In: Accounting
Elizabeth Wall suffered injuries when a truck struck the vehicle in which she was riding. Liberty Insurance Co. was the insurer involved and provided personal injury coverage. Elizabeth went to see Dr. Shadrick, a chiropractor who provided treatments 32 times over a 3-month period. Dr. Shadrick billed Liberty Insurance in three separate billings. After paying the first two billings in full, Liberty Insurance expressed concern about whether Dr. Shadrick's charges were excessive. Liberty hired Chiropractic Consultants, Inc. to evaluate Dr. Shadrick's billings. The consultants advised that Dr. Shadrick's billings were indeed excessive. Liberty then telephoned Dr. Shadrick and offered a partial payment to settle the account. After this conversation, Liberty Insurance issued and sent a check for $864 payable to Dr. Shadrick. On the face of the check, Liberty Insurance noted the total amount allocated to each claim and typed "settlement in full." On the reverse side it said, "The endorsement of this draft by the payee constitutes a clear release and full settlement of the claim or account shown on the other side." Upon receipt of the check, Dr. Shadrick cashed the check. He then sought payment of an additional $895. Liberty Insurance claims there was an accord and satisfaction with respect to the amount due for services rendered by Dr. Shadrick. What are the requirements of an accord and satisfaction? Were those requirements met in this case
Accord and Satisfaction is usually an agreement where a claim is discharged in respect to the parties agreeing to give and accept. Any claim based on an express or implied contract falls under the matter of accord and satisfaction.
Accord is considered a new agreement that is substituting the old one and requires the following four elements-
1) Proper subject matter
2) Competent Parties
3) Meeting of the minds of both the parties
4) Adequate Consideration
In this particular case, Liberty Insurance co. issued and paid a check to Dr. Shadrick stating settlement in full for all the claims and constituting full settlement of the claim on the back of the check. Although Liberty co. offered a partial payment of the entire claim but there is no where stated that Dr. Shadrick accepted the partial payment offer. Rather Dr. Shadrick sought for the payment of $895 after encashing the partial payment cheque he recieved from the company.
As per the requirements, a transaction will only constitute an accord and satisfaction of the claim only when both the parties intend it. In the absence of such intent, the claim to such accord for a specific sum of money cannot be satisfied with partial payment.
Hence, The requirements were not entirely met in this scenario.