Question

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.

Answer 1

In law, if the bank agrees in writing to accept $33,000 as payment in full on a condition (such as early payment) and XYZ Company meets those conditions, the bank cannot later sue for the remaining balance due to the concept of accord and satisfaction.

Step-by-step explanation:

When considering whether XYZ Company can negotiate with the bank to accept $33,000 as payment in full for a $35,000 debt, it is essential to understand the concepts of debt payment and accord and satisfaction in law. Based on the choices provided, the true statement would be: D) A statutory provision provides that the creditor who accepts less than full payment as payment in full cannot later sue for the remainder. This concept is known as accord and satisfaction, where the bank (the creditor) agrees to accept a lesser amount as satisfaction of the debt. In practice, when an agreement of this nature is made and both parties fulfill the conditions of the agreement, including the payment being made on or before the date specified, the creditor is typically barred from pursuing the remainder of the debt. Furthermore, the terms of the agreement must be clear and agreed upon by both parties, and the payment must be made accordingly. Should the bank agree in writing to accept the reduced amount by a certain date and XYZ Company meets these conditions, the bank generally cannot sue for the remaining balance.