A small company,Software Design Limited,was indebted $150,000 to a sole individual,with payment now due.This individual was an investor and former classmate of the firm's president,Angela.Owing to a reversal of fortunes for the company,Software Design could now repay only $100,000.With her investor chalking up the affair to experience,Angela intended the firm to repay what it could now,then she would wind up the company.A few weeks after paying off her creditor at $100,000,but before she could wind up the company,a new investor with both ideas and money approached her,and encouraged Angela to continue on in the business.Once Angela's former classmate heard of the new investor,she demanded the balance due on her loan.Angela briefly considered repaying more,but her new investor demanded a hard-line approach.Angela was holding the repaid note in her hands as her later investor said "Neither you nor she could see the future when she agreed to accept $100,000.But accept she did.Business is business."

Question

Quizplus · Accepted Answer

This situation falls under the doctrine of accord and satisfaction, where a debtor offers to pay a smaller amount than what is owed, and the creditor accepts it as full payment. The acceptance of the $100,000 by the classmate constitutes a binding agreement, and she cannot later demand the balance due. Under statute law, this doctrine is recognized and hence, both common law and statute law allow the debtor (Software Design) to be relieved of the remaining balance.

A Small Company,Software Design Limited,was Indebted $150,000 to a Sole