Accord and satisfaction is a legal concept that allows parties to settle a dispute by agreeing to new terms or conditions, thereby discharging the original obligation. It involves an agreement between the parties where one party offers to perform a different action or provide a different form of consideration to satisfy the existing obligation, and the other party accepts this offer. Once the accord (the new agreement) is executed, and the satisfaction (the performance of the new agreement) occurs, the original obligation is considered discharged. Accord and satisfaction can arise in various contexts, such as contracts, debts, and legal claims, and it provides a mechanism for resolving disputes without resorting to litigation. However, for accord and satisfaction to be effective, it must be made in good faith, with clear and mutual consent between the parties, and must comply with any applicable legal requirements.
Accord and Satisfactions refer to the discharge of an obligation arising under Tort law.
An agreement to settle a contract dispute by accepting less than what’s due. A settlement by which one party, having complied with its own terms in an agreement, allows the other party to discharge its existing debt by means other than those set forth in the original contract. n. an agreement to accept less than is legally due in order to wrap up the matter. Once the accord and satisfaction is made and the amount paid (even though it is less than owed) the debt is wiped out since the new agreement (accord) and payment (the satisfaction) replaces the original obligation. It is often used by creditors as “a bird in the hand is worth two in the bush” practicality. This is a device enables one party in a contract to avoid an obligation that arises under said contract; provided that the other concerned parties agree. The accord is the agreement by which a contractual obligation is discharged, and the satisfaction is the consideration of making the agreement legally sound. Such an agreement only discharges the contractual obligation if it is accompanied by consideration. This procedure is often used by creditors who want to cut their losses by collecting as much money as they can from debtors who cannot pay the full amount. For example; under a contract of sale the seller of goods may discharge the contractual obligation by delivering goods of different quality to that specified in the contract (in the form of a substitution), provided that there is an agreement from the buyer (the accord) and that a reduction in the contracted price (the satisfaction) is offered and accepted. The seller has, therefore “purchased” release from said obligation.
A method of discharging a claim whereby the parties agree to give and accept something in settlement of the claim and perform the agreement, the accord being the agreement and the satisfaction being its execution or performance, is a new contract substituted for an old contract that is thereby discharged, or for an obligation or cause of action that is settled, and must have all of the elements of a valid contract.
To constitute an accord and satisfaction, there must have been a genuine dispute that was settled by a meeting of the minds with an intent to compromise. Where there is an actual controversy, an accord and satisfaction may be used to settle it. The controversy may be founded on contract or tort. It can arise from a collision of motor vehicles, a failure to deliver oranges ordered and paid for, or a refusal to finish constructing an office building, etc.
In former times, courts recognised an accord and satisfaction only when the amount of the controversy was not in dispute. Otherwise, the resolution had to be a compromise or settlement. The technical distinction is no longer made, however, and a compromise of amount can properly be part of an agreement and satisfaction. The amount, whether disputed or not, is usually monetary, as when a pedestrian claims $10,000 in damages from the driver who struck him. The amount can be a variety of other things, however, as when a homeowner claims that she ordered a swimming pool thirty-six feet long rather than thirty-five feet or when an employee insists that he is entitled to eleven rather than ten days of vacation during the rest of the calendar year.
Only those who have the legal capacity to enter into a contract may agree and express satisfaction. A settlement is not binding on an insane person, for example; and an infant may have the right to disaffirm the contract. Therefore, a person acting on behalf of a person incapable of entering into a contract for himself or herself, such as a guardian, may reach an agreement and satisfy the person under his or her charge, but the law may require that the guardian’s actions be subject to court supervision. An executor or administrator may bind an estate; a trustee can accept an accord and satisfaction for a trust; and an officer can negotiate a settlement for a corporation.
A third person may give something in satisfaction of a party’s debt. In such a case, agreement and satisfaction are achieved if the creditor accepts the offer and the debtor authorises, participates in, or later agrees to the transaction.
For example, a widower has an automobile accident but is mentally unable to cope with a lawsuit because his wife has just died. He gratefully accepts the offer of a close family friend to talk to the other driver, who has been threatening a lawsuit. The friend convinces the other driver that both drivers are at fault to some extent. The friend offers to pay the other driver $500 in damages in exchange for a written statement that she will not make any claim against the widower for damages resulting from the accident. The family friend and the other driver each sign a copy of the statement for the other, and when the payment is made, the agreement and satisfaction are complete. If the other driver then sues the widower for more money on account of the accident, the widower could show that he agreed to let his friend negotiate an accord and satisfaction, and the court would deny relief.
An agreement and satisfaction are contracts, and all the essential elements of a contract must be present. The agreement must include a definite offer of settlement and an unconditional acceptance of the offer according to its terms. It must be final and definite, closing the matter it covers and leaving nothing unsettled or open to question. The agreement may call for full payment or some compromise, and it need not be based on an earlier agreement between the parties. It does not necessarily have to be in writing unless it falls within the statute of fraud.
Unless there are matters intentionally left outside of the agreement and satisfaction, it settles the entire controversy between the parties. It extinguishes all the obligations arising out of the underlying contract or tort. Where only one of two or more parties on one side settles, this ordinarily operates to discharge all of them. The reason for this is the rule that there should be only one satisfaction for a single injury or wrong. This rule does not apply where satisfaction is neither given nor accepted with the intention that it settles the entire matter.
An accord without satisfaction generally means nothing. With full satisfaction, the accord can be used to defeat any further claims by either party unless it was reached by fraud, duress, or mutual mistake.
An accord and satisfaction can be distinguished from other forms of resolving legal disputes. A payment or performance means that the original obligations were met. A release is a formal relinquishment of the right to enforce the original obligations and not necessarily a compromise, as in accord and satisfaction. An arbitration is a dispute resolution process where the parties voluntarily accept the arbitrator’s decision on an award. A composition with creditors is very much like an accord but has elements not required for an accord and satisfaction. It is used only for disputes between a debtor and a certain number of his or her creditors, while an accord and satisfaction can be used to settle any kind of controversy—whether arising from contract or tort—and ordinarily involves only two parties. Although distinctions have occasionally been drawn between an accord and satisfaction and a compromise and settlement, the two terms are often used interchangeably. A novation is a kind of accord in which the promise alone, rather than full performance, is satisfaction and is accepted as a binding resolution of the dispute.
Accord and Satisfaction is a legal concept where parties to a contract agree to accept something different from what was originally promised, and then fulfil that agreement, thereby resolving any disputes arising from the original contract.
In Accord and Satisfaction, the parties agree to a new arrangement or compromise that varies from the terms of the original contract, usually to settle a dispute or resolve a disagreement.
The key elements include:
- Agreement: Both parties must agree to a new arrangement or compromise.
- Consideration: There must be something of value exchanged as part of the new agreement.
- Execution: The new agreement must be performed according to its terms to satisfy the original obligation.
Consideration can be anything of value, such as money, goods, services, or the release of a claim or debt, as long as it is agreed upon by both parties.
Yes, Accord and Satisfaction is legally binding if all elements are met and the new agreement is executed according to its terms. Once fulfilled, the original obligation is considered discharged.
Yes, Accord and Satisfaction is often used to settle disputes outside of court, providing a quicker and more cost-effective resolution than litigation.
Accord and Satisfaction can be documented through a written agreement or a memorandum of understanding, outlining the terms of the new arrangement and signed by both parties.
If one party fails to fulfil the terms of the new agreement, the other party may seek legal remedies for breach of contract, including enforcement of the original obligation or damages for non-performance.
Once Accord and Satisfaction is agreed upon and executed, it generally cannot be revoked unless both parties agree to rescind the agreement or if there is fraud, duress, or other grounds for invalidating the agreement.
Q: What is an Accord and Satisfaction? A: Accord and Satisfaction is a legal agreement between two parties to settle a dispute or claim for less than the full amount owed. Q: How does Accord and Satisfaction work? A: The party owing the debt offers to pay a lesser amount than what is owed, and the other party accepts the offer as full payment. Once the payment is made, the debt is considered settled. Q: Is Accord and Satisfaction legally binding? A: Yes, Accord and Satisfaction is a legally binding agreement between two parties. Q: Can Accord and Satisfaction be used in any type of dispute? A: Accord and Satisfaction can be used in any type of dispute where there is a debt owed, including contract disputes, personal injury claims, and employment disputes. Q: What are the benefits of using Accord and Satisfaction? A: The benefits of using Accord and Satisfaction include avoiding costly litigation, resolving disputes quickly, and preserving business relationships. Q: Can Accord and Satisfaction be used in court? A: Yes, Accord and Satisfaction can be used as evidence in court to prove that a debt has been settled. Q: What happens if one party does not fulfill their obligations under the Accord and Satisfaction agreement? A: If one party does not fulfill their obligations under the Accord and Satisfaction agreement, the other party can take legal action to enforce the agreement. Q: Can Accord and Satisfaction be used to settle a debt that is already in collections? A: Yes, Accord and Satisfaction can be used to settle a debt that is already in collections, but it is important to work with the collection agency to ensure that the agreement is properly documented. Q: Is it necessary to have a written agreement for Accord and Satisfaction? A: While a written agreement is not required for Accord and Satisfaction, it is recommended to have one to ensure that both parties understand the terms of the agreement and to provide evidence in case of a dispute.
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This glossary post was last updated: 9th April, 2024.
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