Accord and satisfaction is the method of discharging a claim whereby the parties agree to give and accept something in settlement of the claim and perform the agreement. Generally, an agreement for accord and satisfaction is entered into by the parties themselves. However, there may be cases wherein the parties are not personally present to enter into an accord and satisfaction agreement. In such cases, the parties can enter into such an agreement through their authorized agents.
However, when the agent enters into an agreement for accord and satisfaction, there are various things to be kept in mind. The first requirement in such cases is that the agent must have been duly authorized by the principal to enter into the agreement. In the alternative, the principal must ratify the accord and satisfaction agreement entered into on his behalf by the agent. Therefore, in order for an agent to bind a principal to an accord and satisfaction, the agent must have been authorized to enter into the contract on behalf of the principal, or the alleged principal must have ratified the agreement.[i]
In the case of Homemakers Finance Service, Inc. v. Ellsworth[ii], the borrowers gave a deed to their lender’s employee which stated that the deed was given and accepted in full satisfaction of the borrowers’ obligations to the lender, and the employee told the borrowers that he had no authority to accept it but would forward it to the lender’s counsel who then informed the borrowers that the deed and release provisions were unacceptable, possession of the deed and the keys to the property did not constitute an acceptance of an accord. Therefore in this case, the lender was not precluded from bringing an action based on the borrowers’ original obligation.
[i] Mil-Spec Contractors, Inc. v. U.S., 835 F.2d 865 (Fed. Cir. 1987); Eckert-Fair Const. Co. v. Capitol Steel & Iron Co., 178 F.2d 338 (5th Cir. 1949); Kuehne & Nagel, Inc. v. U.S., 17 Cl. Ct. 11, 1989 WL 49849 (1989).
[ii] 177 Ind. App. 640, 380 N.E.2d 1285 (1st Dist. 1978).
