Accord and Satisfaction - Issue 1

Accord and satisfaction is a contractual method of discharging a debt or claim. Because it is contractual in nature, the intent of the parties is of central importance. It presupposes that the contracting parties dispute the amount owed, but agree to give and accept something other than that which they thought was due in order to settle the claim. Under Illinois law, accord and satisfaction requires: (1) a bona fide dispute; (2) an unliquidated sum; (3) consideration; (4) a shared and mutual intent to compromise the claim; and (5) execution of the agreement. The “accord” itself is the actual agreement between the parties while the “satisfaction” is the execution or performance. Saichek v. Lupa, 787 N.E.2d 827, 832 (Ill. 2003); MKL Pre-Press Elecs./MKL Computer Media Supplies, Inc. v. La Crosse Litho Supply, LLC, 840 N.E.2d 687, 691 (Ill. App. Ct. 2005). The debtor bears the burden of showing that the creditor intended to accept the payment in settlement of the dispute; in the absence of such a showing, the payment only operates as a discharge to the extent of the amount paid. Bd. of Libr. Trustees of Vill. of Midlothian v. Bd. of Libr. Trustees of Posen Pub. Libr. Dist., 2015 IL App (1st) 130672, ¶ 45, 34 N.E.3d 602, 615.

Under Illinois law, where there is an honest dispute as to the amount owed and due between the parties and the debtor tenders an amount with the explicit understanding that it is full payment of all demands, the creditor's acceptance and negotiation of that amount constitutes an accord and satisfaction. Koules v. Euro–American Arbitrage, Inc., 293 Ill.App.3d 823, 830, 228 Ill.Dec. 539, 689 N.E.2d 411 (1998). However, the partial payment of a fixed and certain demand due and not in dispute does not constitute satisfaction of the entire debt even where the creditor agrees to receive partial payment for the whole debt and gives a receipt for the whole demand. Koules, 293 Ill.App.3d at 830, 228 Ill.Dec. 539, 689 N.E.2d 411. 

Accord and satisfaction is a contractual method of discharging a debt or claim. Because it is contractual in nature, the intent of the parties is of central importance. It presupposes that the contracting parties dispute the amount owed, but agree to give and accept something other than that which they thought was due in order to settle the claim. Under Illinois law, accord and satisfaction requires: (1) a bona fide dispute; (2) an unliquidated sum; (3) consideration; (4) a shared and mutual intent to compromise the claim; and (5) execution of the agreement. The “accord” itself is the actual agreement between the parties while the “satisfaction” is the execution or performance. Saichek v. Lupa, 787 N.E.2d 827, 832 (Ill. 2003); MKL Pre-Press Elecs./MKL Computer Media Supplies, Inc. v. La Crosse Litho Supply, LLC, 840 N.E.2d 687, 691 (Ill. App. Ct. 2005).