Civil Law Compromise, Common Law Accord and Satisfaction: Can the Two Doctrines Coexist in Louisiana?

Author:Sally Brown Richardson
Position:Recipient of the Association Henri Capitant, Louisiana Chapter
Pages:176-217

Page 176

Introduction

Jack and Jill went up the hill, To fetch a pail of water; Jack fell down, and broke his crown, And Jill came tumbling after.1

Each filed suit against the brute, Who owned the land and well; Jack sued the med who fixed his head, And the maker of the pail.

Jack stopped short of going to court, For compromise reared its head;

Parties met to settle their debt, And litigation henceforth was dead.

Jack and Jill are by no means anomalies: the majority of litigation ends in settlement rather than judgment.2 This comes as no surprise given the general "belief that it is good policy to favor compromises" over litigation.3 Louisiana jurisprudence and legislation, however, undermine that goal. There is a tangled web of judicial confusion surrounding settlement agreements in Louisiana, specifically surrounding the doctrines of compromise and accord and satisfaction, thus leaving creditors and debtorsPage 177 unsure of whether they have settled a dispute. Such uncertainty in the law discourages rather than encourages settlement.4

Imagine a run of the mill situation between Jack and Jill. Slightly older and wiser, but still lacking indoor plumbing, Jill makes a deal with Jack: she will pay him $10 to provide her with a regular sized pail of water. Jack shakes her hand, masters the hill, and returns with an extra-large sized pail of water, which he leaves on her doorstep. Jack sends Jill a bill for $15-the pail was, after all, extra-large-and she replies with a check for $10, noting on the back, "For the full amount." Jack sees the notation, cashes the check, and sends a letter to Jill stating, "I cashed your check, but you still owe me $5."

Can Jack sue Jill for the remaining $5, or, by cashing her check, did Jack settle the dispute? In Louisiana, it depends because the state has adopted both the civil law doctrine of compromise and the common law doctrine of accord and satisfaction. Applying the doctrine of compromise, Jack may have a cause of action against Jill for the disputed amount.5 Applying the traditional common law doctrine of accord and satisfaction, however, the dispute between Jack and Jill was settled the moment Jack cashed the check.6 But, under a different interpretation of accord and satisfaction utilized by some Louisiana courts, Jack may still be able to litigate his claim.7 In short, the answer to the question isPage 178 that Jack's outcome depends on which doctrine and what interpretation of that doctrine is applied. To make matters worse, Jack has no means of determining which doctrine or what interpretation will apply until he sees the inside of a courtroom.

At least that was the state of settlement agreements in Louisiana prior to June 25, 2007, when the Civil Code articles pertaining to compromise were amended.8 This Comment strives to establish how the revised articles-specifically Louisiana Civil Code article 3071 regarding compromise and article 3079 regarding accord and satisfaction-may harmonize the present discord between these settlement mechanisms, thereby firmly establishing the rights of creditors and debtors, and, in turn, promoting settlement as opposed to litigation.9

To reach this end, this Comment is divided into four parts. Part I defines the doctrines of compromise and accord and satisfaction within the legal systems from which Louisiana drew them. The history of the foundation of Louisiana's legal system10 and the similarities between Louisiana's original compromise article and that of the Code Napoleon11 provide evidence that Louisiana acquired the concept of compromise from its civilian ancestors.12

Page 179

The doctrine of accord and satisfaction, on the other hand, was borrowed by Louisiana courts from the American common law.13Part II looks beyond the textual definition of the settlement agreements and depicts the analytical approaches used by their respective legal systems to determine whether a settlement has been reached. Generally speaking, the civil law inquiry for compromise focuses on the subjective intent of the parties, whereas the common law examination for accord and satisfaction relies predominately on the parties' outward actions.14 Part III examines the application of each method of settlement in Louisiana and identifies how the muddled use of both doctrines has created judicial confusion. Part IV suggests how the newly enacted articles may provide a solution to the problems that have surrounded Louisiana settlement agreements. Finally, this Comment concludes that the recent revision has untangled the web of judicial confusion but has done so at a potentially high price.

Page 180

I Definition: What Are Compromise and Accord and Satisfaction?

To unravel Louisiana's tangled web regarding settlement agreements, the first questions that must be answered are ones of definition. What is civil law compromise? What is common law accord and satisfaction?

A Civil Law Compromise

In civil law jurisdictions, a compromise is an agreement by which parties end or prevent litigious obligations through reciprocal concessions.15 There are four requirements for a valid compromise: (1) existence of litigation, (2) agreement between the parties, (3) intention of ending or preventing the litigation, and (4) reciprocal concessions made by the parties.16

For an illustration of how these requirements operate, recall the dispute between Jack and Jill. Upon leaving the pail of water for Jill, Jack thinks he is owed $15. Jill believes she only owes $10. Instead of rushing to the nearest courthouse, the two sit down,Page 181 discuss their differences, and reach an agreement: Jill will pay Jack $12.50 for the pail of water. At this point, Jack and Jill have compromised. They have reached an agreement that prevented litigation from occurring by making reciprocal concessions.

This simple situation highlights how the requirements for a valid compromise function. The first requirement-that litigation exist-does not require present judicial litigation to exist, though such would certainly suffice.17 Jack has not commenced an action against Jill; there is only a disagreement between the two. The mere existence of a disagreement, or even the belief that a dispute will arise,18 constitutes litigation for the purposes of reaching a compromise.19 It is easy to understand why such disagreement is required: if the parties did not disagree, there would be nothing about which to settle. Had Jack and Jill both initially believed that Jack was owed $15, then the two would have no dispute to resolve.

Once a dispute has arisen, the second requirement is the natural next step towards reaching a compromise: there must be an agreement between the parties. In civil law jurisdictions, "an agreement is the accord of two or more persons on an object of juridical interest."20 Jack and Jill reached an agreement at the moment they both consented that payment of $12.50 would settle their dispute.

The third requirement establishes the cause of the parties' compromise. For a valid compromise to exist, the agreement must intend to end or prevent the litigation.21 If a dispute arises and the parties enter into an agreement, then the goal of that agreement must be to resolve the dispute via settlement rather than judgment. Otherwise, the agreement does not serve the purpose of aPage 182 compromise, as the disagreement between the parties will continue to exist.

The last requirement for a valid compromise is not as intuitive as the first three, but it distinguishes a compromise from other forms of settlement in civilian jurisdictions: reciprocal concessions must be made by the parties.22 There are other methods of settling disputes in civil law systems "in which the sacrifice is made by one of the parties alone," such as renunciation.23 Requiring that Jack and Jill both concede something to one another is what makes their agreement a compromise.24

In sum, a compromise is an agreement between parties that has the goal of ending or preventing litigation through reciprocal concessions. In order for a compromise to exist, there must be a dispute, the parties must reach an agreement that has as its goal to end or prevent litigation, and reciprocal concessions must be made.

B Common Law Accord and Satisfaction

In the American common law, the term "accord and satisfaction" is used to express "the legal consequence of a creditor's acceptance of a substitute performance for a previously existing claim or prior original duty."25 As the conjunctive name implies, accord and satisfaction consists of two distinct parts. The "accord" of an accord and satisfaction is an agreement in which the creditor promises to accept the substitute performance for the preexisting claim or duty.26 The "satisfaction" is the actual acceptance by the creditor of that substitute performance.27 Used together, these terms represent the legal consequence of acceptingPage 183 performance of the accord as satisfaction,28...

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