Effect of Fraud, Mistake, Duress


The satisfaction of a debt obtained by fraud or misrepresentation will not be considered a contract of accord or satisfaction.  A contract of accord and satisfaction obtained through mutual mistake, supervening illegality, or frustration of purpose can be partly or completely set aside.  If a contract is agreed upon misrepresentation or without proper knowledge of facts, such contract cannot be considered as a contract of accord and satisfaction.  If one of the parties to a contract is ignorant about the law in place and the other has a better knowledge, such contract cannot be considered as a contract of accord and satisfaction.  Contracts made over economic pressure will not be considered contracts of accord and satisfaction.  If a party, by his or her financial constrain is forced to accept a lesser amount than the amount claimed, it does not constitute a contract of accord and satisfaction.

In Kucel v. Walter E. Heller & Co., 813 F.2d 67 (5th Cir. Tex. 1987), a lien on the plaintiff’s plane was released by the defendant lender in furtherance to plaintiff’s prepayment of the promissory note on the plane.  However, defendant refused to provide an accounting of the payoff amount.  This resulted in an action against the defendant for over payment of the loan.  The amount of overpayment, interest and attorney’s fees on plaintiff’s claim of money had and received was awarded by the trial court.  The appellate court affirmed the trial court’s decision and contended that the defendant was liable for overpayment.  However, the awarded amount was vacated stating that the trial court had misread the amortization schedule in calculating the overpayment amount.  The award of attorney’s fees to plaintiff, and the sanction imposed on defendant’s attorney was reversed.