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20. If the tenant's only defense is accord and satisfaction, is the tenant likely to prevail?
Upon vacating the building, the tenant mailed a $1,000 check to the window company bearing on its face the following conspicuous notation: «This check is in full and final satisfaction of your $2,000 window replacement bill.» Without noticing this notation, the window company cashed the check and now sues the tenant for the $1,000 difference.
60 days after the window company's satisfactory completion of the window replacement, and prior to the expiration of the tenant's lease, the tenant, then insolvent, ceased doing business and vacated the building. In so doing, the tenant forfeited under the lease provisions its right to the return of a $2,000 security deposit with the landlord. The deposit had been required, however, for the express purpose (as stated in the lease) of covering any damage to the leased property except ordinary wear and tear. The only such damage occuring during the tenant's occupancy was the smashed window. The window company's $2,000 bill for the window replacement is wholly unpaid.
A tenant rented a commercial building from a landlord and operated a business in it. The building's large front window was smashed by vandals six months before expiration of the tenant-landlord lease. The tenant, who was obligated thereunder to effect and pay for repairs in such cases, promptly contracted with a window company to replace the window for $2,000, due 30 days after satisfactory completion of work. The landlord was then unaware of the tenant-window company contract. The window company was aware that the building was under lease, but dealt entirely with the tenant.
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When parties are in a dispute over the proper amount of debt, if the debtor sends the creditor a check for an amount with the notation that the check represents payment in full, and the creditor cashes the check, under the common law view, the debtor is discharged.
Under modern rules of accord and satisfaction, a debtor may make an offer to settle a dispute by offering a check marked «payment in full.» A creditor who cashes a check marked with «in full settlement» or other similar phrasing will lose under UCC § 3-311, as long as: (i) the check contained a conspicuous statement that it was tendered as full satisfaction of the claim; (ii) the claim was subjected to bona fide dispute; and (iii) the debtor acted in good faith. If the notation was sufficiently plain that the creditor should have understood it, then cashing the check without protest amounts to an acceptance of the offer of an accord and satisfaction of the debt. Payment of a lesser sum would not be sufficient consideration to support the modification unless the amount owed to the creditor is genuinely in dispute.
B is correct. Although the tenant made an offer for an accord and satisfaction that the window company accepted when it cashed the check, it was not enforceable because it lacked consideration — the amount of and basis for the debt which the tenant owed to the window company was not in dispute.
A is incorrect. The «payment in full» notation was sufficiently conspicuous to put the window company on notice of its existence.
C is incorrect. An accord and satisfaction is not enforceable unless the debt is genuinely in dispute. Under the UCC, every contract is bound by good faith and fair dealing.
D is incorrect. As explained above, the debt was not genuinely in dispute (in any event, cashing a check with a reservation-of-rights notation most likely would not help the window company).