Sec. 121. Claims - Liquidated Or Unliquidated And Doubtful

In discussing this subject, it is necessary to regard the condition of the claim in respect to whether it is liquidated, unliquidated or doubtful.

We have already considered claims in respect to their condition whether they are liquidated or unliquidated. In this chapter we will have to keep that distinction in mind.

Sec. 122. Settlement Of Liquidated Claims

If a debt is liquidated in amount, it is settled by the rules of the common law that a payment of a smaller amount than the amount due cannot discharge the debt unless there be some new consideration.

Consideration is essential to every simple contract. It consists in parting with or promising to part with something to which one is legally entitled. One does nothing which he ought not already to do when he pays his debt. On this reasoning the common law laid down a rule that the payment of the part of a debt admitted to be true could not possibly discharge the entire debt even though that was the agreement. Thus A owes B $100, he pays $50 on B's agreement that he will discharge him for the entire debt. B can still sue for the other fifty notwithstanding his promise because A parted with nothing to which he was entitled in return for B's promise.

If however, there was any new element which could be construed into a consideration, the agreement would stand, as where the debtor paid the debt before it was due, or gave additional security. So if instead of money he gave something whose value is not fixed but depends on the agreement of the parties, the agreement will stand. As where A owes B $100 and a typewriter worth about $50 is taken in satisfaction. This agreement will stand, because the Courts allow parties to set their own values and do not consider the adequacy of the consideration.

This rule has been departed from in some states and a payment of a smaller amount will discharge the greater provided that is the agreement.

What we have said, applies only to cases in which the amount claimed on one side is conceded to be due on the other.

Sec. 123. Compromise Of Unliquidated Claims - Accord And Satisfaction

If the amount of a claim is disputed in good faith, any settlement of it will stand. But if the compromise is not carried out as agreed upon, a suit may be brought on the original demand.

If any compromise of an unliquidated demand is made, the compromise will stand as made. Thus A claims B owes him $100. B in good faith claims the amount is only $75. They finally agree on $80. If B pays this there is "accord and satisfaction." A cannot claim the other twenty for by agreement $80 was agreed in settlement. If B does not pay as agreed, A can sue him on the compromise, or ignoring the compromise he can sue for the original demand.241

241. Snow v. Greisheimer, 220 111. 106. If a check is sent in "full satisfaction" and retained by the recipient, whether it will so operate depends on the question whether the debt was liquidated or unliquidated.

Sec. 124. Compromise Of Claims Whose Entire Validity Is Doubtful

If the validity of a claim is in doubt but the claim is made in good faith, a compromise of it is good and suit may be brought upon the compromise.

Suppose that A has had an accident befall him which he alleges arose out of B's negligence. B denies any liability yet he agrees with A to pay him $200. A can sue on this agreement.