Accord and satisfaction in Texas is a legal defense that cancels an existing debt when the parties agree to a different or reduced payment and the creditor accepts it. The doctrine comes up most often when one side sends a check for less than the full amount with “paid in full” written on it, and the other side cashes the check. If the elements line up, that cashed check wipes out the entire balance, not just the amount paid. If they don’t, the creditor keeps the money and can still sue for the rest.
The Three Elements That Must Line Up
Texas common law breaks the defense into three parts. There must be a genuine disagreement about what the original contract requires. The parties must reach a new agreement to settle that disagreement through a different or reduced obligation. And that new obligation must actually be performed and accepted. Miss any one and the original debt survives.
The “accord” is the new deal. It requires a meeting of the minds, meaning both sides understand and agree to the revised terms. Without that mutual intent, a payment looks like a partial payment on the old debt rather than a full settlement of it. The “satisfaction” is the follow-through: the debtor delivers and the creditor accepts the agreed substitute. Once both steps are done, the original obligation is gone.
The substitute does not have to be cash. Additional work, equipment, or anything of value that differs from the original obligation can support the accord. What does not work is paying part of an undisputed bill and calling it settled, because partial performance of something already owed is not new consideration.
The Dispute Requirement
The biggest requirement is that the underlying debt must be either unliquidated or subject to a bona fide dispute.1Texas Public Law. Texas Business and Commerce Code 3.311 – Accord and Satisfaction by Use of Instrument A debt is liquidated when both sides agree on the exact amount. If someone owes $10,000 on a clear invoice with no disagreement about the work or the price, a $7,000 check marked “paid in full” accomplishes nothing. The creditor can cash it, keep the $7,000, and still sue for the remaining $3,000.
A bona fide dispute exists when reasonable people could disagree about the amount owed or whether the debt is valid at all. Common examples include disputes over the quality of work, which items were actually delivered, or how pricing terms should be read. The dispute does not need to be resolved in the debtor’s favor to count. It just has to be the kind of disagreement a reasonable person could have in good faith.
This is where most accord and satisfaction claims fall apart. A debtor who simply refuses to pay an obvious bill and then tries to force a lower settlement will not get the protection of the doctrine. If the creditor can show there was no legitimate basis for contesting the amount, the defense fails and the court can order payment of the full balance plus interest.
Paid-in-Full Checks Under Section 3.311
Texas Business and Commerce Code Section 3.311 sets out the specific statutory framework for accord and satisfaction by check. It applies when someone sends a check to settle a disputed claim and the check, or an accompanying letter, includes a conspicuous statement that the payment is being offered as full satisfaction.1Texas Public Law. Texas Business and Commerce Code 3.311 – Accord and Satisfaction by Use of Instrument If the creditor obtains payment of that check, the claim is generally discharged.
Three conditions must be met. The person sending the check must have acted in good faith. The claim must be unliquidated or genuinely disputed. And the creditor must have actually obtained payment. The debtor carries the burden of proving all three.1Texas Public Law. Texas Business and Commerce Code 3.311 – Accord and Satisfaction by Use of Instrument
The practical rule is simple. If you receive a check with “paid in full,” “full and final settlement,” or similar language, and you disagree with the amount, do not deposit it. Once you do, you have almost certainly accepted the settlement.
Making the Notation Count
Section 3.311 requires that the full-satisfaction statement be “conspicuous.” Under Texas Business and Commerce Code Section 1.201, that means written, displayed, or presented so that a reasonable person should have noticed it. Whether a notation qualifies is a question for the court, not the jury.
The statute identifies two safe harbors. A heading in all capitals, or in a larger or contrasting font compared to surrounding text, qualifies. So does language in the body of a document that appears in larger type, a different color, or is set off by symbols that draw the eye. Scrawling “paid in full” in tiny letters on the back of a check may not meet the standard. Writing it clearly on the memo line where anyone handling the check would see it almost certainly does.
For debtors trying to trigger the discharge, make the notation impossible to miss. Use the memo line, write clearly, and consider sending a separate letter that repeats the settlement offer in bold or capital letters. The more conspicuous the statement, the harder it becomes for a creditor to argue they didn’t see it.
The 90-Day Window to Undo a Mistake
Texas law gives creditors a narrow escape hatch. If a creditor cashes a paid-in-full check by mistake, they can undo the accord and satisfaction by returning the full amount of the check within 90 days after obtaining payment.1Texas Public Law. Texas Business and Commerce Code 3.311 – Accord and Satisfaction by Use of Instrument Tendering back only the disputed difference is not enough. The entire check amount has to go back to the debtor.
The 90-day window is available to individuals and to organizations, with one carve-out. An organization that already set up the designated-office procedure described below cannot also fall back on the 90-day repayment. The logic is that an organization with a routing system in place had its chance to catch the check and does not get a second one.
Missing the deadline is fatal. Once the window closes, the discharge is permanent and the creditor loses the right to pursue the remaining balance. The clock runs from the date the bank processed the payment, not the date someone at the company noticed the problem.
Why “Under Protest” Does Not Save You
Creditors sometimes try to cash the check, keep the money, and write “under protest” or “without prejudice” next to their endorsement. In most Texas commercial contexts, those phrases do preserve a party’s rights when they perform under duress or disagreement. Texas Business and Commerce Code Section 1.308(a) says so directly.2State of Texas. Texas Business and Commerce Code Section 1.308
Section 1.308(b) carves out a direct exception. That reservation-of-rights rule does not apply to an accord and satisfaction.2State of Texas. Texas Business and Commerce Code Section 1.308 Texas appellate courts have enforced this consistently, holding that cashing a paid-in-full check even under protest results in a binding accord and satisfaction that bars recovery of the unpaid balance. The creditor’s only options are to return the check uncashed or to repay the full amount within 90 days after an accidental deposit.
This catches creditors off guard because the “under protest” strategy works in many other commercial settings. In this one, the statute is unambiguous. If a check was clearly offered as full satisfaction of a disputed claim and you cash it, writing “under protest” on the back changes nothing.
Designated-Office Protection for Organizations
Section 3.311 gives businesses and other organizations an additional layer of protection that individuals do not have. An organization can send a conspicuous written notice to the debtor before the check arrives, directing that any communications about disputed debts, including checks offered as full satisfaction, must be sent to a specific person, office, or address.1Texas Public Law. Texas Business and Commerce Code 3.311 – Accord and Satisfaction by Use of Instrument
If the organization proves it sent that notice within a reasonable time before the check was tendered, and the check was not actually received at the designated location, the discharge does not apply even if someone else at the company cashed the check. The rule protects large organizations where an accounts-receivable clerk might deposit a check without reading the memo line.
There is an important override. The discharge still applies if the debtor can prove that the claimant or a responsible agent knew the check was offered as full satisfaction before collection was initiated.1Texas Public Law. Texas Business and Commerce Code 3.311 – Accord and Satisfaction by Use of Instrument Actual knowledge by the right people trumps routing procedures. An organization cannot use a designated-office notice as a shield when someone with authority over the disputed account personally knew what the check was for and let it get deposited anyway.
Raising the Defense in Court
Texas Rule of Civil Procedure 94 lists accord and satisfaction among the affirmative defenses that must be specifically pleaded in a responsive filing.3Texas Courts. Texas Rules of Civil Procedure – Rule 94 Affirmative Defenses A defendant who fails to raise the defense in their answer waives it. Even a valid accord and satisfaction can lose at trial if it isn’t pleaded properly.
Because it is an affirmative defense, the defendant carries the full burden of proof. The debtor has to demonstrate every element: that a genuine dispute existed, that a new agreement was reached, and that the new obligation was performed and accepted. If any element falls short, the creditor wins and the original debt stays enforceable.