- Will Supplier recover the $5,000?
Answer: Yes, because the claim was liquidated and Builder had no genuine and reasonable dispute to support the offset.
Whenever you see an accord-and-satisfaction question, focus on the threshold requirement: the claim must be either unliquidated or honestly disputed. Here Supplier's claim was liquidated because the written contract fixed the price at $50,000, with "no deductions except by written amendment," and no amendment existed. Builder's $45,000 check for "payment in full" included an offset for late deliveries, but the statute says a debtor's unsupported assertion of a dispute does not make a liquidated claim unliquidated; the dispute must be genuine and reasonable. Nothing in the facts shows a real late-delivery dispute, so the claim remained liquidated and accord and satisfaction never applied. Supplier therefore recovers the remaining $5,000.
The answer claiming Builder's check did not tender the full $50,000 misses the point: tender of less than the full amount can satisfy an unliquidated claim, but it cannot discharge a liquidated claim without a genuine dispute. The answer saying Supplier cashed the check and accepted an accord and satisfaction overlooks the critical requirement that the claim be disputed or unliquidated—cashing alone is not enough. And the answer that Builder's notation created a bona fide dispute ignores the statute's explicit rule that an unsupported assertion is insufficient.
Your study tip: when you see "full satisfaction" language on a check, first ask whether the underlying claim was genuinely disputed or liquidated—if it was liquidated, the debtor's self-serving notation cannot manufacture an accord.
- Which legal doctrine should the artist rely on?
Answer: Mutual rescission, because the parties agreed to cancel the contract and restore what each had given.
When you see a question about parties agreeing to cancel a contract, think about the difference between "undoing" a contract and "replacing" it with something new. Mutual rescission is the doctrine that lets both parties unwind their deal and restore what each gave. Here, the artist and gallery signed a writing cancelling the sculpture contract, and the writing required the artist to return the $5,000 advance and the gallery to return the preliminary model. The artist did her side; the gallery did not. That is exactly a mutual rescission: both sides agreed to terminate the contract and return the exchanged benefits, so the artist can enforce the gallery's restoration duty.
The wrong choices each distort that idea. Accord and satisfaction is not involved because there was no disputed claim that the artist settled by returning the advance; the writing was an agreed cancellation. Substituted contract sounds close but misses the key point: the parties did not replace the sculpture contract with a new ongoing contract—they cancelled it and provided for restoration of the status quo. Novation is even further off because novation substitutes a new party or a new obligation in place of the old one, not an agreement to undo the deal.
So remember: when a contract says, "We're cancelling, and each side gives back what they received," that is mutual rescission. Watch for the word "cancelled" plus reciprocal restoration—it points you to the right doctrine.
- Is Debtor's obligation to Creditor discharged by accord and satisfaction?
Answer: No, because Creditor tendered repayment of the $9,000 within 90 days after obtaining payment and gave the required notice.
When you see an accord-and-satisfaction question involving a check marked "full settlement," the first thing to check is whether the claimant is an organization that designated a payment office. Under § 2-611(a), a claim is discharged if the debtor tenders an instrument in full satisfaction of a bona fide dispute and the claimant obtains payment without timely repayment. But § 2-611(b) creates an exception: if the claimant is an organization that notified the debtor to send payments to a specific office, and the check is sent there, the claim is not discharged if the organization, within 90 days, tenders repayment and gives notice that the instrument was accepted inadvertently.
Here, Creditor did exactly that. The check was sent to the P.O. Box on the invoice, deposited by the lockbox, and 20 days later Creditor mailed a $9,000 repayment check with a letter explaining the acceptance was inadvertent. That satisfies subsection (b), so Debtor's obligation is not discharged. The correct answer is the choice that says "No, because Creditor tendered repayment… and gave the required notice."
Now the wrong answers: "Yes, because the claim was subject to a bona fide dispute and Creditor obtained payment" ignores the organization's right to undo acceptance under (b). "Yes, because Debtor sent the check to the office specified on the invoice and marked it as full settlement" mistakenly treats the designation as helping the debtor—actually, it triggers the exception that lets Creditor avoid discharge. "No, because a check for less than the invoiced amount can never create an accord and satisfaction" is false; such checks can create it under (a) unless (b) applies.
Study tip: Whenever a statute has a "safe harbor" for organizations, test whether the debtor complied with the notice requirement—if so, the organization gets a 90-day window to repay and rescind. Always read the exception before concluding discharge.
- Which legal doctrine should the bakery assert to defeat the supplier's claim?
Answer: Accord and satisfaction, because the bakery tendered the check in full settlement of a disputed claim and the supplier accepted it.
Whenever you see a disputed bill, a check sent for less than the full amount, and a note saying it is "entire settlement," you should think accord and satisfaction. The doctrine applies when a claim is bona fide disputed, a debtor tenders payment "in full satisfaction," and a creditor accepts that payment. Here, the parties genuinely disputed liability after the oven was installed late, and the bakery sent a $35,000 check explicitly stating it was "the entire settlement of the invoice." That was a full-satisfaction tender. The supplier could have preserved its claim by returning the check within 90 days, but instead its controller crossed out notation and deposited it. Depositing the check, even "under protest," completed the accord; accepting the money discharged the entire disputed claim, including the remaining $15,000.
The other choices are traps. Substituted contract fails because no separate agreement to replace the original sale contract was formed before the check was deposited; accord and satisfaction arises from the tender plus acceptance, not its substitution of contract. Release is wrong because a release requires an express, usually written, surrender of a right, not mere conduct like cashing a check. Rescission is also wrong because rescission would unwind the entire transaction—arrows the oven returned and price refunded—whereas here both parties expected the sale to stand, with only the amount paid in dispute.
Remember: on the bar exam, a full-satisfaction check accepted by a creditor almost always means accord and satisfaction—and "deposited under protest" won't save the creditor. The safe move would have been returning the payment.
- Which legal doctrine is most directly relevant to whether the farm is liable under the earlier contract?
Answer: Substituted contract, because the later contract expressly replaced the earlier contract and discharged the farm's original delivery duty.
When you see a later agreement that explicitly "supersedes and replaces" an earlier one, you are in the territory of contract modification and discharge. The key question is whether the original duty was merely adjusted or entirely replaced. Here, the second contract reduced the quantity to 10,000 pounds and raised the price to $6 per pound, and it stated that it replaced the first agreement. That is the classic substituted contract: the parties intended the later contract to discharge the original delivery duty and stand in its place. Once the farm delivered the 10,000 pounds and Delta paid, the substituted contract was fully performed, so the farm owes nothing under the earlier contract.
Accord and satisfaction is wrong because that doctrine involves accepting a lesser performance to settle a disputed or unliquidated claim—not a bilateral new contract that replaces the old one. Novation is also wrong because a novation substitutes a new party for an original party, not merely a new obligation; no third party is involved here. Release is wrong because a release is a surrender of a claim, typically unilateral and separate from a replacement contract; Delta's agreement here was an exchange of promises, not just a waiver.
On exam day, remember: if the later contract says it "supersedes and replaces" the earlier one, it is a substituted contract—discharge by replacement, not by performance or release.
- Is Painter entitled to recover?
Answer: Yes, because Painter had fully performed and received no new consideration for discharging Homeowner's duty to pay.
Whenever you see a mutual rescission, remember Lin v. Ochoa: it is itself a contract, so consideration is required. The key is to ask what each party is giving up. If one side has already fully performed, that side has no remaining executory right to surrender, so the other party's duty can be discharged only by new consideration.
Here, Painter fully performed by completing the painting and Homeowner accepted it. At rescission, Painter had only the right to receive the remaining $8,000; Homeowner had only the duty to pay it. Painter surrendered no remaining contractual right, and Homeowner's promise to owe nothing was not bought by any new detriment. Therefore the purported rescission is ineffective to discharge Homeowner's debt, and Painter may recover.
"Homeowner's agreement to accept the work as complete" is not new consideration: acceptance was already Homeowner's contractual duty once the conforming work was done, and Painter's completion was past performance, not a bargained-for exchange. The "written rescission supported by mutual promises" fails for the same reason—one party had no promise left to surrender. And "Painter retained the $2,000 advance" is not consideration either; after full performance, Painter was already entitled to keep that money, so retaining it was no legal detriment and no benefit to Homeowner beyond what was already owed.
On exam day, when a rescission follows one party's full performance, immediately check whether the performing party received any new consideration. If not, the duty survives.
- Is Beta liable to Acme?
Answer: Yes, because Beta's duty was not discharged; Acme's consent to Gamma's assumption was not consent to a novation.
When you see a question about delegation of duties, your first instinct should be: delegation almost never lets the original obligor off the hook. The default rule is that a party remains liable unless a true novation occurs. Under Packard, a novation requires the obligee, the original obligor, and the third party all to agree that the original obligor is discharged. Acme's consent to Gamma's assumption is exactly what the Packard court said is not enough. The writing shows Gamma assumed Beta's duties and Acme consented, but nothing in it shows Acme agreed to release Beta. Therefore, Beta remains liable for the $50,000 purchase price.
The trap choices all mistake delegation or assignment for discharge. The answer claiming Beta's assignment of rights relieved Beta of its duty to pay confuses assigning rights with delegating duties—and even a valid delegation does not discharge. Similarly, the choice saying Gamma assumed all duties and Acme consented to substitution misreads consent to assumption as consent to a novation; Novation requires a separate manifestation of assent to Beta's discharge. Finally, the claim that Beta's assignment extinguished Beta's obligations is exactly backwards: an assignor can transfer rights, but duties are not extinguished by delegation or assignment.
Study tip: when the facts say a contract is assigned or delegated, hunt for words showing the obligee agreed to release the original obligor. Without that, the original obligor stays liable.
- Which legal doctrine is most directly at issue in Rosa's defense?
Answer: Novation, because the question is whether Dan was substituted for Rosa as the obligor with Chen's consent.
This question tests whether a third party's promise to pay a debtor's obligation can discharge the original debtor. The controlling idea is that a novation—the substitution of a new obligor for an existing one—requires the creditor's consent. Merely signing a writing between Rosa and Dan cannot affect Chen's rights against Rosa, because Chen was not a party to that agreement.
Rosa's defense is that Dan's promise substituted Dan as the party responsible for the debt. That is exactly the language of novation. A novation occurs when a creditor agrees to release the original debtor and accept a new obligor in their place. Since Chen did not know or consent, there was no novation; Rosa remains liable. Dan's promise and security interest may give Chen additional rights against Dan if Chen later accepts them, but they do not discharge Rosa.
The wrong answers each involve a different contract doctrine. Accord and satisfaction is about a creditor agreeing to accept a lesser or different performance in settlement of a claim; Chen made no such agreement. Substituted contract replaces an existing contract by agreement of the same parties—Rosa and Chen, not Rosa and Dan. Rescission is a mutual cancellation of a contract restoring the parties to their prior positions; again, Chen never agreed to cancel Rosa's debt.
On the exam, whenever a debtor argues that someone else now owes the debt, ask: did the creditor agree? Without the creditor's consent, the original debtor stays liable—that's the novation trap.
- Is Patient's fraudulent concealment claim barred by the release?
Answer: No, because the release did not expressly refer to fraud or fraudulent concealment, and a general release does not bar such a claim.
Whenever you see a release question, watch for statutory carve-outs—especially for fraud and fraudulent concealment. Here, the claim is not barred. Under § 5-113(b), a release does not discharge a claim for fraudulent concealment unless it expressly refers to fraud or fraudulent concealment. The release covers "all claims of any kind, including negligence," but it never mentions fraud. Thus, the general release cannot bar this claim. The choice saying "Yes, because the release was supported by consideration and stated it was a full and final release" misses the point—consideration and broad language do not override the statute's explicit requirement that fraud be specifically named. The choice "Yes, because Patient knew about the surgery and reasonably should have discovered the operative report before signing" misreads subsection (a). That subsection applies to claims described in the release that she knew or should have known about, but subsection (b) creates an independent barrier—fraud claims are simply not discharged unless expressly referenced. Finally, the choice "No, because Hospital's concealment made the release voidable for lack of consideration" is wrong on two counts: there was consideration ($25,000), and under subsection (c) the release is voidable for fraud, not for lack of consideration. The reason the claim survives is subsection (b). Strategy: On the bar exam, if a statute lists specific exceptions, apply them strictly. A general release never covers fraud unless fraud is explicitly written into the release.
- Which issue is most likely to determine whether Metro's lawsuit is barred?
Answer: Whether the fire-suppression defect was within the scope of the settlement agreement's language.
When you see a settlement agreement releasing claims, your immediate focus should be on the scope of the release's language. This question tests the enforceability of a release—specifically, whether a later-discovered claim falls within the terms of the original bargain. Here, the release covered "any and all claims and liabilities of any kind arising out of the purchase, use, or performance of the roaster." The fire-suppression defect is directly tied to the roaster's performance and use. Therefore, the central issue is whether that defect fits within that broad contractual scope. Metro's lack of knowledge about the defect is generally irrelevant to a release's validity unless there was fraud or a reservation of rights—so the language itself is the gatekeeper. The adequacy of the $30,000 payment is not a likely issue because courts do not examine the adequacy of consideration for a release unless it is unconscionable. The distinction between an accord and satisfaction and a release is a red herring—this is a classic release, and that distinction doesn't change the scope analysis. Finally, whether Appliance delegated its duty to a third-party manufacturer is irrelevant because a delegating party remains liable to the obligee unless there is a novation, which isn't indicated. Your study tip: whenever a question involves a settlement or release, identify the precise claim at issue and ask if it falls under the release's plain meaning. Knowledge of the claim at signing is usually not a defense unless the release explicitly excludes unknown claims.
- Which legal doctrine is most directly relevant to whether Owner is liable to Builder?
Answer: Novation, because the parties substituted Surety Co. for Owner as the obligor and Builder agreed to look only to Surety Co.
When you see a question about a three-party agreement replacing who owes payment, you're in the territory of contract discharge by novation versus substituted contract. The key question: did the parties simply swap the payment terms, or did they swap the obligor?
Here, Owner, Builder, and Surety Co. all signed the agreement, and Builder expressly agreed to "look only to Surety Co." for payment and not to assert any claim against Owner. That is the hallmark of a novation: with Builder's consent, Surety Co. was substituted for Owner as the obligor, and Owner was discharged from the original payment obligation. Because all three parties agreed, the novation is valid—even though Surety Co. later became insolvent, Builder's remedy is against Surety Co., not Owner.
"Accord and satisfaction" is wrong because that doctrine involves a two-party settlement of a claim by accepting a substituted performance; here the issue is the substitution of a new debtor. "Substituted contract" is wrong because that term applies when the same parties replace one contract with another—not when a new party is substituted for an original obligor. "Rescission" is wrong because the parties did not cancel the contract and restore pre-contract positions; Builder still expected to be paid, just by Surety Co. instead of Owner.
Study tip: distinguish novation from substituted contract by asking, "Did a new party replace an original party?" If yes, and the original party is released, it's a novation.
- Which of the following best describes Nash's right to recover?
Answer: Nash may recover only for breach of the June agreement, not on the original note, because the parties intended substitution.
Whenever you see a new agreement about an existing debt, classify it: an accord merely suspends the old duty, while a substituted contract immediately discharges it. The key is the parties' intent, often shown by language such as "substitution," "immediate discharge," or "sole remedy."
Here, the June writing says Doral's promise to convey Blackacre is in "complete substitution for, and immediate discharge of" the $60,000 debt, and that Nash's "sole remedy" is breach of the new agreement. That language shows a substituted contract, so the promissory note duty was extinguished the moment the parties signed. Therefore, Nash cannot sue on the original note; Nash may recover only for breach of the June agreement.
The first wrong answer, that Nash may recover $60,000 simply because Blackacre was not conveyed, ignores the substitution: nonperformance triggers the new agreement, not the old debt. The second wrong answer, that there was no new consideration, misunderstands the exchange—Doral's promise to convey Blackacre was new consideration for Nash's promise to discharge the debt. The third wrong answer, requiring Nash to rescind and tender back Doral's promise, is unnecessary; a substituted contract needs no rescission because the old duty is already discharged.
On exam day, treat words like "extinguished," "superseded," and "immediate discharge" as substitution signals, and "suspended" or "remains in effect" as accord signals. If ambiguous, presume accord.
