Legal Definitions - accord and satisfaction

Accord and Satisfaction refers to a legal agreement where two parties, who already have an existing contract or obligation, agree to accept a different performance or payment than what was originally promised, in order to resolve the original duty.

The "accord" is the new agreement itself, outlining the alternative performance. The "satisfaction" is the actual completion of that new, alternative performance. Crucially, the original obligation is only discharged (meaning it's legally fulfilled and no longer binding) once the agreed-upon alternative performance has been fully carried out. This differs from a contract modification, which typically changes the original duty immediately upon agreement.

• Example 1: Settling a Debt with a Lower Payment

  Imagine Sarah owes her credit card company $5,000. Due to unexpected financial hardship, she cannot pay the full amount. Sarah contacts the credit card company and offers to pay a lump sum of $3,500 immediately, if they agree to consider her debt fully paid. The credit card company reviews her situation and agrees to this proposal.

  In this scenario, the agreement to accept $3,500 instead of $5,000 is the accord. When Sarah actually pays the $3,500, that payment is the satisfaction. Only after the credit card company receives the $3,500 is Sarah's original $5,000 debt legally discharged. If Sarah fails to pay the $3,500, the original $5,000 debt remains in effect.

• Example 2: Resolving a Service Contract Dispute

  A homeowner, Mr. Henderson, hired "Elite Builders" to construct a custom deck using a specific type of exotic hardwood. During construction, Elite Builders discovers that the agreed-upon hardwood is no longer available due to supply chain issues. To avoid a breach of contract, Elite Builders proposes using a different, equally durable, and aesthetically similar hardwood, and also offers to include a built-in bench at no extra cost as compensation for the change. Mr. Henderson agrees to this new plan.

  The new agreement to use a different hardwood and add a bench is the accord. When Elite Builders completes the deck with the alternative hardwood and installs the bench, that constitutes the satisfaction. Once the satisfaction is complete, Elite Builders' original obligation to use the specific exotic hardwood is discharged, and Mr. Henderson cannot later sue them for not using the originally specified material.

• Example 3: Accepting Substitute Goods

  A restaurant, "The Gilded Spoon," ordered 100 cases of a particular brand of imported olive oil from its supplier. Before delivery, the supplier informs The Gilded Spoon that a shipment delay makes it impossible to deliver the exact brand on time. The supplier offers to provide 100 cases of a different, slightly more expensive, but equally high-quality domestic olive oil at the original agreed-upon price, ensuring timely delivery. The Gilded Spoon, needing the oil for an upcoming event, accepts this offer.

  The agreement to accept the domestic olive oil instead of the imported brand at the original price is the accord. The actual delivery of the 100 cases of domestic olive oil is the satisfaction. Once the domestic olive oil is delivered, the supplier's original obligation to provide the imported brand is discharged, and The Gilded Spoon cannot claim a breach of contract for not receiving the initially ordered product.