Accord and Satisfaction: Settling Contract Disputes
What Is Accord and Satisfaction?
Accord and satisfaction is a legal concept where two parties resolve a dispute by agreeing to new terms (the accord) and then performing those new terms (the satisfaction). Once both steps are complete, the original obligation is discharged.
In simpler terms, it is a way to settle a disagreement about what is owed by agreeing to something different and following through.
The Two-Part Process
- Accord — The parties agree to a new arrangement that will replace the original obligation. For example, if you owe $10,000 under a contract, the creditor might agree to accept $7,500 as full payment.
- Satisfaction — The new obligation is actually performed. Using the example above, you pay the $7,500. Only when payment is made is the original $10,000 debt discharged.
If the accord is reached but the satisfaction never happens (you never pay the $7,500), the original obligation remains enforceable.
When Accord and Satisfaction Arises
- Disputed debts — The parties disagree about the amount owed and settle on a compromise figure.
- Partial performance issues — One party delivered less than promised, and the other agrees to accept reduced compensation rather than pursue litigation.
- Quality disputes — The delivered goods or services did not meet specifications, and the parties negotiate a price adjustment.
Important Considerations
- The accord must involve genuine consideration — one party cannot simply declare a lower amount without the other's agreement.
- Courts look for clear evidence that both parties intended the new arrangement to replace the original obligation.
- Under the UCC (Uniform Commercial Code), cashing a check marked "payment in full" for a disputed debt can constitute accord and satisfaction.
When to Consult a Lawyer
If someone offers to settle a debt for less than what is owed, or if you receive a check marked "paid in full" for a disputed amount, consider consulting an attorney before taking action. Cashing that check or accepting reduced payment could discharge the entire original obligation.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.