Which defense applies when a debtor tenders a check marked 'paid in full' and the creditor cashes it?

The defense of accord and satisfaction is applicable in the scenario where a debtor pays a creditor with a check that is marked 'paid in full', and the creditor subsequently cashes that check. This legal concept involves an agreement (the accord) between the parties to discharge an existing obligation by substituting it with a new performance (the satisfaction). When the creditor accepts the check marked 'paid in full', they are indicating their agreement to accept that amount as complete payment for the debt, effectively resolving the original obligation.

In accord and satisfaction, it is crucial that the payment offered is of a disputed or unliquidated amount, meaning that the parties have a disagreement about the amount owed or the validity of the debt. By cashing the check, the creditor acknowledges the offer and accepts it, leading to a resolution of the debt involved. This principle protects debtors from being pursued for additional payments after they have made a good faith effort to resolve the debt based on the situation as they understood it.

Other options, such as novation, where one party is substituted in a contract, discharge by substituted agreement, which involves creating a new agreement that replaces the original, and discharge by alteration of the contract, which involves changes to the terms of the contract itself,