Be careful about those dusty pieces of paper at the bottom of your in-basket. The New Hampshire Supreme Court recently issued a decision in the case of New Hampshire Boring, Inc. v. Adirondack Environmental Associates, Inc.,⁽¹⁾ involving the doctrine of "accord and satisfaction," the legal term for settlement of a dispute.

New Hampshire Boring ("NHB"), the plaintiff, contracted with Adirondack Environmental Associates ("AEA") for drilling services. After its services had been completed, NHB sent AEA a bill, and eventually AEA sent a check for substantially less than the amount shown on that bill. In the cover letter with its check, AEA stated that the sum tendered fulfilled all its contractual agreements with NHB. NHB cashed the check, without a restrictive endorsement (e.g., "without prejudice"), and simply applied the amount paid as a credit toward the full amount it had billed, subsequently sending a bill for the balance to AEA. When AEA refused to pay, NHB brought suit. AEA defended by saying that NHB had waived the balance by cashing the check. The trial court directed a verdict for AEA on the basis of accord and satisfaction. NHB appealed.

NHB admitted it failed to read the letter, but claimed that there was no agreement to settle their account for less than they had billed. It contended that AEA should have put the language in bold print or otherwise drawn attention to the fact that a different deal was being proposed. The New Hampshire Supreme Court disagreed. The Justices concluded that the language used by AEA was clear and unequivocal and there was no need for special type or big letters. The Court also found that NHB's lack of any subjective awareness that a deal had been proposed did not matter. In this case, ignoring the cover letter ended up being termed a "lack of diligence" that cost NHB about $17,000.00.

Normally, for an agreement to be enforceable under New Hampshire law, there must be an offer, an acceptance of that offer, and some consideration.⁽²⁾ In the settlement of a legal dispute, the agreement to settle is called an "accord." Actual exchange of the consideration⁽³⁾ is called a "satisfaction."

Our courts have long held that oral agreements are enforceable unless the deal falls under the provisions of the Statute of Frauds.⁽⁴⁾  The Statute of Frauds derives from an ancient principle of English law, promulgated during the reign of King Charles II in 1677, designed to prevent the enforcement of hastily made oral promises regarding certain "big ticket" items. Our ancestors knew that fraud was more likely if the intentions of the parties were not carefully put down in writing. New Hampshire kept the law after the Revolution, and added some provisions, but the premise is still the same: contracts for the sale of land or agreements which are not to be performed within one (1) year have to be in writing, signed by the party to be charged.

So, when is a deal a deal in New Hampshire? The answer depends on the subject matter of the agreement. If you contract to buy a house, an oral promise won't be enforced by the courts. If you make an oral promise to employ the bookkeeper for five years (you know, the one who does not read cover letters that accompany checks in the mail), that promise won't be enforced. But, if you accept a check on an account that says "full and final payment," watch out! That simple four-word phrase is an offer to settle for consideration (the payment of money in exchange for forgiveness of a debt). When you cash the check, you are simultaneously accepting the offer and executing the resulting agreement. Presto: accord and satisfaction!

Our courts have also held that attorneys can bind their clients to a settlement, as long as they have authority to do so. In some cases, like those where a settlement is supervised by the Court, the agreement to settle does not have to be in writing. See, e.g., Halstead v. Murray,⁽⁵⁾ and Bossi v. Bossi.⁽⁶⁾ An attorney's authority to settle is usually presumed, and a client claiming to the contrary has the burden of disproving the point.  Manchester Housing Authority v. Zyla.⁽⁷⁾  The special nature of the attorney-client relationship generally allows one party to rely on the promises made by another's lawyer.⁽⁸⁾ If the settlement involves the transfer of property, then the Statute of Frauds applies and the agreement does have to be in writing. Byblos Corporation v. Salem Farm Realty Trust.⁽⁹⁾

The New Hampshire Boring case appears to caution all of us in an increasingly busy market place to pay attention to the scribbles on the back of checks and on invoices -- and most importantly, read the mail!

Notes:

1. 145 N.H. 397, 762 A.2d 1036 (2000), decided November 17, 2000.

2. "Consideration" is a legal term for giving up something in exchange for something else. It normally, but not always, involves the payment of money by at least one of the parties to the agreement.

3. For example, the exchange of money for a signed release.

4. N.H. R.S.A. 506:1-2.

5. 130 N.H. 560, 547 A.2d 202 (1988).

6. 131 N.H. 262, 551 A.2d 978 (1988).

7.  118 N.H. 268, 269, 385 A.2d 225,227 (1978).

8. Bossi, supra.