## Facts

- A public utility sued a residential customer to recover alleged unpaid balances on five summer-period electric bills from 1968, 1969, and 1970.
- The customer admitted receiving the bills but disputed the amounts as unreasonably higher than comparable prior periods and questioned meter accuracy and/or readings.
- After correspondence, the customer sent a letter to the utility’s president (copied to the local office and payment address) stating he disputed certain bills, selected \$35 as the proper amount due per bill, and would tender checks on the condition that cashing or retaining them would settle the dispute.
- The customer mailed five \$35 checks to the designated payment address; each check contained explicit language stating it was in full payment and satisfaction for the specified billing period and that negotiation constituted a release of claims for that bill.
- The utility replied by reiterating that the meter and readings were accurate and that the electricity had been consumed, but did not address the conditional tender language.
- The utility deposited (negotiated) the checks and later sued for the difference between the amounts billed and the amounts received.

## Issues

1. Whether a creditor’s negotiation of checks conspicuously tendered as “full payment and satisfaction” of a disputed debt creates an accord and satisfaction that discharges the remaining balance.
2. Whether a bona fide dispute exists for accord-and-satisfaction purposes when the creditor’s charges are objectively correct but the debtor disputes them in good faith.
3. Whether a large, high-volume creditor may avoid accord and satisfaction by ignoring or protesting the condition while still negotiating the checks.

## Decision

- The court entered judgment for the defendant customer.
- The court held that the parties had a bona fide dispute over the bills, even though the court found the meter readings and charges substantively accurate.
- The court held that the customer’s letters and the legends on the checks clearly conditioned payment on full settlement of each disputed bill.
- The court concluded that the utility had sufficient notice of the condition and, by negotiating the checks, assented to the settlement.
- The court rejected any rule that would allow a large institutional creditor to negotiate conditional checks yet preserve a claim for the balance.

## Legal Principles

- Accord and satisfaction requires a genuine dispute or unliquidated claim and a clear tender offered on the condition that acceptance will settle the claim.
- A debtor’s honest, good-faith dispute can satisfy the “bona fide dispute” requirement even if the creditor’s underlying demand is ultimately determined to be correct.
- A check conspicuously marked as “full payment and satisfaction,” especially when accompanied by explanatory correspondence, constitutes a conditional tender.
- A creditor that negotiates a conditional check with notice of its terms accepts the accord and is barred from recovering any additional amount on the settled claim, even if the creditor protests or ignores the condition.
- Operational scale or centralized payment processing does not excuse a creditor from the legal effect of knowingly negotiating a conditional tender.

## Conclusion

By cashing checks explicitly offered to resolve a good-faith billing dispute on a “paid in full” basis, the utility accepted an accord and satisfaction and could not later recover the alleged unpaid balance, despite the utility’s view that its bills were accurate and its failure to acknowledge the condition in its correspondence.


Consol. Edison Co. of N.Y., Inc. v. Arroll, 66 Misc. 2d 816, 322 N.Y.S.2d 420 (Civ. Ct. N.Y.C. 1971)