XYZ Company,a distributor of auto parts,is in debt to the bank for $35 000 due on February 25.The company is having difficult times and wants to negotiate with the bank to pay only $33 000 as payment in full.With these facts in mind,which of the following statements of the law is true?
A)If the bank agrees to accept the $33 000 as payment in full if paid early,by February 15,and the company does as requested,the bank could later sue for the remainder because the company gave good consideration for the bank's forgiveness of the debt.
B)Even if the bank takes the $33 000,the bank can still sue for the entire amount plus punitive damages.
C)If the company obtained from the bank the bank's promise to forgive the $2000 under seal,the bank could later sue for the remainder.
D)A statutory provision provides that the creditor who accepts less than full payment as payment in full cannot later sue for the remainder.
E)At common law,if the bank accepted the $33 000 as payment in full,even absent additional consideration,it could not later sue for the remainder because such promises are always binding.

Question

Quizplus · Accepted Answer

The statutory provision known as the "accord and satisfaction" rule provides that when a creditor accepts a lesser amount than what is owed and the debtor pays the lesser amount in full satisfaction of the debt, the creditor cannot later sue for the remaining balance. Therefore, if the bank accepts the offer of $33,000 as payment in full, it cannot later sue for the remaining $2,000. Option A is incorrect because consideration must be given by both parties to make a contract enforceable, and the bank forgives the debt without receiving anything in return. Option B is incorrect because if the bank accepts the $33,000 as payment in full, it relinquishes the right to sue for the remaining balance. Option C is incorrect because obtaining the bank's promise to forgive the debt under seal (i.e., a legal document executed in the presence of a notary public or other authorized official) would not grant the bank the right to sue for the remaining balance. Option E is incorrect because under common law, absent consideration, the bank could still sue for the remainder of the debt.

XYZ Company,a Distributor of Auto Parts,is in Debt to the Bank