Key Takeaways

  • An accord is a legal agreement where one party agrees to accept an alternative performance in place of the original contractual duty.
  • An executory accord is not binding until the new obligation is performed; once satisfied, both the original duty and the accord are discharged.
  • Accord and satisfaction occurs when the alternative performance is completed, settling disputes or claims outside of court.
  • This concept promotes compromise, helping parties avoid litigation, reduce costs, and resolve contract disputes efficiently.
  • Courts generally require clear intent, consideration, and mutual assent for an accord to be enforceable.

The accord legal definition is an agreement between two parties that satisfies a contract dispute by discharging an original contract duty and providing an alternate performance of the agreement. The word accord is used as a synonym for the word treaty. This is often an agreement to drop criminal prosecution if another condition is satisfied.

Elements of an Accord

With an accord, the wronged party is restored property that another party wrongfully dispossessed in exchange for a promise to not pursue legal action. An accord agreement must be specific, and both parties must be privy to the contract.

An accord also occurs if one party agrees to accept a different obligation in place of the original obligation stated in the contract. An accord is considered executory if its obligations have not yet been performed.

For example, if one party promises to settle a debt to another party with real estate instead of cash as originally agreed to in the contract, this would be considered an accord. The accord is satisfied once the promised real estate has been transferred.

When an accord is satisfied, it discharges both the accord itself and the original agreement.

Enforceability of an Accord

For an accord to be legally enforceable, it must meet all basic requirements of contract law. These include:

  • Mutual assent: Both parties must clearly agree to the new terms.
  • Consideration: The new performance must provide some value, even if it differs from the original obligation.
  • Clarity of terms: Courts require that the substituted performance is specific and unambiguous.

If these elements are not present, the accord may be deemed invalid. Courts are cautious to ensure that parties did not merely negotiate but actually intended to settle their contractual obligations under the new terms.

Substitute Contract

The executory accord is considered to substitute for the original contract. In the example above, once the accord is reached, the original agreement no longer exists. This means the person who accepted real estate to settle the debt can sue if that promise is not met. However, he or she cannot sue for the agreement to settle the debt with cash, since that contract was discharged by the accord and no longer exists. If the party changes his or her mind about accepting the real estate, the other party can sue for breach of contract to force him or her to do so.

Difference Between Accord and Contract Modification

It is important to distinguish between an accord and a contract modification:

  • Accord: Suspends or replaces the original obligation with a new one, which is enforceable only upon performance.
  • Modification: Immediately alters the terms of the existing contract, discharging the prior obligation without requiring new performance.

For example, if a debtor offers to pay a lesser sum and the creditor agrees, this is a modification. But if the creditor accepts a car in place of money, it is an accord until the car is delivered.

Agreement That Suspends Obligations

If an executory accord sets out a promise to be fulfilled at a later date, the rights under the original contract are said to be suspended. Returning to the above example, suppose the original contract was set to be settled with cash on December 1. The executory contract establishes that this cash payment will be replaced with real estate to be delivered by December 31.

During December, the rights under the original contract are suspended. The party cannot sue for breach of contract unless the real estate is not delivered by December 31 as agreed. If this occurs, the breaching party can be sued for either the cash payment or the real estate in question, but not until January 1 or later.

Practical Uses of an Accord

Accords are commonly used in real-world scenarios where the original contract terms cannot be met. Examples include:

  • Debt settlements: A creditor may accept a reduced payment as full satisfaction.
  • Business disputes: Companies may agree to substitute goods or services to avoid litigation.
  • Employment claims: Employers and employees sometimes use accord agreements to resolve wage disputes.

In these cases, the accord provides a pathway to settlement without lengthy legal proceedings, saving time and money for both sides.

Accord and Satisfaction Basics

While a contract modification automatically discharges a previously existing duty, an accord and satisfaction does not discharge the duty in question until the agreed-upon alternate contract performance is executed. Accord and satisfaction can be used for any implied or express contract.

An accord and satisfaction is also considered a legal contract and must contain all required contract elements, including:

Accord and satisfaction can also be used to satisfy breach of contract claims outside of court. This commonly occurs with the purchase of a release from debt or in debt negotiations when the original agreement is revised. This could include, for example, smaller but more frequent payments, a lower interest rate, a lower repayment amount, or another alternative arrangement.

However, in this situation, if the new terms are not met, the party is responsible for meeting the terms of the original agreement. That is because the previous contract was suspended but not replaced.

Legal Consequences of Accord and Satisfaction

When an accord is fully performed—creating accord and satisfaction—it discharges both the original obligation and the accord itself. This has several legal consequences:

  • The creditor or claimant cannot revive the original claim.
  • The debtor or defendant is protected against further liability on the matter.
  • Courts will dismiss related lawsuits if the accord and satisfaction can be proven.

However, if the substituted performance is not carried out, the creditor may choose to enforce either the original contract or the accord, depending on the circumstances.

Accord and Satisfaction Benefits

This solution is favored because it is a compromise that benefits both parties if a situation arises in which the original contract terms cannot be upheld. In the case of a debt, for example, the creditor receives partial payment while the debtor receives partial relief. This could also occur if a homeowner is unsatisfied with renovations and agrees to make only a partial payment in exchange for subpar work. The contractor accepts the lower payment in exchange for an agreement that the homeowner will not sue. This accord replaces the original contract.

Limitations and Risks of an Accord

While accords are valuable tools for dispute resolution, they also have limitations:

  • Incomplete performance risk: If the substituted performance is not delivered, the non-breaching party may face delays in enforcement.
  • Ambiguity: Vague or poorly drafted accords may result in litigation over intent.
  • Creditor disadvantage: Accepting less than originally owed may not always be financially beneficial.

For these reasons, parties are encouraged to draft accord agreements carefully and seek legal advice before entering into them.

Frequently Asked Questions

1. What is an accord in simple terms?

An accord is an agreement where one party agrees to accept a substitute performance instead of enforcing the original contract obligation.

2. How is accord different from accord and satisfaction?

An accord is the agreement to substitute performance; accord and satisfaction occurs once the substitute performance is completed.

3. Is consideration required for an accord?

Yes. Like any valid contract, an accord requires consideration—something of value exchanged between the parties.

4. Can an accord be oral, or must it be written?

An accord can be oral unless the underlying contract falls under the Statute of Frauds, which requires certain contracts to be in writing.

5. What happens if an accord is not satisfied?

If the substitute performance is not delivered, the non-breaching party may sue either under the original contract or for breach of the accord, depending on the situation.

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