Montana Law Review

Volume 47
Article 1
Issue 1 Winter 1986

January 1986

A Primer on Accord and Satisfaction

Scott J. Burnham
University of Montana School of Law

Follow this and additional works at: https://scholarship.law.umt.edu/mlr

Part of the Law Commons

Recommended Citation
Scott J. Burnham, A Primer on Accord and Satisfaction, 47 Mont. L. Rev. (1986).
Available at: https://scholarship.law.umt.edu/mlr/vol47/iss1/1

This Article is brought to you for free and open access by The Scholarly Forum @ Montana Law. It has been accepted for inclusion in Montana Law
Review by an authorized editor of The Scholarly Forum @ Montana Law.
 Burnham: A Primer on Accord and Satisfaction

ARTICLES

A PRIMER ON ACCORD AND SATISFACTION

Scott J. Burnham*

I. Introduction ..................................... 1
II. The Common Law Background.................... 2
A. Characterizing the Obligation ................ 2
1. Liquidated or Unliquidated ............... 2
2. Disputed or Undisputed .................. 4
B. The Pre-Existing Duty Rule ................. 4
1. Liquidated and Undisputed Obligations .... 5
2. Unliquidated or Disputed Obligations ..... 6
C. Accord and Satisfaction ...................... 7
D. Substituted Contract ........................ 8
III. Statutory Changes ............................... 11
A. Liquidated and Undisputed Obligations ....... 11
B. A Monkey Wrench in the Works: UCC Section
1-20 7 ...................................... 13
IV . Good F aith ...................................... 17
V . Conclusion ...................................... 19
"He is well paid that is well satisfied." Merchant of Venice,
IV, 1.

I. INTRODUCTION
Attorneys and lay persons use the principles of accord and sat-
isfaction every day. An understanding of these principles allows
disputes to be resolved in an efficient and economical manner. But
failure to grasp the principles can lead the unwary into a trap. Fur-
thermore, a statutory gloss on the principles developed by the
common law may allow lawyerly technicalities to undermine a
common sense result. This article examines these principles and
statutes as they have developed in Montana and proposes the
means by which courts can maintain the usefulness of this body of

*Associate Professor of Law, University of Montana School of Law; B.A., Williams Col-
lege, 1968; J.D., New York University, 1974; L.L.M., New York University, 1981.

Published by The Scholarly Forum @ Montana Law, 1986 1

 Montana Law Review,
MONTANA LAW Vol. 47 [1986], Iss. 1, Art. 1
REVIEW [Vol. 47

law as an informal means of dispute resolution.'

The following situation illustrates the problem. A client calls
her attorney and says:
One of our customers owes us $1000, and we've been having a
problem getting him to pay. Today we got a check from him for
$800. On the back of the check, right over where we would en-
dorse it, are the words "accepted in full satisfaction of my obliga-
tion." We want to take the money, but we still want to be able to
go after him for the other $200. If we cash the check, have we
given up our claim?
To answer this question, it is necessary to examine the common
law background of accord and satisfaction and the statutory altera-
tions of the common law.'

II. THE COMMON LAW BACKGROUND

A. Characterizingthe Obligation
The first step in analyzing an accord and satisfaction problem
is to determine (1) whether the obligation is liquidated or unliqui-
dated, and (2) whether it is disputed or undisputed.

1. Liquidated or Unliquidated
Liquidated means agreed upon by the parties or determined
by the legal process. For example, an agreement between attorney
and client that the attorney will perform services for a flat fee of
$1000 results in a liquidated obligation when the services have
been performed. On the other hand, if the agreement is that the
attorney will bill the client for the reasonable value of the services
and the attorney renders a bill for $1000, the obligation is unliqui-
dated.' In the latter case, the client did not agree to a fee of $1000.

1. Good general sources include RESTATEMENT (SECOND) OF CONTRACTS §§ 278-282

(1981); 12 CAL. JUR. 3D, Compromise, Settlement, and Release §§ 20-36; 6 A. CORBIN, A
COMPREHENSIVE TREATISE ON THE WORKING RULES OF CONTRACT LAW §§ 1268-1302 (1964); E.
FARNSWORTH, CONTRACTS §§ 4.23-.25 (1982); 42 A.L.R. 4th 12 (1985); McLaughlin, Section 1-
207 and "FullPayment": Finding Concord Amidst Discord, NAT'L L.J., Nov. 26, 1984, 20; J.
WHITE & R. SUMMERS, HANDBOOK OF THE LAW UNDER THE UNIFORM COMMERCIAL CODE §§ 1-
5, 13-21 (2d ed. 1980); J. CALAMARI & J. PERILLO, THE LAW OF CONTRACTS §§ 4-10 to 4-12, 5-
16 (2d ed. 1977); Annot., 35 POF2d 735 (1983).
2. Terms used to describe a situation in which the check is offered upon a condition
and the payee understands that cashing the check constitutes assent to the condition in-
clude "full payment check," "check in full settlement," "conditional check," and "condi-
tioned check." See Flambeau Prods. Corp. v. Honeywell Inf. Systems, Inc., 116 Wis. 2d 95,
__ 341 N.W.2d 655, 658 n.3 (1984).
3. See Blottner, Derrico, Weiss & Hoffman, P.C. v. Fier, 101 Misc. 2d 371, 420
N.Y.S.2d 999 (Civ. Ct. Queens Co. 1979).

https://scholarship.law.umt.edu/mlr/vol47/iss1/1 2
 19861 Burnham: A Primer
ACCORD AND on Accord and Satisfaction
SATISFACTION

An example of an obligation liquidated by the legal process ap-

pears in State ex rel. Bishop v. Keating,4 where the court 5 classi-
fied as liquidated the state's obligation to pay the value of cattle
killed by order of the livestock board and assessed pursuant to
statute.6
An unliquidated obligation, such as the attorney's bill based
on the reasonable value of services, can become liquidated under
the doctrine of account stated.7 This doctrine has been well articu-
lated in Montana. In Mattson v. Julian,8 the court stated:
In Johnson v. Tindall, we stated that the basic ingredient of an
account stated is an agreement that the items of the account and
the balance struck are correct and an express or implied agree-
ment for the payment of the balance. Implied agreement for the
payment of the balance may be presumed where there is a course
of dealings, an antecedent indebtedness, and retention of a state-
ment of the account for an unreasonable length of time without
objection."
In Mattson, plaintiff construction company sent defendant owner
a bill for services in December, 1978 and from time to time there-
after. Defendant made no objection to the amount of the bill until
the trial in 1983; in fact, he made a part payment. Applying these
facts to the elements of an account stated, the trial court found an
implied agreement to pay the amount billed. The court affirmed.10
The length of time required before an obligation becomes liq-
uidated under the doctrine of account stated depends on the facts
and circumstances. In Mattson, it was five years. In other cases, it
has been as short as two months." Proving liquidation of the debt

4. 56 Mont. 526, 185 P. 706 (1919).

5. Unless otherwise stated, "the court" refers to the Montana Supreme Court.
6. The relevant statutes are now found in MONT. CODE ANN. §§ 81-2-201 to -210
(1985).
7. RESTATEMENT (SECOND) OF CONTRACTS § 282 (1981) provides:
Account stated.
(1) An account stated is a manifestation of assent by debtor and creditor to a
stated sum as an accurate computation of an amount due the creditor. A party's
retention without objection for an unreasonably long time of a statement of ac-
count rendered by the other party is a manifestation of assent.
(2) The account stated does not itself discharge any duty but is an admission
by each party of the facts asserted and a promise by the debtor to pay according
to its terms.
8. __ Mont. , 678 P.2d 654 (1984).
9. Id. at __, 678 P.2d at 658 (citation omitted).
10. Id.
11. In Johnson v. Tindall, 195 Mont. 165, 635 P.2d 266 (1981), a bill for attorney's
services became liquidated when no objection was made for a period of less than two
months.

Published by The Scholarly Forum @ Montana Law, 1986 3

 Montana Law Review,
MONTANA LAW Vol. 47 [1986], Iss. 1, Art. 1
REVIEW [Vol. 47

is also significant because it represents the point at which pre-

12
judgment interest begins to accrue.

2. Disputed or Undisputed
To make an obligation disputed, the obligor must raise a de-
fense in good faith. The Uniform Commercial Code (UCC) 3 defini-
tion of "honesty in fact""' may serve to distinguish meritorious dis-
putes from those raised to chisel the creditor. Whether a dispute
exists is a question of fact. For example, in Jensen v. Cloud,15
plaintiff truck driver claimed defendant distributor had promised
wages of $5 per trip but paid only $4; defendant claimed there was
a dispute as to the agreed-upon wages. The jury found that there
was in fact no dispute.1 6 Similarly, in Sawyer v. Somers Lumber
Co.," defendant buyer disputed an obligation to plaintiff seller,
claiming the right to offset an amount it owed to a third party. The
court found that the claim was specious, so the obligation was not
disputed.1 8
An interesting issue raised in Sawyer involves the conse-
quences when the obligor disputes a portion of a debt. Defendant,
who owed plaintiff $835, offset the amount of $431 and paid plain-
tiff $404. Does payment of an undisputed portion of a debt permit
the obligor to treat the entire obligation as a disputed one? The
court followed the majority rule that it does.1 9 Even though defen-
dant admitted to owing $404, the dispute as to the $431 made the
entire $835 debt disputed.

B. The Pre-Existing Duty Rule

Having classified the obligation, the next step is to determine
(1) whether it is both liquidated and undisputed, or (2) whether it
is either unliquidated or disputed.

12. MONT. CODE ANN. § 31-1-106(1)(b) (1985).

13. Codified at MONT. CODE ANN. §§ 30-1-101 through 30-9-511 (1985).
14. MONT. CODE ANN. § 30-1-201(19) (1985) provides: "'Good faith' means honesty in
fact in the conduct or transaction concerned."
15. 107 Mont. 593, 88 P.2d 36 (1939).
16. Id. at 598, 88 P.2d at 39.
17. 86 Mont. 169, 282 P. 852 (1929).
18. Id. at 179, 282 P. at 855.
19. "By the great weight of authority a liquidated debt, admitted to be due, is ren-
dered unliquidated by the assertion of a counterclaim or set-off by the debtor, so that it
may be discharged by the payment of a smaller amount." Id. at 178, 282 P. at 855. The
complications arising from this principle are further examined infra notes 28-30 and accom-
panying text.

https://scholarship.law.umt.edu/mlr/vol47/iss1/1 4
 1986] Burnham: A Primer
ACCORD AND SATISFACTION
on Accord and Satisfaction

1. Liquidated and Undisputed Obligations

Matthew 18:23-34 tells the parable of the master who dis-

charges the large debt of his servant. The servant, failing to learn
the lesson of forgiveness, imprisons his own small debtor. When
the master learns of this, he revokes the discharge and imprisons
the servant.
This is not only good religion, but good common law. The dis-
charge was not effective because there was no consideration for it.
Assume that a $1000 debt is liquidated and undisputed. The
debtor has a duty to pay $1000. If the debtor offers to pay $800 in
satisfaction of the debt and the creditor accepts the payment, the
creditor has an enforceable claim for the $200 balance. Even
though the creditor agreed to accept less, that agreement is not an
enforceable contract because it lacks consideration. Since the
debtor had a duty to pay the $800 as part of the $1000, the debtor
gave the creditor no consideration for the creditor's promise to
forego $200.20 This is an application of the "pre-existing duty
rule:" there is no consideration when a promisor merely agrees to
21
do what the promisor was already bound to do.
As a practical matter, there are many occasions when a debtor
offers part payment to discharge a debt. The creditor, valuing a
bird in the hand above two in the bush, may be willing to accept
the part payment in full satisfaction. So the law developed ways
around the inflexibility of the pre-existing duty rule.22 The creditor
could accept a performance different from that originally agreed
to. The creditor could accept, in the lovely expression of Lord
Coke, "a horse, hawk or robe" instead of full payment.2 Or the
creditor could accept performance at an earlier time or a different
place.
Alternatively, the creditor could agree to accept an additional
performance. The problem with accepting $800 in satisfaction of a
$1000 debt is lack of consideration for the $200 which the creditor
foregoes. This problem vanishes if the creditor accepts $800 and a
peppercorn. Since the law does not inquire into the adequacy of
consideration, if the parties deem a peppercorn consideration for

20. Foakes v. Beer, 9 App. Cas. 605 (1884).

21. FARNSWORTH, supra note 1, § 4.21. See Bose v. Sullivan, 87 Mont. 476, 288 P. 614
(1930) (subsequent agreement unenforceable in the absence of consideration).
22. Courts could have distinguished cases in which consideration is required to create
executory duties from cases where duties are discharged but, alas, they did not. See FARNS-
WORTH, supra note 1, § 4.23.
23. Pinnel's Case, 77 Eng. Rep. 237 (1602).

Published by The Scholarly Forum @ Montana Law, 1986 5

 MONTANA LAW
Montana Law Review, Vol. 47REVIEW
[1986], Iss. 1, Art. 1 [Vol. 47

$200, that is their business.2 4 A number of jurisdictions recognized

that these devices elevated form over substance. In some states,
courts simply recognized that creditors benefitted by avoiding the
transaction costs of collection and changed the common law rule.2 5
Others, including Montana, enacted statutes permitting the com-
promise of liquidated, undisputed obligations without
consideration.2

2. Unliquidated or Disputed Obligations

The pre-existing duty rule and the devices to avoid it are only
applicable when the obligation is liquidated and undisputed, for
the problem is lack of consideration. When parties compromise an
unliquidated or disputed obligation, however, consideration exists
in the determination of the debt or the extinguishment of the
claim.27 For example, an attorney retained to perform services at
their reasonable value, renders a bill for $600. The client protests
and the attorney accepts $500 in full satisfaction. The attorney has
no claim for the balance. In consideration of the attorney liquidat-
ing the obligation, the client has acknowledged and satisfied the
obligation. Or if a buyer refuses to pay a $600 bill for goods sold
and delivered on grounds that the goods are defective, the seller's
acceptance of $500 in full satisfaction discharges the obligation. In
consideration of the buyer giving up the claim, the seller has fore-
gone $100.
What if the buyer admits to owing $500 but claims an offset of
$100 for the defective goods? The seller might accept $500 in full
satisfaction, thinking the claim for $100 has been preserved. But
under the rule enunciated in Sawyer, the entire obligation is dis-

24. FARNSWORTH, supra note 1, § 2.11. The quaint references to peppercorns can be
traced back to Blackstone's COMMENTARIES (1766) and Coke's first INSTITUTE (1628).
25. See, e.g., Frye v. Hubbell, 74 N.H. 358, 374, 68 A. 325, 333 (1907):
If costs always equal the expense of litigation, if interest is always full recompense
for delayed payment, and if an execution is always equivalent to money in hand,
then a present part payment of a debt in cash is in fact never beneficial to the
creditor or detrimental to the debtor, and can never be a consideration for a dis-
charge of the balance. Whatever the conclusions of scholastic logic, as men having
some acquaintance with affairs judges are bound to know that none of these pro-
positions are always, if ever, true; and as they are not always all true, it cannot be
matter of law that in a particular case a part payment was not such a benefit to
the creditor or detriment to the debtor as to furnish a consideration for the credi-
tor's agreement of discharge.
The case is discussed in Burnham, Contract Damages in Montana Part I: Expectancy
Damages, 44 MONT. L. REV. 1, 2-3 (1983).
26. This statute, MONT. CODE ANN. § 28-1-1403 (1985), is analyzed infra, Part III.A.
27. FARNSWORTH, supra note 1, § 4.23.

https://scholarship.law.umt.edu/mlr/vol47/iss1/1 6
 1986] Burnham: A Primer
AND on Accord and Satisfaction
SATISFACTION
ACCORD

puted and has been satisfied by the $500 payment. 8 Displeased

with this result, some courts have held that the creditor should be
permitted to accept the undisputed amount and retain the right to
litigate the disputed amount. 9 When the debtor pays only the dis-
puted amount, there is technically no consideration for the dis-
charge of the balance. The better rule is that the debtor has of-
fered the tendered amount for the purpose of concluding the
transaction. The law should not permit a creditor who assents to
the extinction and discharge of a claim to sue on it later.30 To
avoid this controversy, a prudent attorney might advise debtors to
tender slightly more than the undisputed amount.

C. Accord and Satisfaction

The parties' agreement to accept partial performance in full
satisfaction of an unliquidated or disputed obligation is a form of
contract called an accord.3 1 The agreement hovers like Tinkerbell
until it has been fully performed. The full performance is known as
satisfaction.2 Accord and satisfaction, then, discharge the original
obligation. If the accord is not fully performed, it is breached. The
injured party may sue either on the accord or on the original obli-
gation, which is revived by the breach;3 3 any partial performance is
treated as a payment on account. 4 In the example of the attorney
billing $600 for the reasonable value of services, assume the parties
reach an accord to settle the obligation for $500 payable in 30
days. The client pays only $400 in 30 days. The attorney may treat
the accord as breached, revive the $600 claim, and sue for the $200
balance due.
While the injured party rarely sues on the accord, it may hap-
pen when the obligor promises something different from the prom-

28. See supra note 19 and accompanying text.

29. 6 A. CORBIN, CONTRACTS, supra note 1, § 1289. This argument provides an alterna-
tive foundation for the result achieved by the application of UCC § 1-207. See infra notes
61-77 and accompanying text.
30. In Kilander v. Blickle Co., 280 Or. 425, 429, 571 P.2d 503, 505 (1977), the Oregon
Supreme Court stated:
It would be too technical a use of the doctrine of consideration to release a well-
counseled debtor who tenders a nominal amount beyond his admitted debt but to
trap one less sophisticated who is induced to pay the undisputed amount in return
for his creditor's illusory promise to forgive the rest.
31. MONT. CODE ANN. § 28-1-1401 (1985).
32. MONT. CODE ANN. § 28-1-1402 (1985).
33. 6 A. CORBIN, CONTRACTS, supra note 1, § 1271 at 93-94; FARNSWORTH, supra note 1,
§ 4.24 at 285. A good example is a composition among creditors.
34. In the absence of the debtor's performance of an agreement by the creditor to
accept less than full payment, a payment is "merely applied on the debt." Nett v. Stock-
growers' Fin. Corp., 84 Mont. 116, 129, 274 P. 497, 500 (1929).

Published by The Scholarly Forum @ Montana Law, 1986 7

 Montana Law Review,
MONTANA LAW Vol. 47REVIEW
[1986], Iss. 1, Art. 1 [Vol. 47

ise in the original agreement. For example, in Davis v. Sullivan

Gold Mining Co., 5 defendant employer claimed that plaintiff em-
ployee agreed to accept mining company shares in satisfaction of
wage claims. When defendant failed to perform, plaintiff had the
choice of suing for either the wages or the shares.
Since an accord is a contract, the agreement to settle an unliq-
uidated or disputed obligation must satisfy not only the require-
ment of consideration but all the criteria of contract formation."
Offer and acceptance must be present. The law favors settlement,
but it must be a knowing settlement, clearly communicated to each
party.3" A. notation endorsed on a check is not sufficient to create
an accord without a prior understanding or an accompanying no-
tice.3 8 The offeree must either accept the offer on its terms or re-
ject it. A creditor who, knowing that an obligation is unliquidated
or disputed, strikes off the restrictive endorsement or holds the
check for an unreasonable amount of time, may well have accepted
the settlement.3 "

D. Substituted Contract
A fruitful source of difficulty is the failure of the parties to
distinguish between an accord and satisfaction and a substituted
contract. When parties enter an accord, the obligee agrees to
forego part of the obligation in exchange for some consideration
from the obligor. They usually intend that consideration to be per-
formance of the obligor's new promise. The old agreement hovers
until the performance is complete and can be revived if perform-
ance is not completed.
But parties may at any time rescind their original contract
and form a new contract.4 0 They mutually discharge the duties

35. 103 Mont. 452, 62 P.2d 1292 (1936).

36. 6 A. CORBIN, CONTRACTS, supra note 1, § 1277. See Hicks v. Stillwater Co., 84
Mont. 38, 274 P. 296 (1.929) (no contract where mutual mistake).
37. In Kibler v. Frank L. Garrett & Sons, Inc., 73 Wash. 2d 523, 439 P.2d 416 (1968),
the court held that neither a printed notation on a check nor ambiguous language in an
accompanying letter were sufficient to communicate an offer to enter an accord and
satisfaction.
38. 6 A. CORBIN, CONTRACTS, supra note 1, § 1293.
39. This is one of the few instances of acceptance by silence. See Barbarich v. Chicago,
M., St. P. & P. Ry. Co., 92 Mont. 1, 15, 9 P.2d 797, 801 (1932); Annot., 42 A.R.R. 4th 117
(1985)
The issue of whether certification of a check constitutes acceptance of an offer of ac-
cord is discussed at Annot., 42 A.L.R. 4th 95 (1985).
40. This new agreement is also called a novation, although the common practice is to
use novation when the new obligation is undertaken by a third party and substituted con-
tract when it is undertaken by the same parties. 6 A. CORBIN, CONTRACTS, supra note 1, §
1293 at 190.

https://scholarship.law.umt.edu/mlr/vol47/iss1/1 8
 1986] Burnham:
ACCORD A Primer
ANDon Accord and Satisfaction
SATISFACTION

under the old contract and accept new promises. Each promise in
the new contract is good consideration for the other.4 1 The old con-
tract does not hover, but is extinguished as soon as the new, sub-
stituted contract is made. In compromising an obligation by enter-
ing a substituted contract, an obligee settles for the promise of
performance, not performance itself.
Under a substituted contract, therefore, if the obligor does not
perform, the obligee is stuck with enforcing the new promise.4 2 An
obligee may claim an accord was intended, but since courts mea-
sure intention objectively, careless expression can lead to an unin-
tended result. For example, A has a $10,000 tort claim against B.4 a
After negotiations, A promises to release B in exchange for B's
promise to pay A $5000 within 30 days. B does not pay. A, think-
ing an accord has been breached, revives the tort claim. B raises
the affirmative defense of accord and satisfaction.4 4 B's defense is a
good one. A originally had an unliquidated claim and B had a po-
tential liability. The parties discharged this claim and agreed to
new obligations: A's promise to release B and B's promise to pay
the liquidated amount of $5000. A valid substituted contract has
been formed. 45 B has breached that contract; A's remedy is to sue

RESTATEMENT (SECOND) OF CONTRACTS § 280 (1981) defines novation as exclusively a

substituted contract that includes a third party, but Montana Code Annotated defines it to
include a new contract between the same parties as well. MONT. CODE ANN. § 28-1-1502
(1985) states:
Novation is made by the substitution of:
(1) a new obligation between the same parties with intent to extinguish the
old obligation;
(2) a new debtor in place of the old one with intent to release the latter; or
(3) a new creditor in place of the old one with intent to transfer the rights of
the latter to the former.
41. RESTATEMENT (SECOND) OF CONTRACTS § 71 (1981).
42. An accord that contemplates performance is often called an executory accord or
accord executory. 6 A. CORmN, CONTRACTS,supra note 1, § 1269. If an obligee sues on the
original contract, the obligor may raise as defenses accord and satisfaction or substituted
contract, either of which would prevent the obligee from reviving the original contract. An
executory accord is not a defense, for if the obligor does not perform the executory accord,
the obligee may revive the original contract.
43. Note that a claim may serve as the basis for an accord. The Montana statutes
provide for an accord and satisfaction to discharge an obligation. MONT. CODE ANN. §§ 28-1-
1401, -1402 (1985). An obligation may arise either by contract or by operation of law. MONT.
CODE ANN. §§ 27-1-105, 28-1-101, -102 (1985).
44. MONT. R. Civ. P. 8(c) requires that accord and satisfaction be pleaded as an affirm-
ative defense. In Nett v. Stockgrowers' Fin. Corp., 84 Mont. 116, 274 P. 497 (1929) and
Nelson v. Young, 70 Mont. 112, 224 P. 237 (1924), parties who failed to plead the affirmative
defense were not allowed to raise it at trial.
45. This example points out that the term "substituted contract" is a misnomer; the
original obligation may be a mere claim. 6 A. CORBIN, CONTRACTS, supra note 1, § 1268.

Published by The Scholarly Forum @ Montana Law, 1986 9

 Montana Law Review,
MONTANA LAWVol. 47REVIEW
[1986], Iss. 1, Art. 1 [Vol. 47

for $5,000.46
The prudent attorney should protect the client against an un-
secured promise by stipulating a remedy for its breach. For exam-
ple, in this situation the stipulation and order of dismissal could
provide that if B does not pay the $5,000 in 30 days, A may enter
judgment for the full amount of the claim, less payments made. If
the promise is for a substantial future performance, as in a struc-
tured settlement, the payment should be secured. Obtaining a
promissory note is not sufficient. The note is merely a promise to
pay. If a creditor accepts a note in satisfaction and the note is un-
paid, the creditor may sue on the note but may not revive the orig-
47
inal claim.
If the parties do not express their intention, determining that
intent becomes, as with any contract, a question of interpreta-
tion.48 In determining whether the parties intended the promise or
the performance to discharge the obligation, courts consider: (1)
whether the parties formed the new contract before any breach of
the original; (2) if after breach, whether the breach was disputed;
(3) if after breach, whether the amount of the claim for breach was
liquidated. In case (1) it looks more like substituted contract; in
(2) and (3), more like accord and satisfaction. 9
In the example of the attorney who has an unliquidated claim
for $600 worth of services, it could be fatal for the attorney to bill
the client for $500 after the accord is reached. If the client
breaches the accord, the attorney wishes to revive the original $600
claim. The bill for $500, however, is strong evidence that a substi-
tuted contract was formed. In the new contract, the attorney's
agreement to accept $500 is consideration for the client's promise
to pay that liquidated amount. Following the wiser course, an at-
torney should make express the intention to form an accord by
sending a bill for $600 with a notation on the bill that it may be

46. Imagine trying to explain that to your client!

47. 6 A. CORBIN, CONTRACTS, supra note 1, § 1293 at 195. See Gallaher v. Theilbar
Realties, 93 Mont. 421, 18 P.2d 1101 (1933) (part payment in cash and a note for the bal-
ance discharged the obligation). Courts have been known to let creditors off the hook by
stating that the note was taken as a "conditional payment," i.e., with the intention of reviv-
ing the original obligation if the note were not paid. Acceptance of a check, on the other
hand, does not operate as payment of the sum due until the check has been paid. Kalman v.
Treasure Co., 84 Mont. 285, 275 P. 743 (1929).
48. 6 A. CORBIN, CONTRACTS, supra note 1, § 1293.
49. E. IMWINKLREID, HANDBOOK FOR THE TRIAL OF CONTRACTS LAWSUITS, 303-306
(1981). This issue is analyzed in Goggins v. Bookout, 141 Mont. 449, 378 P.2d 212 (1963);
Flint v. Mincoff, 137 Mont. 549, 353 P.2d 340 (1960); Davis v. Sullivan Gold Mining Co., 103
Mont. 452, 62 P.2d 1292 (1936); Barbarich v. Chicago, M., St. P. & P. Ry. Co., 92 Mont. 1, 9
P.2d 797 (1932).

https://scholarship.law.umt.edu/mlr/vol47/iss1/1 10
 1986] Burnham:
ACCORD A Primer
AND on Accord and Satisfaction
SATISFACTION

satisfied by the payment of $500 within 30 days. The attorney

would thereby make clear that the promise of performance consti-
tuted the consideration for the $100 reduction.
In an interesting Montana case, Barbarich v. Chicago, Mil-
waukee, St. Paul & Pacific Railway,50 plaintiff had a tort claim
against defendant railroad. After negotiating a settlement of plain-
tiff's claim for $500 and a railway pass, defendant sent a check and
the pass to plaintiff's lawyer, Wellington Rankin. Plaintiff then re-
pudiated the settlement. Defendant first claimed that plaintiff had
settled the claim for its promise of payment, not the performance.
Analyzing the intent, the court held that the parties intended to
settle the obligation by performance."' Defendant next claimed
that since it had performed by delivering the draft and pass to
Rankin, the obligation was satisfied by accord and satisfaction.
The court held that there was no performance, for defendant ten-
dered a check rather than cash, and Rankin lacked authority to
52
endorse the check.

III. STATUTORY CHANGES

A. Liquidated and Undisputed Obligations

While common law theories of contract formation were ade-
quate to permit the compromising of unliquidated or disputed ob-
ligations, there remained the problem of settling liquidated and
undisputed obligations. As a practical matter, parties may wish to
settle without tendering an alternative performance such as "a
horse, hawk or robe." Montana Code Annotated section 28-1-1403
provides the solution. The statute avoids the pre-existing duty rule
by enabling the parties to settle a liquidated and undisputed obli-
gation without consideration:
When part performance extinguishes obligation. Part perform-
ance of an obligation, either before or after a breach thereof,
when expressly accepted by the creditor in writing in satisfaction
or rendered in pursuance of an agreement in writing for that pur-
pose, though without any new consideration, extinguishes the
obligation.
It is a relatively simple matter to track the statute to deter-
mine whether all the elements have been satisfied. Was the obliga-
tion liquidated and undisputed? To avoid confusion, the statute

50. 92 Mont. 1, 9 P.2d 797 (1932).

51. Id. at 14, 9 P.2d at 800.
52. Id. at 15, 9 P.2d at 801.

Published by The Scholarly Forum @ Montana Law, 1986 11

 Montana Law Review,
MONTANA LAWVol. 47REVIEW
[1986], Iss. 1, Art. 1 [Vol. 47

should be applied only to liquidated and undisputed obligations.

For example, A sends a $600 bill to B, who disputes the obligation.
A and B orally agree that B may satisfy the obligation with a pay-
ment of $500. B performs. Is the obligation satisfied? Under the
statute, it appears it is not, for the creditor's acceptance of part
performance was not in writing. But it is satisfied, for B supplied
consideration by giving up the dispute. Fewer errors of this sort
will result if the statute is reserved for liquidated and undisputed
obligations, which require a substitute for consideration. 3
Was there an agreement to accept part performance? Common
law standards of contract formation assist in this determination.
Was the agreement in writing and expressly accepted? In Sawyer,
the court held that the creditor's mere endorsement on a check is
not the kind of express acceptance contemplated by the statute. 4
This decision is wise. The obligor of a disputed obligation must
give notice of the dispute independently of the check.5 5 Similarly,
the obligor of an undisputed obligation should make clear to the
obligee that the obligation is being compromised by acceptance of
the check. In the case of volume creditors, who routinely endorse
checks without reading the restrictions, a contrary ruling could be
56
catastrophic.
Was there performance of the agreement? A substituted con-
tract cannot arise under the statute, for it states that "[p]art per-
formance of an obligation. . . extinguishes the obligation. ' 57 This
language makes clear that performance, and not the promise of
performance, is required. Note, however, that the statute requires
part performance of the obligation. "Part performance" must refer
to the creditor's agreement to accept less than full performance of
the obligation. It cannot mean that the debtor may extinguish the
obligation by performing less than the full extent of the new per-

53. For an example of its misapplication, see Kelly v. David D. Bohannon Org., 119
Cal. App. 2d 787, -, 260 P.2d 646, 649-50 (1953), which cites the corresponding Califor-
nia statute, CAL. CIV. CODE § 1524, and states "[a]n accord and satisfaction must be predi-
cated upon a bona fide dispute, a real dispute."
54. Sawyer v. Somers Lumber Co., 86 Mont. 169, 177, 282 P. 852, 854 (1929).
55. See supra notes 37-38 and accompanying text.
56. See Consolidated Edison Co. v. Arroll, 66 Misc. 2d 816, 322 N.Y.S.2d 420 (Civ. Ct.
N.Y. Co. 1971), in which the court rejected a claim by plaintiff, a large utility, that the
"nature and volume of its operations does not allow for an examination of each and every
check it receives for language written thereon which could bind it to an accord and satisfac-
tion." Under the facts, defendant was not relying on the statute but on a dispute clearly
communicated in a separate writing.
The facts of Arroll form the basis for the proof of an accord and satisfaction offered in
Annot., 35 POF2d 735, 754-61 (1983).
57. MONT.CODE ANN. § 28-1-1403 (1985) (emphasis added).

https://scholarship.law.umt.edu/mlr/vol47/iss1/1 12
 1986] Burnham:
ACCORD A Primer
AND on Accord and Satisfaction
SATISFACTION

formance agreed to by the creditor. The purpose of the statute is

to dispense with consideration, not to dispense with the principle
that a breached accord revives the original obligation. For dis-
charge, it requires the debtor's full performance of the part of the
original performance which the creditor agreed to accept. 8
Application of the statute may be seen in a California case,5
in which P obtained judgment against D for $465.06 plus interest
and costs. P agreed in writing to accept payment of $483.34 in
monthly installments of $50 in full satisfaction of the obligation. D
made payments aggregating $363.48 and then defaulted. P sought
execution for the unpaid balance of the original judgment and D
moved to stay execution. The Court of Appeal allowed the execu-
tion on grounds that there was no satisfaction of the accord, stat-
ing that the statute "has no application to the circumstances of the
present case." 5 9 The result is correct; the reasoning is not. This was
a liquidated obligation, determined by the trial court that issued
judgment."0 Because there was no consideration for the creditor's
agreement to accept less, no accord could be formed under the
common law. The agreement to accept less was effective only be-
cause of the statute. Applying the statute to the facts, the creditor
agreed in writing to accept part performance, but the debtor did
not fully perform under the new agreement. Therefore the original
obligation was revived. The payments made were credited as pay-
ments on account and the creditor was entitled to execution for the
unpaid balance.

B. A Monkey Wrench in the Works: UCC Section 1-207

Application of the principles of accord and satisfaction should
assist parties in making knowing, deliberate, and expeditious reso-
lution of their disputes. However, this assistance fails because
some courts apply section 1-207 of the Uniform Commercial Code
to this situation. The section provides:
Performance or acceptance under reservation of rights. A party
who with explicit reservation of rights performs or promises per-
formance or assents to performance in a manner demanded or of-
fered by the other party does not thereby prejudice the rights re-
served. Such words as "without prejudice", "under protest" or the
like are sufficient.
Creditors use the statute in this situation. A debtor communicates

58. Blumer v. Madden, 128 Cal. App. 22, 16 P.2d 319 (1932).
59. Id. at -, 16 P.2d at 321.
60. See supra notes 3-5 and accompanying text.

Published by The Scholarly Forum @ Montana Law, 1986 13

 Montana Law Review, Vol. 47 [1986], Iss. 1, Art. 1
MONTANA LAW REVIEW [Vol. 47

a dispute to a creditor. The debtor tenders a check for part pay-

ment with the notation "accepted in full satisfaction," over the en-
dorsement, inviting an accord and satisfaction. The creditor en-
dorses the check, adding the words "accepted without prejudice."
The creditor intends to reject the debtor's attempt at an accord
and satisfaction, accept the payment as a payment on account, and
reserve a claim for the balance. Will the creditor succeed?
Authority is sharply divided.6 1 The differing views of courts in
South Dakota, Wisconsin, and New York are useful in analyzing
this question. In Scholl v. Tallman, 2 the Supreme Court of South
Dakota, upholding a creditor's right to collect the balance of an
obligation where the creditor crossed out the debtor's conditional
endorsement and wrote "Restriction of payment in full refused,"
stated:
We do not agree with the defendant's contention that this result
dictates the demise of accord and satisfaction as an effective
method of commercial compromise. The doctrine has long been
an effective method of avoiding litigation; it will serve that func-
tion whenever rights are not explicitly reserved. It remains availa-
ble as a device to facilitate the private resolution of honest dis-
putes through compromises made in good faith. 3
If this court desired to prevent chiseling by limiting accord and
satisfaction, it may have gone too far, for the decision may prevent
all informal compromises, not just the coerced ones. At best, it
shifts the advantage to creditors, leaving them in a position to co-
erce debtors who have offered an accord in good faith. Further-
more, just as it may take a sophisticated creditor to use the stat-
ute, a sophisticated debtor can make the offer conditional on the
creditor's not invoking the statute. 4 This "Battle of the Condi-
tional Check Endorsements" brings us a long way from a dispute
resolution device that is accessible to lay persons as well as to so-

61. The many cases on this topic are collected at Annot., 37 A.L.R.4th 358 (1985). Law
review citations may be found in Flambeau Prods. Corp. v. Honeywell Inf. Systems, Inc.,
116 Wis. 2d 95, -, 341 N.W.2d 655, 659 n.4 (1984). See also McLaughlin, supra note 1,
and WHITE AND SUMMERS, supra note 1, §13-21.
62. 247 N.W.2d 490 (S.D. 1976).
63. Id. at 493.
64. For example, in a letter to the National Law Journal, December 10, 1985, a Chi-
cago attorney recommended that the debtor use this language:
Payment in full. Upon cashing this check the creditor agrees to fully discharge the
debtor from liability arising out of (specified obligation) and further agrees not to
reserve any rights with respect to that obligation and waives his right to use Sec-
tion 1-207 of the Uniform Commercial Code. The return or destruction of this
check shall mean that the creditor has rejected these conditions, but the act of
cashing it shall be deemed to be conclusive evidence that he has accepted them.
https://scholarship.law.umt.edu/mlr/vol47/iss1/1 14
 Burnham: A Primer on Accord and Satisfaction
1986] ACCORD AND SATISFACTION

phisticated attorneys.
As long as we must live with the statute, the proper question
is not whether use of it to defeat an accord and satisfaction is de-
sirable, but whether the legislature intended it. In rejecting appli-
cation of this statute to the common law doctrine of accord and
satisfaction in FlambeauProducts Corp. v. Honeywell Information
Systems, Inc.,65 the Supreme Court of Wisconsin looked to the Of-
ficial Comments to the UCC, the legislative history, and rules of
construction. The Official Comments make no reference to the
statute's applicability to accord and satisfaction. The Comments
suggest that the statute did not change common law, but clarified a
party's rights during a continuing course of performance.66 For ex-
ample, in the famous "chicken" case, buyer, who was shipped stew-
ing chickens when it expected fryers, sent seller a cable stating
that it was accepting the shipment without prejudice to its rights
to recover damages and to receive frying chickens in future deliv-
eries.6 While the court in Flambeau based its reasoning on the
Comments, a trial court in Pennsylvania strengthened this analysis
with reference to the text of the UCC. a This court based its con-
clusion that the statute is inapplicable to accord and satisfaction
on the fact that section 1-207 "refers only to performance and does
not mention payment."6 9 The court observed that where the UCC
intends a statute to apply to payment, as in section 1-208, it men-
tions both performance and payment."'
The study of Wisconsin legislative history in Flambeau
showed that an earlier draft of Article 3 included a codification of
common law accord and satisfaction. The drafters later dropped
this provision. The court inferred that the presence of the two sec-
tions in the same draft suggested that each addressed a different
need. Therefore, section 1-207 could not address accord and satis-
faction. 7' Turning to rules of construction, the court noted that the
UCC states in section 1-102(1) that it "shall be liberally construed
and applied to promote its underlying purposes and policies," one
of which is to "simplify, clarify, and modernize the law governing

65. 116 Wis. 2d 95, 341 N.W.2d 655 (1984).

66. Id. at -, 655 N.W.2d at 660-61.
67. Frigaliment Importing Co. v. B.N.S. Int'l Sales Corp., 190 F. Supp. 116 (S.D.N.Y.
1960).
68. KCF Constr. Inc. v. Amper, 36 U.C.C. Rep. Serv. 369 (Pa. Ct. C. P. Allegheny Co.
1983).
69. Id. at 375.
70. Id.
71. Flambeau, 116 Wis. 2d at -, 341 N.W.2d at 661-62. This negative inference
does not seem justified. The drafters might also have dropped the reference in Article 3
because it duplicated another provision.

Published by The Scholarly Forum @ Montana Law, 1986 15

 Montana Law Review,
MONTANA LAW Vol. 47REVIEW
[1986], Iss. 1, Art. 1
[Vol. 47

commercial transactions." The court reasoned that the simplifica-

tion of the resolution of commercial disputes would be better
served by the common law of accord and satisfaction.7
New York has adopted a middle position. That state's legisla-
tive history specifically refers to the application of the statute to
payment as well as to performance.7 3 Therefore, the statute is ef-
fective when used in transactions involving the sale of goods, i.e.,
Article 2 of the UCC.7 4 This seems illogical. The state makes the
statute applicable to Article 2 transactions, but the section is in
Article 1. The Article 1 provisions apply throughout the UCC, in-
cluding Article 3, which deals with the use of checks. Therefore, it
should apply to a conditional check for services as well as to the
sale of goods. At best, the New York rule establishes consistency,
but that is debatable given the amount of litigation over whether a
transaction involves the sale of goods.75 And New York courts are
divided on the effectiveness of the statute in non-UCC transac-
tions, such as real estate sales and services. 6
All of these decisions overlook the fact that when a court ap-
plies the statute to accord and satisfaction, it improperly charac-
terizes the behavior of the parties. Assume that the parties first
agree to an accord and the debtor later performs by payment. The
creditor could not invoke section 1-207 when the debtor pays, for
the statute contemplates reservation of rights in the face of defec-
tive performance. 77 There is no defective performance when the
debtor performs pursuant to the terms of an accord. Assume, alter-
natively, that the debtor tenders a conditional check. The debtor is

72. Id. at -, 341 N.W.2d at 661-62. See also Connecticut Printers, Inc. v. Gus
Kroesen, Inc., 134 Cal. App. 3d 54, 184 Cal. Rptr. 436 (1982).
73. REPORT OF THE COMMISSION ON UNIFORM STATE LAWS TO THE LEGISLATURE OF THE
STATE OF N.Y. 19-20 (1961), incorporated as New York Annotations in N.Y. U.C.C. § 1-207
(McKinney 1964).
74. Braun v. C.E.P.C. Distribs., Inc., 77 A.D.2d 358, 433 N.Y.S.2d 447 (1st Dep't 1980).
75. WITE AND SUMMERS, supra note 1, § 2-2. In Geelan Mech. Corp. v. Dembar Con-
str. Corp., 97 A.D.2d 810, 468 N.Y.S.2d (1983), the court first had to resolve whether a
construction subcontract was a UCC transaction; determining that it was not, the court then
held that the statute was not effective.
76. Gimby v. Frost, 84 A.D.2d 806, 444 N.Y.S.2d 143 (2d Dep't 1981) (sale of real
property; statute not effective); Ayer v. Sky Club, Inc., 70 A.D.2d 863, 418 N.Y.S.2d 57 (1st
Dep't 1979), appeal dismissed, 48 N.Y.2d 705, 397 N.E.2d 758, 422 N.Y.S.2d 68 (1979) (sale
of services; statute effective).
77. Official Comment 1 states:
This section provides machinery for the continuation of performance along the
lines contemplated by the contract despite a pending dispute, by adopting the
mercantile device of going ahead with delivery, acceptance, or payment "without
prejudice," "under protest," "under reserve," "with reservation of all our rights,"
and the like.
(Emphasis added).

https://scholarship.law.umt.edu/mlr/vol47/iss1/1 16
 1986] Burnham:
ACCORD A Primer
ANDon Accord and Satisfaction
SATISFACTION

offering simultaneously to enter an accord and to perform it. By

invoking the statute in these circumstances, the creditor must be
characterizing as defective the performance under the original
agreement. But this misstates the transaction. The debtor is not
defectively performing the original transaction; the debtor is offer-
ing to enter into a new transaction. Courts should not permit a
creditor to reject an offer while accepting its benefits on the basis
of a knowingly wrongful characterization.

IV. GOOD FAITH

There is a tension in the law of accord and satisfaction. On the

one hand, the principles permit inexpensive and informal resolu-
tion of disputes outside of court. On the other hand, a chiseler can
easily raise a phony dispute in order to escape the full extent of an
obligation. This concern has engendered a number of criticisms of
the law. One authority refers to the debtor's offer to pay an
amount less than the total debt as "an exquisite form of commer-
cial torture."7 8 A student note goes so far as to suggest that "[t]he
positions of the parties to an accord and satisfaction are frequently
the reverse of the classic debtor-creditor relationship, with the
creditor practically at the mercy of the so-called debtor."7 9 Because
of the high transaction costs of recovering the full obligation (i.e.,
recovery of minimal costs, low interest, and no recovery of attor-
neys' fees), the creditor will often be forced by economic reality to
accept the lesser amount."'
If the creditor spurned the lesser amount and took the debtor
to court, exposing the chiseler's scheme, the victory would be Pyr-
rhic. The phoniness of the dispute would not increase the recovery
or reduce the transaction costs of the creditor. 1 But this would not

78. WHITE AND SUMMERS, supra note 1, § 13-21 at 544.

79. Note, Role of the Check in Accord and Satisfaction: Weapon of the Overreaching
Debtor, 97 U. PA. L. REV. 99, 100 (1948).
80. See the discussion of transaction costs in Montana in Burnham, Contract Dam-
ages in Montana Part I: Expectancy Damages, 44 MoNT. L. REV. 1, 47-49 (1983).
81. A colorful, if archaic, example is found in Hackley v. Headley, 45 Mich. 569, 8
N.W. 511 (1881), aff'd after remand, 50 Mich. 43, 14 N.W. 693 (1883). Headley obtained
payment of $4000 in full satisfaction of a $6200 claim against Hackley. The court described
the circumstances under which this accord and satisfaction came about as follows:
Hackley told Headley to come in again in the afternoon, and when he did so
Hackley said to him: "My figures show there is 4,260 and odd dollars in round
numbers your due, and I will just give you $4,000. I will give you our note for
$4,000." To this Headley replied: "I cannot take that; it is not right, and you know
it. There is over $2,000 besides that belongs to me, and you know it." Hackley
replied: "That is the best I will do with you." Headley said: "I cannot take that,
Mr. Hackley," and Hackley replied, "You do the next best thing you are a mind
to. You can sue me if you please." Headley then said, "I cannot afford to sue you,

Published by The Scholarly Forum @ Montana Law, 1986 17

 Montana Law Review,
MONTANA LAW Vol. 47REVIEW
[1986], Iss. 1, Art. 1 [Vol. 47

be so if the creditor could obtain a recovery for the independent

tort of breach of the covenant of good faith. This covenant is im-
plied in UCC transactions: "Every contract or duty within this Act
imposes a duty of good faith in its performance or enforcement." 2
California has upheld the principle of tort liability for breach of
this obligation in a contract between parties of roughly equal bar-
gaining power. 8 The Supreme Court of California stated:
It has been held that a party to a contract may be subject to tort
liability, including punitive damages, if he coerces the other party
to pay more than is due under the contract terms, through the
threat of a lawsuit, made "'without probable cause and with no
belief in the existence of the cause of action.'" There is little dif-
ference, in principle, between a contracting party obtaining excess
payment in such manner, and a contracting party seeking to
avoid all liability on a meritorious contract claim by adopting a
"stonewall" position ("see you in court") without probable cause
and with no belief in the existence of a defense. Such conduct
goes beyond the mere breach of contract. It offends accepted no-
tions of business ethics. Acceptance of tort remedies in such a
situation is not likely to intrude upon the bargaining relationship
or upset reasonable expectations of the contracting parties.84
If tort liability may be imposed when a party coerces another
into paying more than is due or when a party seeks to avoid all
liability without any excuse, it should also be imposed when a
party seeks to compromise an obligation by asserting a fictitious
dispute. In all these instances, one party is forced to go to court to
prove that the other acted in bad faith. If the covenant of good
faith and fair dealing were implied in every contract, as it is in
California, 8 5 the principle would be applicable to every accord and
satisfaction, not just those arising under the UCC, where the cove-

because I have got to have the money, and I cannot wait for it. If I fail to get the
money to-day, I shall probably be ruined financially, because I have made no
other arrangement to get the money only on this particular matter." Finally he
took the note and gave the receipt, because at the time he could do nothing better,
and in the belief that he would be financially ruined unless he had immediately
the money that was offered him, or paper by means of which the money might be
obtained.
After two trips to the Michigan Supreme Court, Headley obtained judgment for the full
amount.
82. MONT. CODE ANN. § 30-1-207 (1985). See Summers, "Good Faith" in General Con-
tract Law and the Sales Provisions of the Uniform Commercial Code, 54 VA. L. REV. 195
(1968).
83. Seaman's Direct Buying Serv., Inc. v. Standard Oil Co. of Cal., 36 Cal. 3d 752, 686
P.2d 1158, 206 Cal. Rptr. 354 (1984).
84. Id. at 770-71, 686 P.2d at 1167, 206 Cal. Rptr. at 363 (citations omitted).
85. Id. at 769, 686 P.2d at 1166, 206 Cal. Rptr. at 362.
https://scholarship.law.umt.edu/mlr/vol47/iss1/1 18
 1986] Burnham:
ACCORD A Primer
ANDon Accord and Satisfaction
SATISFACTION

nant is expressed by statute.

Montana could impose liability on the chiseler under existing
law. In Tribby v. Northwestern Bank of Great Falls,8" the court
stated that "[wle are not holding that every contract or statutorily
imposed obligation, alone, carries with it an implied covenant of
good faith and fair dealing, the breach of which permits recovery
in tort. '87 The court could, however, hold that every contract con-
tains an implied covenant of good faith and fair dealing without
holding that the breach of that covenant permitted recovery in
tort. Where the court has imposed tort liability for breach of the
implied covenant, the elements have included reckless disregard
for the rights of another, unequal bargaining power, and breach of
an obligation."s When a debtor raises a phony dispute to escape an
obligation, the elements of breach and reckless disregard are
clearly present. While bargaining power is generally examined at
formation of the contract, it could be said that coercion by the
debtor puts the creditor in a situation where, because of the eco-
nomic expense of refusing to capitulate, the creditor lacks bargain-
ing power.

V. CONCLUSION

Montana is yet to rule on the applicability of UCC section 1-

207 to accord and satisfaction. It is my hope that the state would
join those rejecting the application of section 1-207 to conditional
checks. The public, both sophisticated and unsophisticated, has ac-
cess to a simple and inexpensive dispute resolution mechanism
through accord and satisfaction. They should not be denied it by
strained statutory construction. The concern that obligors will
abuse the principles by raising baseless disputes in order to escape
their obligations can be answered by holding that this practice is a
breach of the covenant of good faith, subjecting them to tort
liability.
The following flow chart 89 outlines the information an attor-
ney would need to obtain to resolve an accord and satisfaction
question and projects the consequences of each alternative:

86. - Mont. -, 704 P.2d 409 (1985).

87. Id. at -, 704 P.2d at 419.
88. Id. (citing First Nat'l Bank in Libby v. Twombly, - Mont. -, 689 P.2d 1226
(1984)). See also Graham and Luck, The Continuing Development of the Tort of Bad Faith
in Montana, 45 MONT. L. REv.43 (1984).
89. This flow chart was prepared with the assistance of Douglas S. Freeman, a student
at the University of Montana School of Law.

Published by The Scholarly Forum @ Montana Law, 1986 19

 20 Montana Law Review,
MONTANA LAW Vol. 47REVIEW
[1986], Iss. 1, Art. 1 [Vol. 47

ACCORD and SATISFACTION

Is a creditor's agreement to accept part payment
in full satisfaction of an obligation enforceable?

https://scholarship.law.umt.edu/mlr/vol47/iss1/1 20
 1986] Burnham:
ACCORD A Primer
ANDon Accord and Satisfaction
SATISFACTION

ACCORD and SATISFACTION

Continued from the preuious page

Published by The Scholarly Forum @ Montana Law, 1986 21

 Montana Law Review, Vol. 47 [1986], Iss. 1, Art. 1

https://scholarship.law.umt.edu/mlr/vol47/iss1/1 22