It happens with some frequency in Tennessee that a check is written and notated “paid in full” or “payment in full.” Sometimes, if a check is not written “paid in full,” the business which owes the debt may send an accompanying letter stating that the payment is for the full amount of the account or debt. Sometimes, when the debtor is very prudent, it so notates the check and also sends such a letter with the check.
Under Tennessee common law, as well as under a Tennessee statute, T.C.A. §47-3-311, if a person or business owed money (a creditor), cashes a check marked “paid in full” or with similar language, or cashes a check sent with a letter stating that the payment is in full satisfaction of the debt, that creditor may well be barred from collecting any additional money.
In Tennessee breach of contract cases, a party who proves an accord and satisfaction is relieved of further liability to the creditor. To prove successfully an accord and satisfaction, the debtor must prove that the amount it owed the creditor was disputed; it sent a check conspicuously marked “paid in full,” or with other language establishing that the payment was in full satisfaction of the debt, or sent the check with a letter indicating that the payment was in full satisfaction of the alleged debt; and, that the creditor cashed the check.
For an example of a breach of contract case where an accord and satisfaction defense was successful, take a look at Pendergrass v. Ingram (Tenn. Ct. App. 2016). Here are the basic facts of that case:
- Plaintiffs agreed to do certain grading and other work on Defendant’s property
- The parties orally agreed that Plaintiffs would be paid $2,500
- Plaintiffs were paid $1,000 up front
- After the Plaintiffs began working, the Plaintiffs performed additional work beyond the work to which the parties had agreed
- The parties never discussed what Plaintiffs would be paid for the additional work
- After the work was finished, the Plaintiffs sent Defendant a bill for $9,073
- Defendant let the Plaintiffs know that he did not believe he owed more than $1,500
- The Defendant then sent Plaintiffs a check for $1,500 with the notation “pd. in full”
- The Plaintiffs marked through the “pd. in full” notation on the check and cashed it