Accord and Satisfaction is Alive and Well but…

By William J. Walker, Associate Attorney

The Indiana Court of Appeals recently confirmed the doctrine of accord and satisfaction is alive and well but provided guidance on the requirements under the statute. In Mayes v. Goldman Sachs Bank USA [1], the Court of Appeals affirmed the trial court’s decision that a claim was not discharged under accord and satisfaction when a bank cashed a check with a memo line indicating it was a “settlement.”

In Mayes, a borrower obtained a personal loan from a bank. After six months of non-payment, the bank retained counsel and sent demand directing all communication to be directed to the attorney’s office.

Six months after the collection letter, Mayes retained counsel which sent a letter to the bank stating, “My client disputes the debt. … I’m enclosing a check for $200. If you cash this check … it will be considered settlement in full.” The bank cashed the check then filed suit against the borrower for the balance owed on the loan. Borrower argued bank formed a subsequent contract through the “performance” of cashing the bank’s claim was discharged through accord and satisfaction. The trial court granted summary judgment to the bank.

The first issue addressed on appeal was whether the bank’s action of cashing the check created a new contract between the parties. The original Loan provided its terms may not be amended, modified, or limited except by a written agreement. Absent a new written agreement, borrower’s argument failed.

Turning to accord and satisfaction, IC § 26-1-3.1-311 provides that if  “1) the person is good faith tendered an instrument to the claimant as full satisfaction of the claim; 2) the amount of the claim was unliquidated or subject to a bona fide dispute; and 3) the claimant obtained payment of the instrument” then the claim is discharged insofar as the instrument contained a conspicuous statement it was tendered in full satisfaction.

Although the enclosed letter had a “conspicuous statement,” the court found it difficult to see the offer was tendered in “good faith” since the debt was over $9,200 and the check was for $200. Even assuming this was a good faith tender, the borrowed never proved the debt to be unliquidated or subject to a bona fide dispute. The balance was certain and supported by account statements and a letter stating, “my client disputes this debt,” does not prove a bona fide dispute. Accordingly, the borrower did not meet her burden of proof.

Mayes tells us that while accord and satisfaction may be alive and well, the good faith standard must be met, along with the debt being subject to a bona fide dispute. A generic statement of dispute doesn’t meet this burden.

[1] Mayes v. Goldman Sachs Bank USA, 232 N.E.3d 1164 (Ind. Ct. App. 2024)