FORT LAUDERDALE BUSINESS LITIGATION: PARTIES THAT AGREE TO SATISFY PRIOR CONTRACTUAL OBLIGATIONS CANNOT ENFORCE THOSE OBLIGATIONS LATER IN A LAWSUIT

            Florida law recognizes the defense of accord and satisfaction in contract disputes. The defense applies when contracting parties agree to resolve their dispute by accepting performance of an obligation that differs from the original obligation required under the contract. Jacksonville Elec. Authority v. Draper’s Egg & Poultry Co., 557 So. 2d 1357 (Fla. 1990) (“An accord is an agreement for the settlement of some previously existing claim by a substituted performance.”); Republic Funding Corp. of Fla. v. Juarez, 563 So. 2d 145 (Fla. 5th DCA 1990) (“Accord and satisfaction results when there is an existing dispute as to the proper amount due from one party (the debtor) to another party (the creditor) and the parties mutually intend to effect settlement of the existing dispute by a superceding agreement and the debtor tenders, and the creditor accepts, performance of the new agreement in full satisfaction and discharge of the debtor’s prior disputed obligation.”). The Fort Lauderdale business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

                The accord and satisfaction defense was used in Vitality Systems, Inc. v. Sogeval Laboratories, Inc., 2009 WL 2147005 (M.D. Fla. July 16, 2009). In Vitality Systems, Inc., the defendant entered an agreement with the plaintiff to purchase certain assets. The agreement required the defendant to make an initial payment and then two additional payments in the future. In addition, the defendant had to employ two shareholders of the plaintiff. If the defendant terminated the shareholders without cause, the due date for the two additional payments would be accelerated. The defendant made the initial payment and hired to two shareholders. However, the defendant terminated the two shareholders without cause thereby accelerating the due date of the two additional payments.

The defendant informed the plaintiff in writing that it determined the amount of additional payments to be $5,358,760 and that payment of this amount to the plaintiff would be “in full satisfaction” of the debt. The defendant transferred the funds to the plaintiff’s bank account. The plaintiff acknowledged receipt of the payment, but informed the defendant it owed more than the $5,358,760. The defendant requested its payment be returned, and stated that, if the payment was not returned, the defendant would regard the plaintiff’s retention of the fund as acceptance in full satisfaction of the debt. The plaintiff responded that it did not accept the funds as full satisfaction, but did not return the payment to the defendant. Instead, the plaintiff transferred the funds into a trust account.

The plaintiff filed suit for breach of contract, and the defendant moved for summary judgment on its accord and satisfaction defense. The court denied the defendant’s motion because insufficient evidence demonstrated the plaintiff accepted the payment as full satisfaction of the debt. The court arrived at its conclusion even though the defendant stated it was tendering the payment to the plaintiff in full satisfaction of the debt and the plaintiff acknowledged receipt of the funds. This is because there was no meeting of the minds between the plaintiff and the defendant . McDonald v. Allstate Ins. Co., 408 So. 2d 580 (Fla. 4th DCA 1981) (“A meeting of the minds or an agreement is an essential element of an accord and satisfaction.”). Although the defendant believed acceptance of its funds fully satisfied the defendant’s obligations to the plaintiff, the plaintiff disagreed. Vitality Systems, Inc. demonstrates that both parties must agree to have a viable accord and satisfaction defense.

The Fort Lauderdale business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.