Contracts and Sales Multistate Bar Practice Exam

Under what circumstances can a bona fide dispute be satisfied by a partial payment on an existing debt?

1. Only if the creditor agrees to the terms

2. When there is a written acknowledgment of the payment

3. If there’s a genuine dispute over the amount owed

4. When the debtor submits a formal request to modify the contract

The correct answer is: If there’s a genuine dispute over the amount owed

The correct answer is based on the principles of contract law regarding the resolution of disputes over debts. A bona fide dispute exists when there is a legitimate disagreement between parties about an amount owed. When a debtor makes a partial payment toward an existing debt that is disputed, this can often be considered as a means of settling the dispute, even if the amount paid does not cover the total debt. The rationale behind this is that if a genuine dispute exists over the amount owed, a partial payment can signify the debtor's willingness to pay a certain amount while still contesting the remaining balance. This can lead to the resolution of the dispute by demonstrating good faith on the part of the debtor, potentially encouraging the creditor to accept the payment as a resolution to the disagreement. While other options may introduce relevant factors in different contexts, they do not address the fundamental condition under which a bona fide dispute might be satisfied. For instance, the creditor agreeing to terms is more about contractual negotiations than the resolution of an existing dispute. A written acknowledgment of the payment doesn't inherently relate to the dispute itself; it merely records the transaction. A formal request to modify the contract also diverges from the essence of settling a dispute via payment. Thus, the existence of a genuine dispute over the amount