Accord and Satisfaction Defense Rejected

Accord and Satisfaction Defense Rejected

      In a January, 2013 decision, the Kentucky Court of Appeals rejected an accord and satisfaction defense to efforts to collect on an open account.  Pop’s Classic Cars, LLC v. The Engine Warehouse Parts, Inc., No.2011-CA-001378-MR (Ky. App. Jan. 25, 2013). 

      Pop’s Classic Cars and (presumably – the opinion does not specify) its member, Dennis Sowder (collectively “Sowder”) signed a credit agreement with Engine Warehouse Parts (“Engine Warehouse”) pursuant to which Sowder agreed to pay the invoices and, if not, pay related attorney fees. 

      Sowder ran up a bill of $18,517.87.  Engine Warehouse and Sowder entered into a payment plan to resolve the open account, but Sowder did not make the agreed payments.  He did, however, tender a check in the amount of $236.16 containing an annotation that everyone agreed constituted an effort to claim “accord and satisfaction” of the entire debt.

      When Engine Warehouse filed suit, Sowder filed an answer, but did not claim as an affirmative defense accord and satisfaction.  He did, however, in response to Engine Warehouse’s motion for summary judgment, assert accord and satisfaction.  In response, Engine Warehouse argued that (1) accord and satisfaction must be affirmatively pled in the answer, and in that Sowder failed to do so the defense was waived and (2) the amount in question was undisputed and liquated, for which accord and satisfaction is not available.

      The Court of Appeals agreed with Engine Warehouse on both bases.  As to the unavailability of accord and satisfaction as to liquidated amount, the Court wrote:

Sowder’s delivery of a $236.16 check to a lockbox as full payment for $18,517.87 owed to Engine Warehouse was not a good accord and satisfaction.  Engine Warehouse submitted undisputed evidence that when Sowder tendered the check, the amount owed was liquidated and undisputed.

Procedurally, the accord and satisfaction defense satisfaction was waived because it was not presented in the answer or in an amended answer.  “It is undisputed that Sowder did not plead accord and satisfaction in the answer to Engine Warehouse’s complaint and, therefore, the defense was waived.”

      The Court also dismissed an argument that the credit agreement at issue was an unenforceable adhesion contract, and that Sowder was not bound by the terms on its reverse.  As to the claim that it is an unenforceable adhesion contract, the court found rather that it reflected a “commercial transaction favorable to both parties.”  As to the terms set forth on the reverse of the agreement, the Court found that the language on the face of the contract specifically referenced and incorporated that on the reverse, thereby making it part of the agreement entered into by Sowder.