When money is owed and a dispute arises, people often try to settle it informally. One common tactic is sending a check marked “Paid in Full” or “Final Payment” for less than the full balance.

But does cashing that check really wipe out the rest of the debt?

In Texas, the answer depends on the law of accord and satisfaction.

Understanding how this doctrine works can protect you from accidentally giving up thousands of dollars—or help you resolve a dispute legally and efficiently.

What Is Accord and Satisfaction?

“Accord and satisfaction” is a legal concept that allows parties to resolve a disputed debt through a negotiated compromise.

• Accord = An agreement to accept something different than what was originally owed
• Satisfaction = Performance of that agreement (usually payment)

When both exist, the original obligation is discharged.

In plain English:
If a valid settlement is reached and completed, the old debt is legally over.

The Key Texas Statute: Business & Commerce Code § 3.311

Texas has codified this doctrine in the Uniform Commercial Code.

Under Texas Business and Commerce Code § 3.311, a debt may be discharged if:

“A person in good faith tenders an instrument to the claimant as full satisfaction of the claim…”
(Tex. Bus. & Com. Code § 3.311(a))

To create a binding accord and satisfaction, several legal requirements must be met.

Legal Requirements for Accord and Satisfaction in Texas

Under Section 3.311, all of the following must generally apply:

1. The Claim Must Be Disputed or Unliquidated

There must be a real disagreement about:

• How much is owed, or
• Whether anything is owed at all

If the debt is clear and undisputed, accord and satisfaction usually does not apply.

2. The Payment Must Be Made in Good Faith

The debtor must honestly intend to settle the dispute.

Bad-faith tactics, deception, or manipulation can invalidate the settlement.

3. The Payment Must Clearly State “Full Satisfaction”

The check or accompanying document must include conspicuous language such as:

• “Paid in full”
• “Final settlement”
• “Full and final payment”

This notice puts the creditor on alert that accepting the money may end the claim.

4. The Creditor Must Accept the Payment

If the creditor:

• Cashes the check, or
• Deposits the funds,

that usually counts as acceptance under Texas law.

Once accepted, the claim may be legally discharged.

Example: How This Works in Real Life

Imagine this situation:

A contractor claims a homeowner owes $15,000.
The homeowner disputes the work and sends a $9,000 check marked “Final Payment in Full.”

If the contractor deposits the check without proper precautions, the remaining $6,000 claim may be lost forever.

That is accord and satisfaction in action.

Important Exception: Designated Dispute Addresses

Texas law provides protection for businesses that handle many payments.

Under § 3.311(c), a creditor may avoid accidental settlement by:

• Designating a specific address or office for disputed payments, and
• Giving notice to customers

If the debtor fails to send the “paid in full” check to that address, accord and satisfaction may not apply.

This is especially important for landlords, service providers, and professional firms.

Can a Creditor Undo Accord and Satisfaction?

Sometimes.

Under § 3.311(d), a creditor may reverse the settlement if:

• The payment was cashed unintentionally, and
• The money is returned within 90 days

However, this window is limited and risky. Once time passes, the defense may be permanent.

How Accord and Satisfaction Is Used in Lawsuits

In litigation, accord and satisfaction is an affirmative defense.

Under Texas Rule of Civil Procedure 94, it must be specifically pleaded.

If proven, it can completely defeat a creditor’s claim—even when money is still technically owed.

Courts regularly enforce valid accord and satisfaction agreements.

Common Mistakes That Cost People Money

❌ Cashing Checks Automatically

Many businesses deposit payments without reviewing endorsements.

This is one of the fastest ways to lose a valid claim.

❌ Writing “Under Protest”

Simply crossing out “paid in full” usually does not defeat accord and satisfaction.

Texas courts focus on acceptance, not side notes.

❌ Ignoring Settlement Language

Emails, letters, and invoices can create accord agreements even without checks.

Practical Tips for Texans

For Creditors

• Review all payments carefully
• Train staff to flag “paid in full” language
• Use designated dispute addresses
• Consult counsel before depositing disputed funds

For Debtors

• Clearly state settlement intent in writing
• Act in good faith
• Keep copies of all communications
• Understand that vague language may not work

Why This Matters in Texas Business and Personal Disputes

Accord and satisfaction frequently appears in:

• Contractor disputes
• Medical billing conflicts
• Landlord-tenant matters
• Business service disagreements
• Loan repayment issues
• Divorce and property settlements

A small mistake can erase large claims.

Handled properly, it can also resolve disputes efficiently without court.

When to Speak with a Texas Attorney

If you are dealing with:

• A disputed debt
• A “paid in full” payment
• A settlement check
• A threatened lawsuit

You should get legal advice before acting.

Once accord and satisfaction is complete, it is often impossible to undo.

Final Thoughts

Texas law allows people to settle disputed debts informally—but only when specific legal rules are followed.

Accord and satisfaction can be:

• A powerful settlement tool, or
• A costly trap

Understanding the law before accepting or sending payment protects your financial rights.

If you have questions about disputed debts or settlement payments, a qualified Texas attorney can help you evaluate your options.

At David C. Barsalou, Attorney at Law, PLLC, we help clients navigate business, family, tax, estate planning, and real estate matters ranging from document drafting to litigation with clarity and confidence. If you’d like guidance on your situation, schedule a consultation today. Call us at (713) 397-4678, email barsalou.law@gmail.com, or reach us through our Contact Page. We’re here to help you take the next step.