Accord and Satisfaction

Terms:

Accord:
An agreement in which the promisor in a current contract promises to perform a different obligation than the one he is contractually bound to perform and the promisee agrees to accept the different obligation instead of the performance he is entitled to under the current contract.

Satisfaction:
The performance of the Accord by the promisor.

Executory Accord:
An Accord which has not yet been performed.

An Accord is an agreement in which one party to an existing contract agrees to different performance than the performance he is entitled to under the first contract. For example:

Thelma owes Louise $100,000 under a contract. Thelma owns a beach house which she promises to give Louise in settlement of the debt and Louise promises to accept the house in settlement of the debt instead of the $100,000. This new agreement is an Accord.

Satisfaction is the performance of the Accord by the promisor, so that if the Accord is performed, the Accord is said to have been satisfied. Therefore, if Thelma actually gives Louise the beach house and Louise accepts the beach house in settlement of Thelma’s debt, there is satisfaction of their accord.

The satisfaction of an accord discharges both the accord and the original contractual duty. That is to say, if Thelma gives Louise her beach house and Louise accepts it, the accord is satisfied and so is Thelma’s original duty to pay Louise $100,000.

An accord that has not yet been performed is called an Executory Accord.

There are two ways to look at Executory Accords.

(1) The Executory Accord can be considered a substitute contract. That is to say, if the parties to an original contract agree to an Accord, the original contract no longer exists. For example:

Thelma owes Louise $100,000 on a contract. Thelma offers to give Louise her beach house and Louise agrees to accept the beach house in payment of the debt. This new Accord immediately discharges the original contract so that now Thelma does not owe Louise $100,000. Thelma owes Louise a beach house.

Accordingly, if Thelma breaches her Accord with Louise, Louise can sue for the beach house but not for the $100,000. Alternatively, if Louise decides to refuse the beach house as payment of the debt, Thelma can sue Louise to force her to accept the beach house as payment. See Dobias v. White, 80 S.E.2d 23 (N.C. 1954).

(2) An Executory Accord is as an agreement that suspends the obligations under the original contract but does not replace the original contract. For example:

Thelma owes Louise $100,000 due on September 31st. On September 1st, Thelma offers to give Louise her beach house on December 31st in lieu of the $100,000. Louise agrees to accept the beach house in payment of the debt so long as the beach house is delivered by December 31st. This Accord suspends Louise’s rights under the original contract so that between September 31st and December 31st, the time period in which Thelma is supposed to perform the Accord, Louise cannot sue Thelma for the $100,000.

Please note that, because the Executory Accord does not substitute for the original contract but only suspends the promisee’s rights under the original contract, if the promisor breaches the Accord, the promisee can sue the promisor either under the Accord or under the original contract. Thus:

In the above example, if December 31st comes and Thelma does not deliver the deed to the beach house, Louise can sue Thelma either for the $100,000 under the old contract or for the beach house under the new Accord.

Whether an Accord is a substitute for the old contract or not is usually a question of the parties’ intent when they made the accord.