Chapter 16-3 Accord and Satisfaction

• Jurisdiction: United States

16-3 Accord and Satisfaction

The defense of accord and satisfaction is based upon an agreement by the parties that discharges an existing obligation by means of a lesser payment which has been both tendered and accepted.⁷ The "accord" represents the new agreement between the parties.⁸ The "satisfaction" represents the performance of that agreement.⁹ An accord and satisfaction constitutes a complete bar to any action on the original obligation.¹⁰ The defense of accord and satisfaction has its origins in common law, but has also been codified in the UCC. The main differences between the two are that, under the statutory defense, there are requirements that the debt be disputed or unliquidated¹¹ and that the satisfaction may only be obtained through actual payment.¹²

16-3:1 Elements—Common Law

(1) An express or implied contract between the parties;¹³

(a) The agreement must be supported by consideration;¹⁴

(2) In which the parties agree to the discharge of an existing obligation by means of a lesser payment tendered and accepted;¹⁵ and

(3) Which agreement is performed.¹⁶

16-3:2 Elements—Statutory

(1) The defendant tenders an instrument or an accompanying written communication containing a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim;¹⁷

(2) The defendant in good faith tendered an instrument to the claimant as full satisfaction of the claim;¹⁸

(3) The amount of the claim was unliquidated or subject to a bona fide dispute;¹⁹ and

(4) The claimant obtained payment of the instrument.²⁰

16-3:3 Other Substantive Issues

The most difficult part of proving an accord and satisfaction is showing that an agreement existed between the parties. The agreement may be either express or implied,²¹but in either event, the language which sets out the accord must be "so clear, full, and explicit that it is not susceptible of any other interpretation."²²

Because an accord may be implied, a plaintiff may unwittingly enter into an accord. Courts routinely hold that a plaintiff who accepts payment which is clearly conditioned as an accord and satisfaction has impliedly agreed to the accord and satisfaction²³ even if the plaintiff crossed out the language creating the condition or included protest language on the endorsement of the check.²⁴ The rule is the same under the UCC.²⁵

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Notes:

^[7] Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 863 (Tex. 2000).

^[8] Melendez v. Padilla, 304 S.W.3d 850, 852-53 (Tex. App.—El...