This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
In order to establish the existence of an accord, it must be shown that the minds of the two parties met upon the same proposition,2 and that the thing which was offered by one party as a satisfaction was accepted by the other as satisfaction.3 Payment of a part of a liability does not amount to an accord and satisfaction unless the party to whom such liability is due understands that such payment is made in full satisfaction of his claim.4
An understanding of this sort, however, like other simple contracts, need not be in any specific form.5 It is sufficient if the entire transaction, including what the parties did, as well as what they said, and including the surrounding circumstances, as well as any formal agreement, shows that the one party offered something in satisfaction of a prior liability due from him to the adversary party and that the other party thus accepted it. If the parties actually understand that the transaction is intended to discharge a pre-existing liability, a receipt in full is sufficient.6 An accord and satisfaction may exist, although the original obligation was evidenced by a note and mortgage, and the party to whom the satisfaction was paid did not surrender the note or release the mortgage or give a receipt for such satisfaction.7
1 See ch. V et seq.
2 Arkansas. Breckenridge v. Hearne Timber Co., - Ark. - , 204 S. W. 981.
Idaho. Heath v. Potlatch Lumber Co., 18 Ida. 42, 2? L. R. A. (N.S.) 707, 108 Pac. 343.
Iowa. Jacobs v. Jacobs, 130 Ia. 10, 114 Am. St. Rep. 402, 104 N. W. 489.
Kansas. Matheney v. El Dorado, 82 Kan. 720, 28 L. R. A. (N,S.) 980, 109 Pac. 166.
Nevada. Wolf v. Humboldt County. 36 Nev. 26, 45 L. R. A. (N.S.) 762, 131 Pac. 964.
New York. Fuller v. Kemp, 138 N. Y. 231, 20 L. R. A. 786, 33 N. E. 1034.
North Dakota. Paulson v. Ward County, 23 N. D. 601, 42 L. R. A. (N.S.) 1ll, 137 N. W. 486.
Vermont. Jones v. Campbell, - Vt. - , L. R. A. 1918A, 1036. 102 Atl. 102.
3 Breckenridge v. Hearne Timber Co.. - Ark. - , 204 S. W. 981; Jacobs v. Jacobs, 130 Ia. 10, 114 Am. St. Rep. 402, 104 N. W. 489; Shahan v. Bayer Vehicle Co., 179 Ia. 923, 162 N. W. 221: Wolf v. Humboldt county, 36 Nev. 26, 45 L. R. A. (N.S.) 762, 131 Pac. 964; Jones v. Campbell, - Vt. - , L. R. A. 1918A, 1056, 102 Atl. 102.
4 Jacobs v. Jacobs, 130 Ia. 10, 114 Am. St. Rep. 402, 104 X. W. 489; Harrison v. Henderson, 67 Kan. 194, 100 Am. St. Rep. 386. 62 L. R. A. 760. 72 Pac. 876.
5 Lilly v. Verser, - Ark. - , 203 S. W. 31; Colorado Tent & Awning Co. v. Denver Country Club, - Colo. - . 176 Pac. 494; Zinke v. Knights of the Maccabees, 275 Mo. 660, 205 S. W. 1; Laughead v. H. C. Frick Coke Co., 209 Pa. St. 368, 103 Am. St. Rep. 1014, 68 Atl. 685.
On the other hand, the payment of a thing of value can not amount to an accord and satisfaction unless both parties understand that it is to have such effect.8 A payment which is understood to be a partial payment,9 such as a. payment on account,10 can not operate as an accord and satisfaction.
An apparent exception to this exists in cases in which interest is a mere incident to the debt, there being no express promise on the part of the debtor to pay interest; and payment of the principal is made in full and a receipt given therefor.11 In such cases a subsequent action will not lie to recover interest.12 This result, however, is to be explained on the theory that the interest is a mere incident and not on the ordinary principles of accord and satisfaction.13