Accord and satisfaction—deceptively simple, often decisive. It’s the doctrine that swaps an old obligation for a new agreement + performance, then bars any further claims on the original debt. In the business world, it usually shows up as the “paid in full” check. In litigation and commercial work-outs, it appears as a short written settlement (or even an open-court recitation) that substitutes different performance for what was first promised.

North Carolina’s rule set. Our courts preserve the classic common-law approach and overlay it with the UCC through G.S. 25-3-311, which adds creditor-side protections for the check scenario: a designated address for “full-payment” instruments, a knowledge shield for organizations, and a 90-day repayment option to unwind an inadvertent deposit.

Who this is for. This guide distills the doctrine as it actually functions in North Carolina, and then closes with a practical playbook for counsel and operators—especially businesses around Huntersville, Cornelius, Davidson, and the Lake Norman area—who need to make quick, defensible decisions when a “paid in full” check lands or a settlement is taking shape.

---

I. Core Definitions and the Common-Law Frame

North Carolina courts have long defined accord and satisfaction exactly as the words imply:

• Accord: An agreement to accept something different than originally owed in full satisfaction of the claim.
• Satisfaction: The performance of that new agreement—which discharges the original claim.

See Dobias v. White (N.C. 1954) and Prentzas v. Prentzas (N.C. 1963). The baseline contract principles apply: offer, acceptance, consideration, and intent. There must also be a meeting of the minds (though courts will infer assent from conduct in appropriate circumstances).

When is it a legal question? While the existence of accord and satisfaction is often fact-intensive, courts will decide it as a matter of law—for example, on summary judgment—where the only reasonable inference is existence or non-existence and the essential facts are clear on the record. See Construction Co. v. Coan (N.C. App. 1976).

---

II. The “Paid in Full” Check Line: Common Law Meets Article 3

A. The classic rule (before the statute and still relevant)

When there’s a genuine dispute over what’s owed (or the amount is unliquidated), and the debtor tenders a check conspicuously marked “full payment” (or equivalent), cashing the check can create an accord and satisfaction as a matter of law. North Carolina decisions like Barber v. White (N.C. App. 1980) and Moore v. Greene illustrate the rule: the creditor could have declined and sued for the full amount; by negotiating the instrument with conspicuous “full payment” language and a disputed claim, the creditor elected the settlement.

Conversely, when the claim is liquidated and undisputed, a memo-line “paid in full” notation does not create an accord and satisfaction just because the creditor accepted the check. See Fruit & Produce Packaging Co. v. Stepp (N.C. App. 1972). Without a bona fide dispute or unliquidated amount, the creditor is justified in treating the partial payment as a mistaken underpayment.

B. Article 3 codifies—and adds creditor safe harbors (G.S. 25-3-311)

North Carolina’s G.S. 25-3-311 (UCC 3-311) formalizes the paid-in-full-check doctrine and builds in protections for modern processing realities:

Discharge only if all are true (subsections (a)–(b)):

1. The debtor tendered the check in good faith;
2. The claim was unliquidated or subject to a bona fide dispute;
3. The check or accompanying writing contained a conspicuous statement that it was tendered in full satisfaction; and
4. The claimant obtained payment of the instrument.

Creditor “off-ramps” (subsections (c)–(d)):

• Designated person/place (§ 25-3-311(c)(1)): If, before tender, the claimant sent the debtor a conspicuous notice directing all “full-payment” checks to a specific person/office/address, and the debtor did not send it there, no discharge occurs.
• Knowledge shield (§ 25-3-311(c)(2)): For organizations, no discharge unless an agent with direct responsibility for the claim knew the check was offered as full satisfaction before it was paid. This protects lockboxes and payment centers.
• 90-Day repayment (§ 25-3-311(d)): If a full-payment check was inadvertently deposited, the creditor can reinstate the claim by repaying the amount within 90 days after payment (this corrective option is generally unavailable when you rely on the designated-address procedure).

Key limits. The statute applies only when the claim is unliquidated or bona fide disputed. It doesn’t transform a judgment or fixed sum into a negotiable settlement by memo notation alone, and it doesn’t let a creditor “have the cake and eat it too” by crossing out “paid in full” or endorsing “under protest.” The majority rule—traceable through scholarship like Patricia Fry’s survey—rejects the idea that the old UCC § 1-207 (reservation of rights) defeats a check-based accord and satisfaction.

C. Illustrative cases

• Five Oaks Recreational Ass’n v. Horn (N.C. App. 2012): HOA foreclosure; owner’s check with an illegible “full payment” memo and no prior dispute letter did not discharge the debt. Liquidated assessments + no pre-tender dispute = no A&S.
• Sharpe v. Nationwide (N.C. App. 1983): Fire loss is unliquidated; insured signed a proof of loss (the accord) and then negotiated the full-payment draft. The insured’s typed “partial payment only” language on the draft did not prevent accord and satisfaction.
• Walden v. Vaughn (N.C. App. 2003): Judgment collection; a settlement was formed and accepted in Virginia when the creditor’s lawyer deposited certified checks clearly labeled as “in full satisfaction.” Choice-of-law: the place of last act (acceptance) controlled. The UCC 3-311 “90-day undo” didn’t apply because the claim (judgment) was liquidated.

---

III. Settlements Beyond Checks: Notes, Releases, and Open-Court Accords

While “paid in full” checks get the attention, much North Carolina doctrine flows from non-check settlements—often cleaner, usually safer.

• Notes + lien waiver as accord & satisfaction: In N.C. Monroe Constr. Co. v. Coan (N.C. App. 1976), the disputed construction account was settled by defendants issuing promissory notes and the contractor giving an owner’s and contractor’s affidavit acknowledging full payment and waiving mechanic’s lien rights. Intent + consideration were clear; A&S barred the owners’ contract claims.
• Open-court settlement as accord (with satisfaction by performance): In Griffin v. Sweet (N.C. App. 1995), the parties’ settlement was read into the record; the contractor released the lien and tendered payments. Even though the clients later balked, the court enforced the on-the-record accord and found satisfaction in the contractor’s performance and the attorney’s acceptance of settlement payments on clients’ behalf.
• Releases as accord & satisfaction (and a bar): A short written release/settlement that is supported by consideration and expresses clear intent can function as accord & satisfaction and bar later claims. (Unpublished but instructive) Hamilton v. FedEx applied this principle; the court treated a written release as an A&S defense resolvable as a matter of law on undisputed facts.

Caveats—statute of frauds; misrepresentation.

• Commercial loan work-outs: Oral “we’ll deed it back” compromises on loans over $50,000 are void under G.S. 22-5 unless in writing—see Macon Bank v. Gleaner (N.C. App. 2015). Don’t rely on an oral deed-in-lieu for a commercial note.
• Misrepresentation voids the accord: In Collier v. Bryant (N.C. App. 2011), beneficiaries cashed distribution checks before discovering the executrix had concealed insider self-dealing in the sale. Any putative A&S was voidable for misrepresentation; concealment in fiduciary contexts invites constructive-fraud presumptions and defeats a clean accord.

---

IV. What Does Not Work (and Why)

• “Under protest” notations, crossing out the memo, or “partial only” stamps: Courts repeatedly reject these tactics in the full-payment check context (see Brown v. Coastal Truckways; Sharpe). Under Article 3, the discharge rests on the statute’s elements and exceptions, not on unilateral stamps.
• Silent memo lines on undisputed debts: Without a prior dispute or unliquidated claim, a “paid in full” memo won’t transmute a fixed invoice into an A&S (see Stepp, Five Oaks).
• Oral commercial work-outs for large loans: G.S. 22-5 requires a writing; an oral “accord” with real property or >$50,000 commercial loans is unenforceable (Gleaner).
• Ignorance of legal effect: A payee’s lack of legal understanding does not undo acceptance where the statutory/common-law elements are otherwise met (see Barber, Sharpe).
• Hoping a court will ignore the choice-of-law path: Settlements consummated by deposit in another state can be governed by that state’s law (Walden). Plan your acceptance (or rejection) accordingly.

---

V. The Practical Playbook (Counsel & Operations)

A. For creditors and organizations (A/R, lockbox, servicers)

1. Adopt a “Full-Payment Instruments Notice”
   Include conspicuous language on invoices, statements, credit apps, demand letters, and your website (terms) designating a specific person/department/address for instruments tendered in full satisfaction. This activates § 25-3-311(c)(1) and protects you when debtors send “paid in full” checks elsewhere.
2. Train and route
   Teach A/R and lockbox vendors to flag any item with “paid in full,” “full settlement,” “for account in full,” “painting in full,” etc., or cover letters indicating full settlement. Route to the designated person immediately. Don’t let field offices or automated centers cash it.
3. Use the 90-day undo
   If a full-payment check was inadvertently processed (and you’re within Article 3’s scope), tender repayment within 90 days to reinstate the claim under § 25-3-311(d). Calendar a tickler. (Note: the 90-day fix is not a free do-over for judgments or liquidated claims outside Article 3’s scope.)
4. Document the dispute
   Preserve emails, letters, and call notes demonstrating the bona fide nature of any dispute (or that none existed). The presence or absence of a dispute before tender often decides A&S fights.
5. Prefer short written releases for certainty
   If the parties can actually engage, paper a two-page settlement with clear consideration and a release. That accord avoids the ambiguity of a memo-line check and is readily enforceable (see Coan, Griffin, and release-as-bar cases).

B. For debtors and payors

1. Make the dispute clear and conspicuous
   If you are tendering less than the creditor claims, ensure the dispute existed before tender, and make the full-payment statement conspicuous—on the check and/or a cover letter that travels with it.
2. Use a cover letter like Sanyo
   North Carolina has enforced A&S where the check arrived with a letter stating it is in full, final, and complete settlement, inviting return if unacceptable. That’s the cleanest way to show offer + acceptance when the creditor banks the funds.
3. Expect designated-address and knowledge-shield defenses
   If the creditor has a designated person/address, sending your “paid in full” check elsewhere won’t bind them. If an A/R clerk processed the payment without a responsible agent’s knowledge, the knowledge shield can defeat discharge. Account for these hurdles.
4. Judgments are different
   Article 3’s dispute/unliquidated requirement means a judgment or fixed sum isn’t transformed by the memo line. If you want finality on a judgment, negotiate and document a written settlement; don’t rely on a check legend.

---

VI. Construction & Insurance: Focused Guidance

Construction. Disputes often resolve by exchanging notes and lien waivers (Coan), or by open-court settlement (Griffin). If you represent the contractor, make sure the lien waiver expressly states “paid in full” (or define the scope if partial). If you represent the owner, confirm the waiver and release are truly final, or segment the settlement (e.g., “through Pay App #7 only”) if more claims remain.

Insurance. Many property claims are unliquidated; proofs of loss can serve as the accord, and cashing the insurer’s full-payment draft completes satisfaction (Sharpe). If the insured disputes the amount, do not endorse a full-payment draft while trying to reserve rights by typing “partial only”; that tactic fails. Either reject and invoke appraisal or other policy remedies—or negotiate a written partial settlement that is explicit about what remains open.

---

VII. Checklist & Templates

A. 30-second checklist (organization facing “paid in full” checks)

• Claim disputed/unliquidated? If no, Article 3 discharge likely doesn’t apply.
• Check or cover letter conspicuous as “full satisfaction”?
• Was it sent to the designated address/person? If no, invoke § 25-3-311(c)(1).
• Did a responsible agent know before payment? If no, invoke § 25-3-311(c)(2).
• If inadvertently processed, are you within 90 days to repay and reinstate under § 25-3-311(d)?
• Prefer a short written release when feasible.

B. Invoice footer (designation notice)

FULL-PAYMENT INSTRUMENTS NOTICE. Any check or instrument tendered as full satisfaction of any claim must be sent to: [Designated Person/Dept] – [Street Address], [City, ST ZIP].
Instruments sent elsewhere are not accepted in full satisfaction. (G.S. 25-3-311(c)(1))

C. Return letter (wrong place)

We received your instrument dated [date] referencing [account/claim]. Because it purports to be tendered in full satisfaction, and it was not sent to our designated person/address per G.S. 25-3-311(c)(1), we are returning it unnegotiated.
Please remit undisputed sums to our standard remittance address. If you wish to propose full settlement, direct such instruments and communications to [Designated Person/Address].

D. 90-day repayment letter

Without conceding discharge, we enclose our check for $[amount] as repayment pursuant to G.S. 25-3-311(d) following inadvertent collection of your instrument dated [date]. All rights to pursue the balance are expressly reserved.

---

VIII. Bottom Line — Plain-English, Practical, and Ready to Use

1) The simple rule.
If you and the other side make a new deal and someone does what the new deal requires, the old claim is over. Lawyers call that accord (the new deal) and satisfaction (doing it).

2) The “paid in full” check trap (and how NC fixes it).
North Carolina has a statute—G.S. 25-3-311—that mostly follows the common-sense rule people expect:

• If a debt is genuinely disputed (or the amount isn’t fixed), and someone sends a check with a clear “paid in full” message, and you cash it, the matter can be settled.
• But the law also gives creditors modern safety valves:
  • Designated address: You can tell customers exactly where “paid in full” checks must go. If they send it somewhere else, it doesn’t settle the claim.
  • Knowledge shield: Big organizations aren’t trapped by something a lockbox clerk cashed; a responsible person must have known it was a “full payment” tender before it was paid.
  • 90-day undo: If a “paid in full” check got cashed by mistake, you can repay the amount within 90 days and restore your claim.

3) What doesn’t work (don’t waste time here).

• Writing “under protest,” “partial only,” or crossing out “paid in full” does not save your rights once you deposit the check. Article 3 doesn’t care about those stamps.

4) The safest route: put it in writing.
When you can actually talk to the other side, don’t leave your settlement on a memo line. Use a short, written agreement that says:

• What each side will do (money, timing, lien waiver, release, etc.), and
• That the agreement resolves the dispute.
  This is especially smart in construction, lending, and business disputes. It’s faster to enforce and less likely to blow up.

5) Prove there really was (or wasn’t) a dispute.
For “paid in full” checks, everything hinges on whether the debt was truly disputed before the check was sent:

• If you’re the one paying less: Put the dispute in writing before you send the check and make the “full payment” wording obvious.
• If you’re receiving the check: Keep a simple record (emails, notes) of whether there was or wasn’t a real dispute. That paper trail often decides the result.

---

Quick “What do I do now?” guide

If you RECEIVE a check marked “Paid in Full”:

1. Don’t deposit it yet.
2. Ask: Was this claim genuinely disputed before now?
   • No: You can usually treat it as a partial payment (especially for fixed invoices).
   • Yes: Route it to your designated person/address (set this up on your invoices).
3. If it was cashed by mistake, use the 90-day repayment to reinstate your claim.
4. Consider proposing a short written settlement instead.

If you WANT to settle by sending a “Paid in Full” check:

1. Make sure there is a real dispute (or the amount isn’t fixed).
2. Put the dispute and the offer in a short cover letter and write “Full and Final Settlement” clearly.
3. Send it to the creditor’s designated address if they have one.
4. If they cash it, you likely have a binding settlement.

If you’d rather not use a check for this:

• Email or sign a 2-page settlement and release. It’s cleaner, faster, and avoids arguments about what a memo line means.

---

A few everyday examples

• Fixed invoice (no dispute): You owe $1,000. You send $700 with “paid in full.” The company cashes it. Because there was no dispute, you still owe $300.
• Real dispute: You say the service was late and worth $700, not $1,000. You send $700 with a clear letter saying it’s “full settlement.” If the company cashes it, the claim is likely settled.
• Accidental cashing: Your lockbox deposits a “paid in full” check. You can repay it within 90 days and continue to pursue the balance.
• Construction job: You exchange a lien waiver and a final check with a short written release saying the job is settled. That’s simple, enforceable accord and satisfaction.

---

Bottom line (in one breath)

If you want finality, use a short written settlement. If you’re dealing with “paid in full” checks, remember the two keys: there must be a real dispute, and the law gives creditors three safety valves (designated address, knowledge shield, 90-day undo). Don’t count on “under protest” stamps. And always document—because whether a claim was truly disputed before the check often decides who wins.

---

Adkins Law, PLLC — Huntersville | Lake Norman
Adkins Law, PLLC is a boutique civil and business firm based in Huntersville, serving clients throughout Lake Norman and Charlotte. We help companies and individuals resolve contract disputes, navigate “paid in full” checks and settlement agreements, and put practical policies in place to prevent costly mistakes. Whether you need a same-day review of a payment dispute, a short-form release, or an A/R playbook for your team, our attorneys deliver clear, actionable guidance tailored to North Carolina law.

Click here to reach out to Adkins Law, PLLC to schedule a consultation to speak with an experienced attorney in Huntersville.