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Accord and Satisfaction

Accord and Satisfaction

What Is Accord and Satisfaction?

An accord and satisfaction is a legal contract by which two gatherings consent to discharge a tort claim, contract, or other liability for an amount in light of terms that contrast from the original amount of the contract or claim. Accord and satisfaction is additionally used to settle legal claims prior to carrying them to court.

Figuring out Accord and Satisfaction

The accord is the agreement based on the new conditions of the contract, and the satisfaction is the performance of those terms according to the agreement. At the point when there is an accord and satisfaction, and the performance (or satisfaction) has been executed, all prior claims connecting with the matter are smothered.

Accord and satisfaction is a concept from contract law that normally applies to the purchase of a release from a debt obligation.

An accord and satisfaction might happen in debt talks. For instance, Company A has a credit agreement with a bank that is coming down on its balance sheet. The bank works with Company An and the original credit agreement is updated. The new terms could permit Company A to make a bigger number of more modest payments, to repay the debt at a lower interest rate, to repay an amount not exactly the original obligation, or another arrangement.

If, for reasons unknown, Company A doesn't deliver on the new conditions, it very well might be at risk for the original contract since it didn't fulfill the terms of the accord. An accord and satisfaction doesn't supplant the original contract; rather, it suspends that contract's ability to be implemented, gave that the terms of the accord are fulfilled as agreed upon.

Benefits of Accord and Satisfaction

An accord and satisfaction can be utilized as a form of compromise that benefits the two players when the original terms of a contract can't be upheld out of the blue. At the point when an accord and satisfaction is reached to discharge a debt, the creditor actually gets some payment of the debt, while the debtor benefits from not being held to the full obligation.

This can apply to daily existence as well as corporate finance. For instance, a homeowner employs a contractor to redesign their kitchen for $30,000. The contract requires a $12,000 down payment, $10,000 paid during the renovation interaction and the leftover $8,000 to be endless supply of the kitchen. In any case, when the kitchen is complete, the homeowner tracks down the work trashy and won't pay.

An accord and satisfaction can be reached by which the homeowner consents to pay $3,000. Basically, they are getting a discount on the price of the disgracefully built kitchen in return for surrendering their right to sue.

The contractor is paying $5,000 to try not to be sued by the homeowner, and surrenders their right to sue for the full $8,000. The two players surrender something to limit their downside liability.


  • In the event that a party neglects to satisfy the new terms of an accord and satisfaction then they may at last be obligated for the more rigid terms of the original contract.
  • The accord is the agreement based on the new conditions of the contract, and the satisfaction is the performance of those terms according to the agreement.
  • An accord and satisfaction is another agreement that suspends the terms of an existing agreement for another one.
  • However long the gatherings in an accord and satisfaction meet the new terms, the previous agreement stays suspended.