Bar Exam (Next Generation) Quiz: Discharge Of Duties

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Discharge Of DutiesQuestion 1 of 12

The Court of Appeals of this jurisdiction held in Packard v. Tyner: 'A delegation of duties does not discharge the delegating party. A novation occurs only when the obligee, the original obligor, and a third person all agree that the third person will be substituted for the original obligor and that the original obligor is released from liability to the obligee. The obligee's consent to the third person's assumption, or its acceptance of the third person's performance, is not enough; there must be a manifestation of assent to the original obligor's discharge.'

Acme contracted to supply Beta with 10,000 circuit boards for $50,000. Before delivery, Beta assigned its rights and delegated its duties to Gamma. Acme, Beta, and Gamma signed a writing: 'Gamma assumes all of Beta's duties under the supply contract. Acme consents to Gamma's assumption. Beta makes no warranty of Gamma's performance or payment.' Gamma accepted delivery of the circuit boards but never paid Acme. Acme sues Beta for the $50,000 purchase price.

Is Beta liable to Acme?

Yes, because Beta's duty was not discharged; Acme's consent to Gamma's assumption was not consent to a novation.

Yes, because Beta's assignment of its rights to Gamma relieved Beta of its duty to pay and left Gamma as the sole obligor.

No, because Gamma assumed all of Beta's duties and Acme consented in writing to the substitution.

No, because Beta's assignment of its rights to Gamma extinguished Beta's obligations under the contract.

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Bar Exam (Next Generation) Quiz

Bar Exam (Next Generation) Quiz: Discharge Of Duties

Practice Discharge Of Duties in Bar Exam (Next Generation) with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Discharge Of Duties, giving you a quick way to practice the rules, question types, and explanations that matter most for Bar Exam (Next Generation).

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

Is Beta liable to Acme?

Yes, because Beta's duty was not discharged; Acme's consent to Gamma's assumption was not consent to a novation. (correct answer)
Yes, because Beta's assignment of its rights to Gamma relieved Beta of its duty to pay and left Gamma as the sole obligor.
No, because Gamma assumed all of Beta's duties and Acme consented in writing to the substitution.
No, because Beta's assignment of its rights to Gamma extinguished Beta's obligations under the contract.

Explanation: 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.

Question 2

Section 3-218 of this jurisdiction's Commercial Code provides: 'A claim is discharged by accord and satisfaction when (i) the claim is unliquidated or subject to a bona fide dispute, (ii) the debtor tenders an instrument as full satisfaction of the claim, and (iii) the claimant obtains payment of the instrument. A claim is liquidated when its amount is fixed by the parties' agreement or is ascertainable by an objective standard. A debtor's unsupported assertion that the claim is disputed does not make a liquidated claim unliquidated; the dispute must be genuine and reasonable.'

Under a written contract, Builder agreed to pay Supplier $50,000 for delivered goods, 'net 30, no deductions except by written amendment.' All goods were delivered on the contract dates. Builder nevertheless sent Supplier a check for $45,000 marked 'payment in full; $5,000 offset for late deliveries.' Supplier cashed the check and later sued Builder for the remaining $5,000.

Will Supplier recover the $5,000?

Yes, because the claim was liquidated and Builder had no genuine and reasonable dispute to support the offset. (correct answer)
Yes, because Builder's $45,000 check did not tender the full amount of the $50,000 claim.
No, because Supplier cashed the check and thereby accepted Builder's offer of accord and satisfaction.
No, because Builder's notation created a bona fide dispute as to the amount owed.

Explanation: 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.

Question 3

A parts supplier delivered a commercial oven to a bakery and invoiced $50,000. The bakery refused to pay, asserting that the oven was installed late and caused it to lose business. After the parties exchanged emails disputing the amount owed, the supplier offered to settle for $35,000. The bakery sent a check for $35,000 with a note stating, "This check is the entire settlement of the invoice." The supplier's controller crossed out that notation, endorsed the check "deposited under protest and with all rights reserved," and deposited it. The supplier later sued for the remaining $15,000.

Which legal doctrine should the bakery assert to defeat the supplier's claim?

Substituted contract, because the parties' settlement agreement replaced the original sale contract before the check was cashed.
Release, because the supplier's acceptance of the check was an express surrender of its right to the remaining $15,000.
Rescission, because the parties intended to cancel the original sale contract and return the oven and the price.
Accord and satisfaction, because the bakery tendered the check in full settlement of a disputed claim and the supplier accepted it. (correct answer)

Explanation: 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.

Question 4

Delta Brewing contracted with a hop farm to buy 20,000 pounds of hops at $4 per pound. Before delivery, a blight destroyed most of the crop. Delta and the farm signed a new contract stating that it "supersedes and replaces" the earlier contract and requiring the farm to deliver 10,000 pounds at $6 per pound. The farm delivered the 10,000 pounds and Delta paid $60,000. Delta later sued the farm for failing to deliver the remaining 10,000 pounds under the earlier contract.

Which legal doctrine is most directly relevant to whether the farm is liable under the earlier contract?

Accord and satisfaction, because the farm's delivery of a different quantity was accepted by Delta in place of the earlier delivery duty.
Substituted contract, because the later contract expressly replaced the earlier contract and discharged the farm's original delivery duty. (correct answer)
Novation, because the farm's later promise substituted a new delivery obligation for the earlier contract.
Release, because Delta's acceptance of the later contract surrendered its right to enforce the earlier delivery quantity.

Explanation: 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.

Question 5

Metro Coffee Roastery bought a commercial roaster from Appliance Co. After the roaster repeatedly malfunctioned, Metro threatened to sue. Metro and Appliance signed a settlement agreement in which Appliance paid Metro $30,000 and Metro agreed that it would not assert "any and all claims and liabilities of any kind arising out of the purchase, use, or performance of the roaster." Six months later, a defect in the roaster's fire-suppression system caused a fire. Metro sued Appliance, arguing that it did not know about that defect when it signed the settlement agreement.

Which issue is most likely to determine whether Metro's lawsuit is barred?

Whether the fire-suppression defect was within the scope of the settlement agreement's language. (correct answer)
Whether the $30,000 payment was adequate consideration for Metro's promise to give up its claims.
Whether the settlement agreement was an accord and satisfaction rather than a release.
Whether Appliance's duty to provide a safe roaster was delegated to a third-party manufacturer.

Explanation: 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.

Question 6

Owner hired Builder to construct a warehouse for $500,000. After Builder completed the work, Owner owed Builder a final payment of $100,000. Owner, Builder, and Surety Co. then signed an agreement providing that Surety Co. would pay Builder $100,000 and that Builder would look only to Surety Co. for payment and would not assert any claim against Owner under the construction contract. Surety Co. later became insolvent without paying, and Builder sued Owner for the final payment.

Which legal doctrine is most directly relevant to whether Owner is liable to Builder?

Accord and satisfaction, because Builder's acceptance of Surety Co.'s promise substituted a different performance for Owner's payment obligation.
Substituted contract, because the three-party writing replaced the payment terms of the original construction contract.
Novation, because the parties substituted Surety Co. for Owner as the obligor and Builder agreed to look only to Surety Co. (correct answer)
Rescission, because the parties' agreement canceled the construction contract and restored the parties to their pre-contract positions.

Explanation: 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.

Question 7

The Supreme Court of this jurisdiction held in Lin v. Ochoa: 'A mutual rescission is an agreement to terminate a contract and restore the parties to their pre-contract positions. Because it is a contract, it must be supported by consideration. Each party's surrender of remaining executory rights under the original contract is consideration for the other's surrender. If one party has already fully performed, that party has no remaining executory right to surrender; a purported rescission is therefore ineffective to discharge the other party's duty unless the performing party receives new consideration.'

Homeowner hired Painter to paint her house for $10,000, with $2,000 payable on signing and $8,000 payable on completion. Painter completed the painting, and Homeowner accepted the work. Homeowner then refused to pay, and the parties signed a writing: 'The parties rescind the painting contract. Painter will retain the $2,000 advance as full satisfaction of all claims, and Homeowner will owe nothing further.' Painter later sues Homeowner for the $8,000.

Is Painter entitled to recover?

Yes, because Painter had fully performed and received no new consideration for discharging Homeowner's duty to pay. (correct answer)
Yes, because Homeowner's agreement to accept the work as complete was new consideration for Painter's promise.
No, because the written rescission was a binding contract supported by mutual promises.
No, because Painter retained the $2,000 advance as consideration for the rescission.

Explanation: 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.

Question 8

An artist and a gallery signed an agreement for the artist to create a sculpture for $20,000. After the artist completed only a preliminary model, the artist and gallery signed a writing stating: "The sculpture contract is cancelled. The artist will return the $5,000 advance, and the gallery will return the preliminary model." The artist returned the advance, but the gallery kept the model. The artist sued the gallery for return of the model.

Which legal doctrine should the artist rely on?

Accord and satisfaction, because the artist's return of the advance satisfied the gallery's claim to the model.
Substituted contract, because the cancellation writing replaced the sculpture contract with a separate return-of-model duty.
Novation, because the gallery's duty to return the model replaced the artist's duty to create the sculpture.
Mutual rescission, because the parties agreed to cancel the contract and restore what each had given. (correct answer)

Explanation: 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.

Question 9

A statute of this jurisdiction provides: '§ 5-113. Effect of a Release.

(a) A written release supported by consideration and stating that it is a full and final release discharges all claims described in the release that the releasing party knew about or reasonably should have known about at the time of signing.

(b) A release does not discharge a claim for fraud or fraudulent concealment unless the release expressly refers to fraud or fraudulent concealment.

After surgery, Patient discovered that a sponge had been left in her abdomen. Patient and Hospital signed a release in which Patient, in exchange for $25,000, released Hospital from 'all claims of any kind, including negligence, arising out of the surgery.' Patient later learned that Hospital had intentionally concealed an operative report showing that the sponge count was incorrect. Patient sued Hospital for fraudulent concealment.

Is Patient's fraudulent concealment claim barred by the release?

Yes, because the release was supported by consideration and stated it was a full and final release of all claims.
Yes, because Patient knew about the surgery and reasonably should have discovered the operative report before signing.
No, because the release did not expressly refer to fraud or fraudulent concealment, and a general release does not bar such a claim. (correct answer)
No, because Hospital's concealment made the release voidable for lack of consideration.

Explanation: 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.

Question 10

Rosa owed Chen $12,000. Without Chen's knowledge or consent, Rosa and Dan signed a writing in which Dan promised to pay Rosa's debt to Chen and Rosa assigned Dan a security interest in her equipment as compensation. When Rosa did not pay, Chen sued Rosa. Rosa defended on the ground that Dan's promise substituted Dan as the party responsible for the debt.

Which legal doctrine is most directly at issue in Rosa's defense?

Novation, because the question is whether Dan was substituted for Rosa as the obligor with Chen's consent. (correct answer)
Accord and satisfaction, because Dan's promise and security interest were offered to settle Rosa's debt to Chen.
Substituted contract, because the writing between Rosa and Dan replaced Rosa's debt with a new obligation to Dan.
Rescission, because Rosa and Dan intended to cancel Rosa's debt and substitute Dan's promise.

Explanation: 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.

Question 11

Creditor, Inc., sold goods to Debtor for $15,000. Debtor disputed the amount, asserting that some goods were defective, and sent Creditor a check for $9,000 marked 'Full settlement of all claims.' Creditor's invoice had stated: 'Send all payments to Creditor, Inc., P.O. Box 777, Springfield.' The check was sent there and deposited by Creditor's lockbox. Twenty days later, Creditor mailed Debtor a check for $9,000 and a letter stating: 'The settlement check was cashed inadvertently; we do not accept it as full satisfaction, and repayment is tendered.'

A statute of this jurisdiction provides: '§ 2-611. Accord and Satisfaction by Tender of Check.

(a) A claim is discharged when: (1) the claim is unliquidated or subject to a bona fide dispute; (2) the debtor tenders an instrument to the claimant as full satisfaction of the claim; (3) the claimant obtains payment of the instrument; and (4) the claimant has not, within 90 days after obtaining payment, tendered repayment of the amount paid.

(b) If the claimant is an organization that has notified the debtor in writing that payments must be sent to a particular office, and the instrument is sent to that office, the claim is not discharged if the organization, within 90 days after obtaining payment, tenders repayment and gives notice that the instrument was accepted inadvertently.'

Is Debtor's obligation to Creditor discharged by accord and satisfaction?

Yes, because the claim was subject to a bona fide dispute and Creditor obtained payment of the $9,000 check.
Yes, because Debtor sent the check to the office specified on Creditor's invoice and marked it as full settlement.
No, because Creditor tendered repayment of the $9,000 within 90 days after obtaining payment and gave the required notice. (correct answer)
No, because a check for less than the invoiced amount can never create an accord and satisfaction.

Explanation: 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.

Question 12

The Supreme Court of this jurisdiction held in Duran v. Eady: 'When parties to an existing contract make a new agreement about the same subject matter, the new agreement is either an accord or a substituted contract. It is a substituted contract if the parties manifest an intent that the new agreement immediately discharges the existing duty and that the obligee's only remedy for breach is on the new agreement. It is an accord if the parties manifest an intent that the existing duty is merely suspended until the new performance is rendered. Language that the old duty is "extinguished" or "superseded" indicates a substituted contract; language that the old duty is "suspended" or "remains in effect until" the new performance indicates an accord. If the writing is ambiguous, the presumption is in favor of an accord.'

In March, Doral owed Nash $60,000 under a promissory note. In June, Doral and Nash signed a writing: 'Nash accepts Doral's promise to convey Blackacre to Nash in complete substitution for, and immediate discharge of, the $60,000 debt. Nash's sole remedy if Doral fails to convey shall be for breach of this agreement.' Doral never conveyed Blackacre. Nash sues Doral on the original promissory note.

Which of the following best describes Nash's right to recover?

Nash may recover $60,000 on the promissory note because Doral's promise to convey Blackacre was not performed.
Nash may recover on the promissory note because the June agreement was supported by no new consideration.
Nash may recover only for breach of the June agreement, not on the original note, because the parties intended substitution. (correct answer)
Nash may recover only if Nash first elects to rescind the June agreement and tenders back the promise to convey.

Explanation: 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.