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State, County, or Municipal Government

Accord and satisfaction is a method of discharging a claim whereby the parties agree to give and accept something in settlement of the claim and perform the agreement.  Accord is the agreement and satisfaction is its execution or performance.

If a person has an unliquidated or disputed claim against a state, county, or municipality and accepts part payment of the claim with knowledge that the claim has not been allowed in full, the payment amounts to a satisfaction of the claim[i].  Similarly, if a state has a disputed claim against a party, and if the state accepts part payment of the claim even under protest to agree the payment in full, the party will be excluded from paying the balance amount[ii].

In Indiana Lumbermen’s Mut. Ins. Co. v. State[iii], appellant challenged a judgment that permitted the state to recover under performance issued by appellant as surety.  On appeal, the court reversed the judgment that permitted the state to recover under a performance bond issued by appellant.  The stipulated facts and the findings of the trial court established that the parties disputed the amount owed by appellant under the bond.  The appellant paid in full a certain amount but the state refused appellant’s condition as payment in full but accepted the payment.

Court observed that a disputed money demand can be discharged by the acceptance and negotiation of a check by the creditor for an amount less than the claim given on the condition that its acceptance is in full and final satisfaction of the claim.  However, if such acceptance by the creditor even under protest will be binding on the creditor and precludes recovery for any unpaid amount. Therefore, an accord and satisfaction took place.

[i] Chandler v. State Highway Board, 61 F.2d 601 (5th Cir. Ga. 1932)

[ii] Indiana Lumbermen’s Mut. Ins. Co. v. State, 1 S.W.3d 264 (Tex. App. Fort Worth 1999)

[iii] Id.


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