Accord and Satisfaction - Issue 2

Under the UCC as adopted by the state, a party that with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as "without prejudice," "under protest," or the like are sufficient. NY UCC §1-308

"New York courts interpreting this statute have determined that it altered the common law rule in cases in which the Code is applicable. (Under New York common law, negotiation of a check for less than the amount owed, regardless of any conditional endorsements, would constitute an accord and satisfaction). As a result, if a check is received for less than the amount owed but purports to be in ""full settlement"", providing that the recipient indicates that he is reserving his rights, he may negotiate the check without waiving those rights. See e.g., Braun v. C.E.P.C. Distributors, Inc., 77 A.D.2d 358, 433 N.Y.S.2d 447 (1st Dep't 1980)(where seller received check from buyer containing an endorsement stating that ""check constitutes payment in full of all claims"" and seller indicated on check, prior to cashing it, that it was accepting ""payment without prejudice and with full reservation of rights"", seller was permitted to seek balance of payment owed); see Horn Waterproofing Corp. v. Bushwick Iron & Steel Co., 66 N.Y.2d 321, 326, 497 N.Y.S.2d 310, 313 (1985)(court held that § 1-207 applies to payment for both goods and services and authorizes the payee to indorse a check under protest and accept the amount of the check without entering an accord and satisfaction)."

Pursuant to NY UCC § 1-308 (previously codified at § 1-207), “[a] party that with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as ‘without prejudice,’ ‘under protest,’ or the like are sufficient.” New York courts interpreting this statute have determined that it altered the common law rule in cases in which the Code is applicable. (Under New York common law, negotiation of a check for less than the amount owed, regardless of any conditional endorsements, would constitute an accord and satisfaction). As a result, if a check is received for less than the amount owed but purports to be in "full settlement", providing that the recipient indicates that he is reserving his rights, he may negotiate the check without waiving those rights. See e.g., Braun v. C.E.P.C. Distributors, Inc., 77 A.D.2d 358, 433 N.Y.S.2d 447 (1st Dep't 1980)(where seller received check from buyer containing an endorsement stating that "check constitutes payment in full of all claims" and seller indicated on check, prior to cashing it, that it was accepting "payment without prejudice and with full reservation of rights", seller was permitted to seek balance of payment owed); see Horn Waterproofing Corp. v. Bushwick Iron & Steel Co., 66 N.Y.2d 321, 326, 497 N.Y.S.2d 310, 313 (1985)(court held that § 1-207 applies to payment for both goods and services and authorizes the payee to indorse a check under protest and accept the amount of the check without entering an accord and satisfaction).