A rug maker contracts for 2,000 spools of yarn per month for four years at $10 per spool. After two years, the supplier sends 2,000 spools with 90% wool and 10% synthetic; the rug maker pays $15,000 with a note stating payment in full for the shipment, but $5,000 less due to the synthetic fiber. The supplier deposits the check and sues for the remaining $5,000 months later. What effect does the check have on the contract for that shipment?

• A. The check creates a new contract for the reduced amount.
• B. The check discharges the rug maker's obligation to pay the remaining $5,000 for that shipment.
• C. The check has no effect; the rug maker must pay the full $20,000.
• D. The check serves as partial payment and the remaining amount is disputed.

Answer: (B)

When money is disputed, a payment offered as “full settlement” that is accepted or cashed can create an accord and satisfaction. Here, for that shipment the total value was $20,000, but the rug maker paid $15,000 with a note saying it’s payment in full, reducing by $5,000 due to the synthetic content. The supplier’s acceptance and deposit of the check signals the parties’ agreement to settle that shipment’s debt for $15,000. Under accord and satisfaction, the claim for the remaining $5,000 is discharged for that shipment. So the check effectively ends the rug maker’s obligation beyond the $15,000 already paid.