TeachMeFinance.com - explain Composition
Composition -- An agreement between a debtor and his creditors
by whicB the latter accept in full payment of their claims
a portion of the amounts due. The sum or rate paid or
agreed to be paid in compounding with creditors also is called
A composition agreement is strictly interpreted by the
courts. For instance, A owes B $100 and says to him, "If you
will release that debt I will pay you $10 a week for the next
five weeks." B agrees. If A fails to make the payment in any
one of the five weeks B is no longer bound by his agreement.
He may rescind the agreement immediately and sue for so
much of the $100 as he has not received in the weekly instalments,
which if kept up would have discharged the debt for $50.
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