Consider the common dispute between two parties: Party A believes Party B owes it money—be it for an unpaid bill or compensation for a personal injury. In these cases, if Party B wishes to settle the claim it may do so by tendering a check to the claimant along with a conspicuous statement that the check is tendered in full satisfaction of the claim asserted against them. When that check is cashed by the claimant, the claim is discharged and the matter is settled. This is the common law doctrine known as “Accord and Satisfaction.”
But did you know that Section 1526 of the California Civil Code, which codified the doctrine, added a provision that states there is no accord and satisfaction if the release language is crossed out or the check is cashed and through inadvertence the language is not crossed out.
In the years after the enactment of Section 1526, every party receiving a check which was offered in settlement of a disputed claim could (theoretically) cash the check while still maintaining its claim by crossing out the satisfaction language. This meant that the claimant who received such a check could have its cake and eat it too.
Fortunately, it did not take the California Legislature long to remedy this one-sided reality, and in 1992, the California Legislature enacted Section 3311 of the California Uniform Commercial Code.
Section 3311 of the Commercial Code maintained the same common law approach to accord and satisfaction, but with one important distinction from Section 1526 of the Civil Code: the payees on the check could no longer cross out the satisfaction language and still accept the check. Under Section 3311, when there is a bona fide dispute over money owed, and a party tenders a check to the claimant bearing a conspicuous statement that the check was tendered in full satisfaction of the claim, the claim is settled if the claimant cashes the check, regardless of whether the claimant crosses out the language. In essence, the major difference between Section 3311 of the Commercial Code and Section 1526 of the Civil Code is that claimants no longer have the unilateral ability to cross out the language, cash the check, and continue to dispute the claim.
Section 3311 also provides that if the claimant tenders the payment back within 90 days, there is no accord and satisfaction.
Perhaps most importantly, it is recognized by various appellate districts of California that Section 3311 of the Commercial Code supersedes Section 1526 of the Civil Code. That is to say, when it comes to a party tendering a check to the claimant in full satisfaction of the claim, Section 3311 applies. In light of the two conflicting statutes, courts have held that the one which was enacted more recently controls, Section 3311.
Today, courts are most likely to hold that Section 3311 applies. Thus, where there is a bona fide dispute over sums owed, and the defendant tenders to the claimant a check for an amount which the defendant believes in good faith to represent full satisfaction of the claim, and the check bears or is accompanied by a statement reflecting that the check is offered on the condition that acceptance constitutes full satisfaction of claim, a claimant discharges their claim against the defendant by cashing the check regardless of whether they cross out the satisfaction language (unless the claimant tenders the payment back within 90 days).
As always, we remind you that this article as well as all other articles in our newsletters are meant for informational purposes only and not to be considered as legal advice. For legal advice on this topic and others we write about you should consult with your attorney.