February 4, 2014
by Kate A. Lachowsky
Wilson & Associates, PLLC
USFN Member (Arkansas, Tennessee)
Trammell v. Hooks is a case about the affirmative defense of accord and satisfaction. On December 14, 2010, Trammell and Hooks agreed on a sale price of $400,000 for the sale of real estate and businesses in Paragould, Arkansas. Trammell filed a breach of contract action against Hooks the following February, where he alleged that Hooks failed to pay in accordance with their agreement. Hooks denied that he breached their agreement and affirmatively pleaded that he tendered a lesser than agreed upon amount to Trammell in full payment as an accord and satisfaction. Trammell denied that an accord and satisfaction occurred. A jury in Green County Circuit Court found in favor of Hooks on Trammell’s breach of contract suit and the Court of Appeals of Arkansas affirmed.
It is well-settled law that an accord and satisfaction involves a settlement where a creditor agrees to accept a different consideration or less money than what he is owed. In order for there to be an accord and satisfaction, there must be a disputed amount involved and consent to accept less than the full amount in settlement of the whole before acceptance of the lesser amount. Trammell v. Hooks, 2013 Ark. App. 576. The dispute need not be well-founded; it simply must be in good faith. The elements of accord and satisfaction are identical to the elements of a contract: there must be an offer, acceptance of that offer, and consideration given. An accord and satisfaction is ultimately a new agreement and acceptance of the new agreement.
In this case, pursuant to the terms of the contract: $15,000 was due in January 2011 with monthly payments to follow, but the contract failed to set forth the due dates, the amounts of the payments, or an interest rate. On the same day as the execution of the contract, a warranty deed conveying the real property from Trammell to Hooks was executed by Trammell, but was not delivered to Hooks. In January 2011, Trammell’s accountant prepared an amortization schedule setting the interest rate, spreading the monthly payments over twenty years, and establishing the monthly payment due date. The amortization schedule indicated that at the end of the twenty-year period, Hooks would have paid $802,000 — more than double the contract price.
At trial, Trammell testified that Hooks had “no intention of paying all of that interest.” Hooks testified that he tendered $240,000 in cash to Trammell to pay off the contract and received a receipt from Trammell, who noted on the contract that it had been paid in full. Consequently, Trammell delivered the executed warranty deed to Hooks.
The court was required to determine whether there was some evidence of a dispute over what was owed and a manifestation of consent to accept less than what was owed, in order to support giving the Arkansas Model Jury Instruction 2431 on accord and satisfaction. The jury found that there was a settlement of less than the total owed.
On appeal, the Court of Appeals held that the trial court did not err because Trammell substantially increased the price by adding interest to the payment schedule, and it was clear that Hooks did not wish to pay the interest. This constituted evidence of a dispute over the debt. Under the facts presented, there were also indicators that the parties agreed to a tender of $240,000 as payment in full on the contract, such as acceptance of the payment and delivery of the warranty deed. Accordingly, the Court of Appeals affirmed the giving of the accord and satisfaction instruction to the trial jury.
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