BUSINESS LAW
Supreme Court of Alaska (2022)
Jake Sherman
In Small Creek, Inc. v. Build Alaska General Contracting, L.L.C., 513 P.3d 253 (Alaska 2022), the Alaska Supreme Court held that for purposes of accord and satisfaction, (1) printing “full payment” on a check could be evidence of bad faith tender, and (2) disagreement over calculation of payment could be a bona fide dispute. (Id. at 261–262). A general contractor entered into a subcontracting agreement with subcontractor. (Id. at 256). The general contractor paid the subcontractor periodically, and on its final check, the general contractor inscribed the words “Chena River Trail Improvements Final Payment.” (Id.). Although the parties disputed how to calculate the subcontractor’s compensation, an employee of the subcontractor cashed the final check. (Id. at 257). The subcontractor later attempted to return the payment, but the general contractor refused to accept it. (Id.). The lower court ruled for the general contractor on summary judgment, finding the final check to be an accord and satisfaction accepted by the subcontractor when cashed. (Id. at 257–58). The supreme court overturned the lower court, finding that issues of material fact existed as to whether the general contractor tendered the check in good faith and whether the parties had a “bona fide” dispute over price. (Id. at 260–61). First, the court explained that the text “Final Payment” could be construed as bath faith tender in light of the parties’ communications. (Id. at 260). Second, the court concluded that the parties’ disagreement over how to calculate the subcontractor’s payment was not frivolous as a matter of law. (Id. at 261). Overturning the lower court, the supreme court held that for purposes of determining the existence of an accord and satisfaction, (1) printing words like “full payment” on a check could be bad faith tender, and (2) disagreement over calculation of payment could be a bona fide dispute. (Id. 261–262).
