What is an accord and satisfaction?

🤔 Contracts • Excuse of Non-Performance K#136

Legal Definition

An "accord" is an agreement by the parties to accept a to an already existing obligation. A "satisfaction" is the performance of that new "accord" agreement, which discharges both the original contract and the accord contract. The different performance offered under the accord cannot consist of . If the accord is not performed, the other party can recover on either the original obligation or the accord.

Plain English Explanation

Imagine if Bob and Sam entered into an agreement where Bob agreed to pay $100 for Sam to provide 200 tacos. Unfortunately, Sam only has 50 taco-sized tortillas on hand and, due to a global pandemic, it's almost impossible to find them anywhere. In fact, it would cost $200 just to purchase the needed tortillas. Luckily, Sam has plenty of burrito-sized tortillas. However, Sam has no right to substitute a burrito for a taco without Bob agreeing to it. So Sam explains this to Bob and says, "Look, I can't get you 200 tacos, but I'm willing to make you 150 burritos at the same price even though they usually cost twice as much. I'm willing to do this if you rescind our previous agreement." Bob says, "Ok, I agree."

If Bob and Sam were to just agree to discharge their previous agreement and substitute it with a new one, it would be considered a modification. However, by making the first contract rescission conditioned on Sam's performance of the new agreement, it is an accord and satisfaction. That's basically the difference between a "modification" and an "accord and satisfaction."

With an "accord and satisfaction," the "accord" is the new agreement that is proposed, but it doesn't inherently discharge the original agreement. Only when the "satisfaction" is performed does it discharge the prior obligation. In contrast, a "modification" swaps out one agreement with a different agreement.

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