Business, Legal & Accounting Glossary
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.
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This glossary post was last updated: 26th April, 2020 | 12 Views.