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Payment by Third Person

An accord is a contract in which a person promises to accept a stated performance in satisfaction of the other person’s existing duty.  Performance of accord discharges the original duty.[i] If the payment of debt is made by a third person and the creditor accepts the debt in full, then the debt will be discharged.  Payment in full settlement of a liquidated debt by or with the aid of a third person discharges in full the entire original debt. [ii] A payment or other performance by a third person and accepted by creditor, as full or partial satisfaction of his claim, discharges the debt of the debtor.  Payment by a third person of a sum less than the amount due, with the understanding that it is in full satisfaction is a valid accord and satisfaction.  A check issued by the debtor’s attorney is not a third party payment that discharges the debt of the debtor.[iii]

[i] In re Zerodec Mega Corp., 47 B.R. 304 (Bankr. E.D. Pa. 1985)

[ii] Bealkowski v. Powers 310 Ill. App. 662 (Ill. App. Ct. 1941)

[iii] King Metal Products, Inc. v. Workmen’s Compensation Board, 20 A.D.2d 565 (N.Y. App. Div. 2d Dep’t 1963)

Inside Payment by Third Person