A landlord and a tenant entered into a one-year lease agreement for an apartment. The lease specified that the tenant must pay rent of $1,000 on the first day of each month. On the second month, the tenant sent a check for $900, along with a note stating, 'This payment is for full satisfaction of this month's rent. If you cash this check, you agree to accept $900 as full payment.' The landlord, needing the money, cashed the check but immediately sent a letter to the tenant stating that he did not agree to the reduced rent and reserved all rights under the lease. What is the legal effect of the landlord cashing the check?
- AThe landlord's cashing of the check, combined with his written protest, prevents an accord and satisfaction from forming.
- BThe tenant's offer of partial payment was a valid modification of the lease, which the landlord accepted by cashing the check.
- CThe landlord's cashing of the check constitutes an accord and satisfaction, discharging the tenant's remaining $100 obligation.
- DThe landlord's cashing of the check, despite his protest, does not create an accord and satisfaction because the debt was liquidated.
Show answer & explanationAnswer & explanation
Correct answer: D. The landlord's cashing of the check, despite his protest, does not create an accord and satisfaction because the debt was liquidated.
Accord and satisfaction typically applies to unliquidated or disputed debts. Here, the rent amount was clearly defined in the lease agreement, making it a liquidated debt. When a debt is liquidated and undisputed, partial payment, even if tendered 'in full satisfaction,' does not discharge the remaining balance unless there is new consideration or a specific statutory exception (like UCC 3-311 for negotiable instruments, which has specific requirements not fully met here, and often state law for landlord-tenant issues treats rent as liquidated). The landlord's protest further indicates no intent to accept less than the full amount.
Why the other options are wrong
- A. While a protest might be relevant in some UCC contexts, for a liquidated common law debt, merely protesting does not change the fact that the original debt remains.
- B. A modification requires new consideration from both parties, or a valid exception. The tenant offering less than owed is not new consideration.
- C. Accord and satisfaction generally applies to unliquidated or disputed debts, not liquidated debts like fixed rent.
Accord and Satisfaction (Liquidated Debt)
An agreement (accord) to accept a lesser or different performance in satisfaction of an existing contractual duty, followed by the performance (satisfaction). It typically requires a disputed or unliquidated debt to be effective.
- Requires a genuine dispute over the amount or existence of the debt (unliquidated).
- If the debt is liquidated and undisputed, partial payment does not discharge the full amount.
- Acceptance of the lesser sum must be intended as full satisfaction.
- UCC 3-311 provides specific rules for 'full satisfaction' checks for negotiable instruments.
Memory trick: Accord and Satisfy: Disputed sums, new deal, done!