual performance of
the original obligation. In United States, some states have specific statutes
explaining accord and satisfaction, while in other states, courts have
defined the elements constituting accord and constitution.

State Laws on Accord and Satisfaction: Related Pages
Alabama Accord and Satisfaction
Alaska Accord and Satisfaction
Arizona Accord and Satisfaction
Arkansas Accord and Satisfaction
California Accord and Satisfaction
Colorado Accord and Satisfaction
Connecticut Accord and Satisfaction
Delaware Accord and Satisfaction
Florida Accord and Satisfaction
Georgia Accord and Satisfaction
Hawaii Accord and Satisfaction
Idaho Accord and Satisfaction
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Maine Accord and Satisfaction
119
Maryland Accord and Satisfaction
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Minnesota Accord and Satisfaction
Mississippi Accord and Satisfaction
Missouri Accord and Satisfaction
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Nebraska Accord and Satisfaction
Nevada Accord and Satisfaction
New Hampshire Accord and Satisfaction
New Jersey Accord and Satisfaction
New Mexico Accord and Satisfaction
New York Accord and Satisfaction
North Carolina Accord and Satisfaction
North Dakota Accord and Satisfaction
Ohio Accord and Satisfaction
Oklahoma Accord and Satisfaction
Oregon Accord and Satisfaction
Pennsylvania Accord and Satisfaction
Rhode Island Accord and Satisfaction
South Carolina Accord and Satisfaction
South Dakota Accord and Satisfaction
Tennessee Accord and Satisfaction
Texas Accord and Satisfaction
Utah Accord and Satisfaction
Vermont Accord and Satisfaction
Virginia Accord and Satisfaction
Washington Accord and Satisfaction
West Virginia Accord and Satisfaction
Wisconsin Accord and Satisfaction
Wyoming Accord and Satisfaction

120
Virginia Accord and Satisfaction
According to Virginia courts, an accord and satisfaction relates to offer and
acceptance.[i] The acceptance may be implied, where the amount due is
unliquidated, disputed, and a remittance of an amount less than that
claimed is sent to the creditor with a statement that it is in full satisfaction
of the claim, or is accompanied by such acts or declarations as amount to a
condition that if accepted, it is accepted in full satisfaction, and the creditor
accepts it with knowledge of such condition, then accord and satisfaction
results.
The accord is the agreement that a debtor will give and the creditor will
accept something in settlement of a disputed claim.[ii] An accord and
satisfaction does not result unless the debtor intends his/her offer as a
satisfaction of the demand and such intention is clearly made known to the
creditor and accepted by the creditor in accordance with the debtors
intention.
[i] Virginia-Carolina Elec. Works v. Cooper, 192 Va. 78 (Va. 1951)
[ii] John Grier Constr. Co. v. Jones Welding & Repair, Inc., 238 Va. 270
(Va. 1989)

121

122
Maryland Accord and Satisfaction
An accord and satisfaction ordinarily concerns monetary settlements of
debts or liabilities. However, other settlements not involving an exchange
of funds also come under its purview.[i] The principle of accord and
satisfaction is based on equity and is essentially contractual. Consideration
for an accord and satisfaction can be monetary or non-monetary.[ii]
While an accord is an agreement by one party to give or perform and by the
other party to accept, in settlement or satisfaction of an existing or matured
claim, something other than that which is claimed to be due, the
satisfaction is the execution or performance of the agreement.[iii] In the
event of a dispute of claim, the creditors acceptance of payment, coupled
with knowledge that payment was intended fully to satisfy a disputed claim,
constitutes an accord and satisfaction that bars any further recovery.[iv]
Accord and satisfaction is an affirmative defense and the defendant must
prove:
that a dispute arose between the parties about the existence or
extent of liability;
that, after the dispute arose, the parties entered into an agreement
to compromise and settle the dispute by the payment by one party
of a sum greater than that which he admits he owes and the
acceptance by the other party of a sum less than that which he
claims is due; and
that the parties performed the agreement as stipulated.[v]
[i] Automobile Trade Asso. v. Harold Folk Enterprises, Inc., 301 Md. 642,
665 (Md. 1984)
[ii] Id. at 666
[iii] Weston Builders & Developers, Inc. v. McBerry, LLC, 167 Md. App. 24,
55 (Md. Ct. Spec. App. 2006)
123
[iv] Wickman v. Kane, 136 Md. App. 554, 561 (Md. Ct. Spec. App. 2001)
[v] Air Power, Inc. v. Omega Equip. Corp., 54 Md. App. 534, 538-39, 459
A.2d 1120 (1983)

124
Tennessee Accord and Satisfaction
According to Tennessee courts, accord and satisfaction is a term
describing the legal consequence of a creditors acceptance of a substitute
performance for a previously existing claim or prior original duty.[i]
Acceptance of the substitute performance discharges the previously existing
claim. A debtors pleading and proving of the accord and satisfaction is a
complete defense to an action by the creditor on the previously existing
claim.
To constitute a valid accord and satisfaction it is essential that what is given
or agreed to be performed shall be offered as a satisfaction and extinction of
the original demand; that the debtor shall intend it as a satisfaction of such
obligation, and that such intention shall be made known to the creditor in
some unmistakable manner.[ii] Moreover, it is equally essential that the
creditor shall have accepted it with the intention that it should operate as a
satisfaction. The intention of the parties must be determined from all the
circumstances attending the transaction.
[i] Dobbins v. Dabbs, 2007 Tenn. App. LEXIS 39 (Tenn. Ct. App. Jan. 25,
2007)
[ii] Ward v. Wilkinson, 1999 Tenn. App. LEXIS 250 (Tenn. Ct. App. Apr. 19,
1999)

125

126
North Carolina Accord and Satisfaction
North Carolina courts hold that an accord and satisfaction is compounded
of the two elements enumerated in the term.[i] An accord is an agreement
whereby one of the parties undertakes to give or perform and the other to
accept, in satisfaction of a claim, liquidated or in dispute, and arising either
from contract or tort, something other than or different from what s/he is,
or considers himself/herself, entitled to. A satisfaction is the execution or
performance, of such agreement. However, if the accord in an accord and
satisfaction is fully performed, the performance satisfies the original claim.
Plaintiff has the burden of proof on accord and satisfaction.[ii] As a matter
of law, when there is some indication on a check that it is tendered in full
payment of a disputed claim, the cashing of the check is held to be an
accord and satisfaction.[iii]
[i] Dobias v. White, 239 N.C. 409 (N.C. 1954)
[ii] N. C. Monroe Constr. Co. v. Coan, 30 N.C. App. 731 (N.C. Ct. App. 1976)
[iii] Moore v. Bobby Dixon Associates, Inc., 91 N.C. App. 64 (N.C. Ct. App.
1988)

127

128

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