An Illinois Appellate Court has recognized accord and satisfaction of a debt where both parties may not have known the consequences of their actions. In MKL Pre-Press Electronics v. La Crosse Litho Supply, LLC, a pre-press printing system’s manufacturer and distributor cancelled their distribution agreement after problems arose relating to one press system’s failure. Outstanding payments were invoiced between the parties for such services as product shipment, repairs, and cancellation of any pending purchase orders. The plaintiff-distributor sent the defendantmanufacturer a letter demanding payment of $26,453.31. The defendant replied with a letter that stated the defendant was sending final payment in the amount of $1,696.47 ($24,756.84 less than the plaintiff had billed) and that it considered all open issues between the parties closed. On the remittance reference line of the check, the phrase “FINAL PAYM” was printed.
Following the receipt and deposit of the correspondence and check, the plaintiff filed suit for, among other claims, breach of contract. The defendant filed a motion to dismiss, claiming its actions, along with the plaintiff’s receipt and deposit of the check, constituted an accord and satisfaction of the plaintiff’s claims. During the hearing on the issue, the plaintiff’s office manager testified that she was charged with processing customer payments and that she did not read the defendant’s letter before she deposited the check marked “FINAL PAYM.” The court upheld the circuit court’s motion to dismiss, finding that the plaintiff intended that the payment operate as an accord and satisfaction, evinced by its mere acceptance and deposit of a check containing conditional language, even though the individual depositor was unaware of the legal consequences of such an action.
Courts will assume that when an individual authorized to deposit a check on behalf of a business does so, her actions are the actions of the business itself and it is responsible for any legal consequences that may inadvertently ensue.
Rein Krammer, Vice-Chair of the firm’s Litigation Practice Group, warns that all employees responsible for processing payments must closely examine payments and correspondence from customers for restrictive language which may subject your company to unintended settlement of a dispute, at an amount much less than the claim may be worth. Your company can take certain actions to ensure that such unintended consequences do not occur.