Fernando owes Lucia $8,000. They both realize he is unlikely to be able to repay that much, so Lucia says: "Pay me $5,000 and we'll call it good." Fernando pays the $5,000. This settlement is called:
A) preexisting duty
B) liquidated debt
C) unliquidated debt
D) accord and satisfaction
E) detrimental reliance

Question

Quizplus · Accepted Answer

The settlement between Fernando and Lucia is an example of accord and satisfaction. Accord means there is an agreement to accept something different than what was originally owed, and satisfaction means that the different payment was made, and it is considered a full and final payment for the original debt. In this case, Lucia agreed to accept $5,000 instead of the full $8,000 owed by Fernando, and he paid that amount, thus satisfying the debt.

Fernando Owes Lucia $8,000