Accord and Satisfaction

Definition of Accord and Satisfaction

Accord and satisfaction is a legal method for resolving a contractual dispute by which one party performs different duties from those originally articulated in the contract, with the approval of the other party. This involves two components:

Accord: The new agreement made between the parties to discharge an obligation.
Satisfaction: The execution or consideration that makes the accord legally binding.

The process is crucial in contract law and debt settlement, where it allows the parties involved to avoid litigation by amicably resolving their disputes.

Examples of Accord and Satisfaction

Example 1: A furniture company has a contract to deliver a certain quality of chairs to a retailer. Due to production issues, the company offers chairs of slightly lesser quality but at a discounted price. The retailer agrees, effectively creating an accord. The discounted price serves as the satisfaction.
Example 2: A debtor owes $5,000 to a creditor but is unable to pay the full amount. They suggest paying $3,500 immediately as a full settlement. If the creditor agrees, this agreement discharges the original debt — the $3,500 is the satisfaction.

Frequently Asked Questions (FAQs)

What is the difference between accord and satisfaction and a substitute agreement?

In an accord and satisfaction, the original contract is modified by a new agreement and followed by the performance which discharges the original obligation. In contrast, a substitute agreement fully replaces the original contract with a new one, involving no performance of the original obligation.

Does accord and satisfaction need to be in writing?

While it is often advisable to put an accord and satisfaction in writing to provide clear evidence of the new agreement and its terms, certain oral agreements may also be enforceable depending on the jurisdiction and specific circumstances.

Can accord and satisfaction be used to settle any contractual obligation?

Accord and happiness can generally be applied to most types of contractual obligations, but not necessarily all. Courts often require that the subject matter of the dispute be unliquidated (not precisely quantified) or subject to bona fide disagreement concerning the owed sum.

What happens if one party does not fulfill the satisfaction?

If the party responsible for fulfilling the satisfaction fails to do so, the obligee may claim breach of the new agreement (accord). The original contractual obligation might also be reinstated, allowing for a claim based on the original agreement.

Can accord and satisfaction discharge an obligation arising under tort law?

Yes, accord and satisfaction can be used to resolve obligations arising under tort law, provided that the involved parties agree to the terms and conditions of the agreement.

Consideration: Anything of value promised to another party in exchange for something else of value. Consideration is essential to make the accord legally binding.
Breach of Contract: A legal cause of action where a binding agreement is not honored by one or more parties.
Settlement Agreement: A legally-binding contract that resolves a dispute between parties without litigation.
Discharge of Contract: The cancellation or termination of a contractual obligation.

Online Resources

Suggested Books for Further Studies

“Contract Law: Text, Cases, & Materials” by Ewan McKendrick
“Understanding Contract Law” by Richard Austen-Baker, Q.C.
“Principles of Contract Law” by Robert Duxbury

Accounting Basics: “Accord and Satisfaction” Fundamentals Quiz

### What are the two main components of accord and satisfaction? - [x] Accord and satisfaction - [ ] Offer and acceptance - [ ] Performance and consideration - [ ] Obligation and liability > **Explanation:** Accord is the new agreement to discharge an existing obligation, and satisfaction is the performance of that new agreement. ### Who must agree for an accord and satisfaction to be valid? - [x] Both parties must agree. - [ ] Only the party offering new terms. - [ ] Only the party receiving the offer. - [ ] A third-party arbitrator must decide. > **Explanation:** Both parties in the contractual agreement must agree to the new terms for accord and satisfaction to be valid. ### What sort of obligation can be discharged by accord and satisfaction? - [x] Any contractual obligation - [ ] Only monetary debts - [ ] Only tort obligations - [ ] Only verbal contracts > **Explanation:** Accord and satisfaction can discharge any type of contractual obligation, including monetary debts and other contractually bound duties. ### Can accord and satisfaction be used to modify contract delivery terms? - [x] Yes, if both parties agree. - [ ] No, delivery terms cannot be modified. - [ ] Only if the contract is still within the consideration period. - [ ] Only if witnessed by a legal body. > **Explanation:** Accord and satisfaction can be used to modify any terms of the contract, including delivery, as long as both parties consent. ### What happens if the satisfaction is not performed? - [ ] The accord automatically cancels. - [x] The original obligation might be reinstated. - [ ] Both parties must go to court. - [ ] The contract becomes void. > **Explanation:** If the satisfaction is not performed, the original obligation might be reinstated, and the obligee can claim breach of the original contract or the new agreement. ### Is a written document necessary for every accord and satisfaction? - [x] It is advisable but not always necessary. - [ ] Yes, always. - [ ] No, oral agreements are sufficient. - [ ] Only for high-value contracts. > **Explanation:** While having a written document is advisable for clarity and proof, oral agreements might still be enforceable under certain circumstances. ### What key element makes an accord legally binding? - [x] Consideration - [ ] Witness testimony - [ ] Notarization - [ ] Contract registration > **Explanation:** Consideration is the critical element that makes an accord legally binding by giving value to the agreement. ### Can a creditor later claim rights under the original contract after accord and satisfaction? - [x] No, if satisfaction has been delivered. - [ ] Yes, they can still claim it. - [ ] Depends on the contract terms. - [ ] Only within a grace period. > **Explanation:** Once the satisfaction has been delivered, the original contractual obligation is discharged, preventing the creditor from claiming further rights under the original contract. ### Is satisfaction necessarily a monetary element? - [ ] Yes, always. - [x] No, it can be any valuable consideration. - [ ] No, satisfaction is always a service. - [ ] Only if the contract stipulates. > **Explanation:** Satisfaction can involve any form of valuable consideration agreed upon by both parties, not just monetary elements. ### What characterizes an obligation suitable for accord and satisfaction? - [ ] Only pre-determined obligations. - [x] An obligation subject to genuine dispute or uncertain amount. - [ ] Any debt owed to a commercial entity. - [ ] Obligations inherent to verbal agreements. > **Explanation:** An obligation subject to genuine dispute or uncertain amount is typically suitable for accord and satisfaction agreements.

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