## Facts

- AFC Interiors provided interior decorating services and furnishings to Nicholas DiCello under an oral agreement beginning in June 1984.
- AFC performed services, purchased and delivered furnishings, and sent invoices; DiCello did not pay the full amount claimed.
- AFC sued for breach of contract in November 1984 and sought summary judgment; the dispute proceeded toward arbitration.
- While the case was pending, DiCello returned some goods and sent a check for less than the amount AFC claimed was due.
- The check bore a notation stating it was “payment in full for any and all claims” against DiCello.
- AFC’s vice president crossed out the “payment in full” notation, wrote “Payment on Account,” and then cashed the check.
- Arbitrators later awarded AFC $15,421 and directed return of goods to DiCello except for a desk.
- After the arbitration award, DiCello sought summary judgment, arguing that cashing the “payment in full” check created an accord and satisfaction that discharged AFC’s entire claim.

## Issues

1. Whether R.C. 1301.13 (U.C.C. § 1-207) supersedes common-law accord and satisfaction when a creditor cashes a “payment in full” check while explicitly reserving rights.
2. Whether AFC’s alteration of the check notation and endorsement as “Payment on Account” prevented an accord and satisfaction as a matter of law.

## Decision

- The Supreme Court of Ohio reversed summary judgment for DiCello and remanded for further proceedings.
- The court held that R.C. 1301.13 supersedes the common-law “conditional check” rule that required a creditor to accept a “payment in full” check in full satisfaction or reject it.
- The court concluded that a creditor may negotiate a check tendered as “payment in full” for less than the amount claimed if the creditor explicitly reserves rights on the instrument (e.g., “under protest” or similar wording).
- The court overruled prior Ohio precedent to the extent it treated negotiation of a conditional check as an accord and satisfaction even when the creditor attempted to reserve rights.

## Legal Principles

- R.C. 1301.13 (U.C.C. § 1-207) allows a party, with explicit reservation of rights, to accept or perform in the manner offered or demanded “without prejudice” to the rights reserved.
- In a disputed-debt “payment in full” check scenario, a creditor may accept the check as partial payment if the creditor clearly and contemporaneously notifies the debtor—by an endorsement or legend—that the check is not accepted as full satisfaction.
- Common-law accord and satisfaction principles yield where they conflict with the statutory reservation-of-rights rule in this context.

## Conclusion

Ohio law permits a creditor to cash a debtor’s “payment in full” check for less than the claimed amount without discharging the remaining claim, so long as the creditor explicitly reserves rights (such as by marking the endorsement “under protest” or “payment on account”); therefore, negotiation of the check did not establish accord and satisfaction as a matter of law.


AFC Interiors v. DiCello, 544 N.E.2d 869 (Ohio 1989)