Discharge of Duties - Next Generation Bar Exam

1. Under UCC 3-311, what conditions make the cashing of a full-payment check an accord and satisfaction?

   A good-faith tender on a claim that is unliquidated or genuinely disputed, with a conspicuous full-satisfaction statement. Cashing the check in those circumstances discharges the claim, subject to limited rights to repay within 90 days.

2. What is the effect of an executory accord on the original duty?

   The original duty is suspended until the accord is performed or breached. Performance of the accord discharges both the accord and the original duty.

3. Why is a mutual rescission ineffective once one party has fully performed?

   The performing party receives nothing in exchange for releasing the other party's remaining duty. A discharge in that situation requires consideration or a recognized substitute, such as a signed release.

4. What is required for an effective mutual rescission of an executory contract?

   Agreement by both parties to discharge their remaining duties. Each party's surrender of its rights against the other supplies consideration for the rescission.

5. What distinguishes a novation from an executory accord?

   A novation immediately discharges the original duty and substitutes a new obligation, often with a new party. Unlike an accord, a novation does not keep the original duty alive pending performance.

6. What is a release?

   A writing providing that a duty owed to the maker is immediately discharged. A release supported by consideration or a recognized substitute discharges the duty without performance.

7. What is an accord?

   An agreement to accept a substituted performance in satisfaction of an existing duty. The original duty is discharged only when the accord is performed, which is the satisfaction.

8. The parties genuinely dispute whether $5,000 or $3,000 is owed. The debtor sends a $3,000 check conspicuously marked 'payment in full,' and the creditor cashes it. What is the effect?

   The claim is discharged by accord and satisfaction. Settlement of a disputed claim is supported by consideration, and cashing the check accepts the offered accord.

9. A debtor owes an undisputed $1,000 due June 1. The creditor agrees to accept $600 paid on May 1 in full satisfaction. What supplies consideration for discharging the balance?

   The earlier payment, which the debtor had no duty to make. Performance that differs from the existing duty, such as early payment, is new consideration.

10. If the obligor breaches an executory accord, what may the obligee enforce?

    Either the original duty or the accord. The obligee may choose whichever remedy it prefers.

11. What makes a payment of part of a liquidated, undisputed debt insufficient to discharge the balance?

    The debtor gives no consideration, because it merely performs part of an existing duty. The creditor's promise to accept less is unsupported absent something new, such as earlier payment or a different performance.

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