Accord and Satisfaction
What is the Accord and Satisfaction?
An accord is a new agreement to accept different performance in satisfaction of an existing obligation, and satisfaction occurs when the new performance is completed, discharging the original duty.
Definition
Accord and satisfaction is a method of discharging a contractual obligation by entering into a new agreement (the accord) and performing under that new agreement (the satisfaction). The accord is the parties' agreement that a different performance will be accepted in place of the original obligation. The satisfaction is the actual rendering of that substitute performance. Once satisfaction occurs, the original obligation is discharged. If the accord is never satisfied, the obligee may enforce either the original obligation or the accord.
The doctrine requires valid consideration for the accord agreement. When the original obligation is liquidated (a fixed, undisputed amount), payment of a lesser sum is generally insufficient consideration for an accord under the preexisting duty rule—a promise to do less than what is already owed provides no new value. However, when the obligation is unliquidated or genuinely disputed, a compromise reached in good faith constitutes valid consideration because the parties are giving up their respective claims. Under UCC section 3-311, a good faith tender of a check marked 'payment in full' in satisfaction of a disputed claim constitutes an accord and satisfaction if cashed.
Accord and satisfaction must be distinguished from novation. In a novation, the original obligation is immediately extinguished upon the new agreement, while in an accord and satisfaction, the original obligation is suspended during the accord and discharged only when the satisfaction (performance of the accord) is completed. If the debtor fails to perform the accord, the original obligation revives.
Key Elements
- 1An existing obligation or claim between the parties
- 2A new agreement (accord) to accept substitute performance
- 3Valid consideration supports the accord
- 4The substitute performance (satisfaction) is actually rendered
- 5The original obligation is discharged upon satisfaction
Landmark Cases
Foakes v. Beer
9 App. Cas. 605 (H.L. 1884)
Established the rule that payment of a lesser amount cannot constitute satisfaction of a liquidated, undisputed debt due to lack of consideration.
Kibler v. Frank L. Garrett & Sons, Inc.
168 S.E.2d 407 (W. Va. 1969)
Illustrates that accord and satisfaction is effective for disputed or unliquidated claims where the compromise itself constitutes consideration.
Marton Remodeling v. Jensen
706 P.2d 607 (Utah 1985)
Applied accord and satisfaction to a construction dispute where the contractor cashed a check marked 'payment in full' for a disputed amount.
Exam Tips
- Distinguish between liquidated (fixed, undisputed) and unliquidated or disputed obligations—the consideration analysis differs.
- For a disputed claim, cashing a check marked 'payment in full' typically constitutes accord and satisfaction.
- Remember that the original obligation is not discharged until satisfaction—the accord alone only suspends it.
- Distinguish accord and satisfaction from novation: in novation, the original duty is immediately extinguished; in accord, it is discharged only upon performance.
Common Mistakes to Avoid
- Assuming that paying a lesser amount always constitutes accord and satisfaction—for a liquidated, undisputed debt, this fails for lack of consideration.
- Confusing accord and satisfaction with novation—the timing of discharge is different.
- Forgetting that if the accord is not performed, the obligee can enforce either the original obligation or the accord agreement.
Memory Aid
Accord = Agreement to take something different. Satisfaction = Actually doing it. No satisfaction, no discharge—the original deal comes back to life.