Question

In: Accounting

Elizabeth Wall suffered injuries when a truck struck the vehicle in which she was riding. Liberty...

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

Solutions

Expert Solution

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.


Related Solutions

The Carlson Department store suffered heavy damage when a hurricane struck on August 31. The store...
The Carlson Department store suffered heavy damage when a hurricane struck on August 31. The store was closed for four months (September through December), and Carlson is now involved in a dispute with its insurance company about the amount of lost sales during the time the store was closed. Two key issues must be resolved (1) The Amount of sales Carlson would have made if the hurricane had not struck and (2) whether Carlson is entitled to any compensation for...
During a family vacation, the Densmores were struck by a transfer truck which destroyed their car....
During a family vacation, the Densmores were struck by a transfer truck which destroyed their car. Luckily, the family survived with what seemed like superficial wounds, except for Mrs. Densmore who appeared to suffer from ‘whiplash injury’. As the days passed, Mrs. Densmore began to suffer neuromuscular symptoms. She exhibited a profound tilting of the head to the right side of her body. Other tests by an orthopedic physician indicated partial paralysis of the right sternocleidomastoid muscle. Subsequent x-rays revealed...
Which of the following statements is​ FALSE? A. When an investor chooses her optimal​ portfolio, she...
Which of the following statements is​ FALSE? A. When an investor chooses her optimal​ portfolio, she will do so by finding the tangent line using the risk-free rate that corresponds to her investment horizon. B. Even though different investors may research different​ stocks, their information will not impact the market portfolio since there is no way to share this information with other investors. C. In the real​ world, borrowers pay higher interest rates than savers receive. D. If the market...
Which of the principles below does Val follow when she reviews her records to make sure...
Which of the principles below does Val follow when she reviews her records to make sure that recorded accounting events correspond to the actual costs? Time period principle Measurement principle Full disclosure principle Matching principle
Suppose when Joan is healthy, she earns $50,000 which generates utility of 100 utils.When sick, the...
Suppose when Joan is healthy, she earns $50,000 which generates utility of 100 utils.When sick, the cost of treatment is $30,000 and her utility falls to 60 utils. The probability of illness occurring is 25%. Income of $32,500 produces actual level of utility of 90. Income of $42,500 produces actual utility of 98. i. Find Joan’s expected income and expected utility without health insurance. ii. Would Joan buy health insurance, given the insurance policy offered sells at an actuarial fair...
Problem 2 When Alice gets stressed out about her classes, she plays a game in which...
Problem 2 When Alice gets stressed out about her classes, she plays a game in which she rolls a pair of dice and if the sum of the two numbers is at least 10, she “wins.” For each win, she gives herself a dollar for ice cream. (a) The night before the final exam, Alice will play this game 10 times. What is the probability that she will win herself at least $3 for ice cream? (b) Alice teaches this...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT