Frequently Asked Questions

Under what scenarios would a settlement not be valid in an accord and satisfaction agreement?

Accord and satisfaction agreements are often used as a defense in breach of contract lawsuits. However, there are certain scenarios where a settlement may not be valid in an accord and satisfaction agreement. According to the Uniform Commercial Code (UCC), a settlement may not be valid if the debtor can prove that before the payment was sent, they were sent a conspicuous statement informing them that any payment sent as full satisfaction should be sent to a designated person, office, or place, and the payment was not sent to that designated location. Another scenario where a settlement may not be valid is if the creditor can prove that they repaid the payment given to them as full payment within 90 days. This implies that the creditor did not accept the payment as full satisfaction of the debt. In addition, businesses should be cautious when accepting checks or drafts marked as "payment in full." Accepting such payments could be construed as accepting an accord and satisfaction agreement. If a creditor cashes such a check without knowing about the notation, or if the creditor strikes out or deletes the "payment in full" notation, they may need to prove that their acceptance of the check did not constitute an accord and satisfaction agreement.