Accord and satisfaction is a method of discharging a claim whereby the parties agree to give and accept something in settlement of the claim and perform the agreement. Accord is the agreement and satisfaction is its execution or performance.
Generally, an executed bilateral modification of a government contract that contains no reservation of rights constitutes an “accord and satisfaction”[i]. Whereas, if a person has an unliquidated or disputed claim against a state, county, or municipality and accepts part payment of the claim with knowledge that the claim has not been allowed in full, the payment amounts to a satisfaction of the claim[ii].
The Secretary of the Treasury can compromise any claim arising under custom laws upon a report by a customs officer, United States attorney, or any special attorney if such action is recommended by the General Counsel for the Department of the Treasury[iii].
Likewise, the Secretary of the Treasury can compromise any civil or criminal case arising under the internal revenue laws. The Attorney General or his/her delegate can compromise any such case after referring to the Department of Justice for prosecution or defense[iv].
In Mil Spec Contractors, Inc. v. United States[v], plaintiff submitted claims for additional costs incurred after finishing its work under a government contract. Plaintiff did not receive contingency funds. Plaintiff reached an oral settlement agreement with a negotiator and it was told that the plaintiff will receive the money directly. Contracting officer mailed a prepared contract modification to plaintiff, but plaintiff did not accept. The Armed Services Board of Contract Appeals denied plaintiff’s claim for additional compensation on the ground that an oral agreement to settle the claims constituted an accord and satisfaction. On appeal, the court reversed the earlier judgment holding that there was no valid oral agreement because the negotiator did not have authority to bind the government, and the modification was not signed by plaintiff.
In Kanag’Iq Constr. Co. v. United States[vi], a contractor entered into a contract with the United States Department of Health and Human Services to perform architectural and electrical repairs and renovations on a health service building. The contractor sought additional money for rerouting some wires due to asbestos located in the building. The court observed that the contractor’s letter to the government constituted a claim regarding the rerouting of certain wires under the Contract Disputes Act. But the court added that the letter did not constitute a claim for delay costs.
[i] Kanag’Iq Constr. Co. v. United States, 51 Fed. Cl. 38 (Fed. Cl. 2001)
[ii] Chandler v. State Highway Board, 61 F.2d 601 (5th Cir. Ga. 1932)
[iii] 19 U.S.C.A. § 1617.
[iv] Id
[v] 835 F.2d 865 (Fed. Cir. 1987)
[vi] 51 Fed. Cl. 38 (Fed. Cl. 2001)
