1. What are the elements of an “accord and satisfaction”?

2. Was there a shared mutual intent to compromise the claims between the parties?

3. Is it fair to expect an office manager to know that by processing a check for $1,696.47 marked “final payment” that her company could lose the right to pursue its position that it was owed an additional $24,756.84?

In September 2002 La Crosse Litho Supply, LLC (La Crosse) entered a distribution agreement with MKL Pre- Press Electronics (MKL) for the distribution of MKL printing systems. La Crosse purchased a 7000 System unit from MKL for its end user Printing Plus with MKL technicians providing service and training for the unit. The 7000 System at Printing Plus failed on three occasions and ultimately repairs were unsuccessful. On September 30, 2003, La Crosse cancelled the distribution agreement. On October 2, 2003, La Crosse sent a letter to MKL’s Sales V.P. Bill Landwer setting forth an itemized accounting of what it owed MKL Pre-Press with deductions for the purchase price of the failed 7000 System and other offsets. MKL sent a subsequent bill for repairs and services, to which La Crosse objected and stated it would not pay them. MKL’s attorney sent a demand letter for $26,453.31. La Crosse’s president, Randall Peters, responded by letter dated December 30, 2003, explaining that with an offset for training and warranty work it performed, “we are sending you the final payment in the amount of $1,696.47.” He added, “[w]ith this correspondence, we consider all open issues between La Crosse Litho Supply and MKL Pre Press closed.” Enclosed with the letter was a check for $1,696.47 payable to MKL Pre-Press. In the remittance portion of the check, under the heading “Ref,” was typed “FINAL PAYM.” The check was endorsed and deposited on either January 26 or 27, 2004. MKL sued La Crosse for $24,756.84. La Crosse defended that the tender and subsequent deposit of the check for $1,696.47 constituted an accord and satisfaction. Jill Fleming, MKL’s office manager, stated that it was her duty to process checks and that she did not read Peters’ letter. From a judgment for La Crosse, MKL appealed.

JUDICIAL OPINION

GREIMAN, J.… An accord and satisfaction is a contractual method of discharging debts or claims between the parties to such an agreement. In order for such an arrangement to exist, there must be: (1) a bonafide dispute as to the claims pending between the parties; (2) an unliquidated sum owed; (3) consideration; (4) a shared mutual intent to compromise the claims; and (5) execution of the agreement. The accord is the actual agreement between the parties, while the satisfaction is its execution or performance.…

Where there is an honest dispute as to the amount owed and due between the parties and the debtor tenders an amount with the explicit understanding that it is full payment of all demands, the creditor’s acceptance and negotiation of that amount constitutes an accord and satisfaction. Koules v Euro-American Arbitrage, Inc., 689 N.E.2d 411 (1998). However, the partial payment of a fixed and certain demand due and not in dispute does not constitute satisfaction of the entire debt even where the creditor agrees to receive partial payment for the whole debt and gives a receipt for the whole demand. Koules, 689 N.E.2d 411. ……………………….