Sec 1003

An agreement by which a lesser sum, with additional security, is accepted in discharge of a prior debt, is an accord and satisfaction, and operates when the new security, being accepted as adequate, is received by the creditor. The consideration, in such case, is sufficient. The debtor obtains reduction and extension; the creditor obtains security which he did not before possess.1 To constitute accord and satisfaction, however, the creditor must accept the new promise with its security; and if he refuses to do so, the original claim may be pursued.2 It is here that the element of novation comes in. If a new contract takes the place of the old, the old, if the consideration be sufficient, is superseded by the new.3 But the mere agreement to take a less sum is on its face without consideration. If, however, a new security is proposed by the debtor and accepted by the creditor, this operates as a satisfaction when the agreement is that it should be so accepted.4 And it is hard to see why an agreement to take such a security, followed by a tender of the security, should not have the same effect when the security consists of a guarantee by a third party. The debtor says, "If you will take two-thirds, I will give you B.'s note." The creditor says, "On consideration of B.'s note, I will take two-thirds." This has all the elements of a binding contract, and substitutes the new agreement for the old.1 Hence, the reception of a cheque by a third party for a lesser amount, accompanied by a receipt in full, is an accord and satisfaction.2 But the new agreement, in such case, "must create a binding contract, supported by a sufficient consideration, and giving a right of action; otherwise it would form no satisfaction of the original debt without an actual performance."3 Hence, an executory contract, by way of compromise, to discharge a disputed claim, by giving the debtor's promissory note for a sum less than the amount actually due, is not a bar to the original demand, although the note has been tendered to the creditor, if it has not been accepted.4 To constitute a bar, there must be some additional element of consideration.5

An agreement to take a lesser amount secured is an accord and satisfaction when security is received.

1 Supra, sec 574, 953 et seq.; Sibree V. Tripp, 15 M. & W. 23; 1 Smith's Lead. Cas. *444; Hinckley V. Arey, 27 Me. 362; Billings V. Vanderbeck, 23 Barb. 546; Douglass V. White, 3 Barb. Ch. 621; Kellogg V. Richards, 14 Wend. 118; Frisbie V. Larned, 21 Wend. 450; Reid V. Hibbard, 6 Wis. 175; Mason V. Campbell, 27 Minn. 54; Sanders V. Bank, 13 Ala. 353; Pope V. Tunstall, 3 Pike, 209. See discussion in 1 Smith's L. C. 7th Am. ed. 598 et seq.

2 Story on Cont. sec 982 6; 2 Parsons on Cont. 681-3; Russell V. Lytle, 6 Wend. 390; Hawley V. Foote, 19 Wend. 516; Kromer V. Heim, 75 N. Y. 574; Hearn V. Kiehl, 38 Penn. St. 147; Keen V. Vaughan, 48 Penn. St. 477. See Young V. Jones, 64 Me. 563; White V. Gray, 68 Me. 579; Pettis V. Ray, 12 R. I. 344; Frost V. Johnson, 8 Ohio, 393.

That acceptance as a full discharge of a promissory note or endorsement of a third person, even for a less sum, may constitute accord and satisfaction, see 1 Smith's L. C. 7th Am. ed. 605; Brooks V. White, 2 Metc. 283; Boyd V. Hitchcock, 20 Johns. 76; Booth V. Smith, 3 Wend. 66; New York State Bank V. Fletcher, 5 Wend. 85; Kellogg V. Richards, 14 Wend. 116; Frisbie V. Larned, 21 Wend. 451; Mason V. Campbell, 27 Minn. 54; Graham V. Morrow, 40 Ga. 487; Sanders V. Bank, 13 Ala. 353; and see cases cited supra, sec 953 et seq.

3 Supra, sec 852 et seq. That a mortgage for a less sum will be an accord and satisfaction, see Keeler V. Salisbury, 27 Barb. 485. Whether a security is accepted as security, or as payment, is elsewhere considered. See supra, sec 953 et seq.

4 Evans V. Powis, 1 Ex. 601; Hall V. Flockton, 16 Q. B. 1039; and cases cited supra, sec 852 et seq., 996 et seq.