In Illinois, Can a Business Refuse Partial Payment and Still Enforce the Full Debt?

This question came from one of our users:

"I would like to know if there is a law that states if a business refuses to accept a payment if the remainder of the debt is voided. I have been fighting with a contractor about his bill, he has sued me in court, and they found for him even though I had pictures of his shoddy workmanship."

It depends, but as it relates to a construction contract, the answer is typically yes; the contractor can refuse to accept partial payment and still enforce the full debt. However, it is the terms of the contract that will control.

Partial Payment

 
If you attempt to make a partial payment instead of full payment for a debt owed on a construction contract, what you are attempting to do is called an accord and satisfaction.  You are making an offer of a lesser amount to satisfy the full debt amount. While you can make an offer to the contractor to accept a lesser amount for payment in full, the contractor has no obligation to accept.

To be a valid, enforceable accord and satisfaction, you would need to indicate on the payment check that it is for “payment in full.” This would be legally sufficient as an offer to settle the dispute for a lesser amount. If the contractor were to take the check and cash it with the knowledge that it is for a lesser amount (either actual or constructive), then they have accepted the offer, and the original debt is settled for the amount offered.

Suppose you were to make an offer of a lesser amount without indicating that it is for “payment in full,” and the contractor accepted the lesser payment. In that case, you do not have an accord and satisfaction, and you would still owe any remaining amount.  

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If the contractor does not want to accept the lesser amount for payment in full, they can refuse to do so. The fact that you made the offer does not reduce the debt. The contractor must accept the offer in order for the full amount of the debt to be discharged. If the contractor does not accept and you refuse payment of the full amount, the contractor can file a lawsuit against you to recover the full amount.  

While the contract controls, if the contractor made a material breach of the terms of the contract, then you are able to withhold payment as a defense. A breach is when a party to a contract fails to perform their obligations under the terms of the contract.  A breach is material if the breach involves an aspect of the contract that is so important that you would not have entered into the contract without it.

If it is a material breach, then you are discharged from performing your duties under the contract. This is something that would likely play out in court, as, usually, each side has its own view of what happened. So, if the contractor sues you, you will have an affirmative defense of material breach of contract.

It becomes a question of fact whether the contractor did indeed materially breach the contract, which is decided by the trier of fact—either a judge or a jury. That would ultimately decide whether you owe the full amount or if your obligation to pay is discharged based on the contractor’s material breach.  
 

Designed for general information use only. The content above does not constitute legal advice or the formation of an attorney/client relationship.