Accord and satisfaction is a method of discharging a contract or cause of action, whereby the parties agree to give and accept something in settlement of the claim or demand of the one against the other, and perform such agreement, the “accord” being the agreement, and the “satisfaction” its execution or performance.  [i]An accord and satisfaction is distinct from a compromise.  While a compromise should be based on a disputed claim, an accord and satisfaction may be based on an undisputed or liquidated claim.[ii]  The scope of accord and satisfaction is relatively vast and all claims relating to the person or to personal property may be the subject of an accord and satisfaction.[iii]

Accord and satisfaction is based on the doctrine of equity.  Although the doctrine of accord mostly concerns monetary settlements of debts or liabilities, other settlements not involving an exchange of funds can be as equally binding as an accord and satisfaction.  For instance, a partnership dispute could be resolved by accord and satisfaction.[iv]

A claim or demand founded on a tort, or contract is a subject of accord and satisfaction.[v]  Any claim arising out of contract, express or implied, may be the subject matter of an accord and satisfaction.  However, the contract should be a legally enforceable one.[vi]

In a criminal case, once monetary compensation to the victim of an assault and battery or other misdemeanor is acknowledged and accepted, the payment is referred to as an accord and satisfaction.[vii]  To effectuate an accord and satisfaction in a criminal case, the victim need only produce a written acknowledgment that s/he received satisfaction for his/her injury and requests that the charges be dropped.[viii]

Accord ands satisfaction can also arise in the context of real property agreements,[ix] breach of warranty[x] and employment contracts.  In the context of an employment contract,  a substitute agreement may be used to resolve good faith disputes between an employer and employee over the amount of commissions, overtime, salary, or other compensation.[xi]

Any claim arising out of contract, express or implied, may be the subject matter of an accord and satisfaction, provided the contract is not illegal.[xii]  Accord and satisfaction, as a defense to a claim based upon a contract, exists when the parties have entered into a new contract, express or implied, which discharges the obligations under the original contract in a manner otherwise than as originally agreed.  The new agreement need not explicitly state that it is intended to be an accord and satisfaction.  Rather, the court may look to the surrounding circumstances of the new agreement to determine if there has been an agreement to discharge the original obligation.

[i] Automobile Trade Asso. v. Harold Folk Enterprises, Inc., 301 Md. 642, 665 (Md. 1984)

[ii] Eastern Steel Products Corp. v. Chestnutt, 252 N.C. 269 (N.C. 1960)

[iii] Id.

[iv] Adams v. Wilson, 264 Md. 1 (Md. 1971)

[v] Belrose v. Kanitz, 284 Mich. 497, 502 (Mich. 1938)

[vi] Indiana Lumbermen’s Mut. Ins. Co. v. State, 1 S.W.3d 264 (Tex. App. Fort Worth 1999)

[vii] Commonwealth v. Henderson, 434 Mass. 155, 157 (Mass. 2001)

[viii] Id.

[ix]Small v. Chemlawn Corp., 584 F. Supp. 690 (W.D. Mich. 1984), judgment aff’d, 765 F.2d 146 (6th Cir. 1985)

[x] Womco, Inc. v. Navistar Int’l Corp., 84 S.W.3d 272 (Tex. App. Tyler 2002)

[xi] Erickson v. Am. Golf Corp., 194 Ore. App. 672 (Or. Ct. App. 2004)

[xii] Indiana Lumbermen’s Mut. Ins. Co. v. State, 1 S.W.3d 264 (Tex. App. Fort Worth 1999)