Asked by Austin Braun on Jul 29, 2024
Verified
A small company, Software Design Limited, was indebted for $150,000 to a sole individual, and it is now due. This individual was an investor who was a former classmate of the firm's president, Angela. Owing to a reversal of fortunes for the company, Software Design could now only repay $100,000. With her investor chalking the affair up to experience, Angela intended the firm to repay what it could now, and then she would wind up the company. A few weeks after paying off her creditor at $100,000, but before she could wind up the company, a new investor with both ideas and money approached her and encouraged Angela to continue on in the business. Once Angela's former classmate heard of the new investor, she demanded the balance due on her loan. Angela briefly considered repaying more, but her new investor demanded a hardline approach. Angela was holding the repaid note in her hands as her later investor said "Neither you nor she could see the future when she agreed to accept $100,000. But accept she did. Business is business."
A) Since Software Design gave no consideration for Angela's classmate's promise to forgive the rest of the debt, Angela's classmate can successfully sue the company for the balance.
B) While Angela's classmate would have been able to sue the firm under common law, statute law says that, having accepted part of the debt as payment for the full amount, she cannot now demand the balance.
C) Whether or not Angela's classmate could successfully sue for the balance of the debt, the courts would not allow a debtor to be unjustly enriched in this way and would order Software Design to repay the balance of the debt.
D) None of the responses are correct.
E) All of the responses are correct.
Consideration
An item of worth traded between entities within a contract, essential for the contract to be considered enforceable by law.
Common Law
A body of law derived from judicial decisions of courts and similar tribunals, as opposed to statutes or official legislation.
Statute Law
Written laws passed by a legislative body, forming part of a country’s legal framework.
- Acquire knowledge about the legal outcomes tied to the acceptance of partial payments on a debt and the principle of accord and satisfaction.
Verified Answer
MW
Michelle WrightJul 30, 2024
Final Answer :
B
Explanation :
Angela's classmate, by accepting a part of the debt as full payment, has effectively agreed to a modification of the original agreement. Under many legal systems, once a creditor accepts a lesser amount as full satisfaction for a debt, they cannot later demand the remaining balance, especially if there is no new consideration for the promise to forgive the rest of the debt. This principle is often codified in statute law, which can override common law principles that might otherwise allow for the recovery of the full debt.
Learning Objectives
- Acquire knowledge about the legal outcomes tied to the acceptance of partial payments on a debt and the principle of accord and satisfaction.