An accord and satisfaction is a method by which parties discharge an existing contract. Accord is a contract between the creditor and the debtor for settlement of the claim by some performance which is different from what is due under the original agreement. The execution or performance of the accord is called satisfaction.
An enforceable accord and satisfaction may arise when a creditor accepts part payment of an unliquidated debt which the debtor tenders in full satisfaction of the debt and the creditor accepts the offer. An accord and satisfaction can also occur when the debtor offers to pay a definite amount or provide a different performance in settlement of a liquidated or undisputed debt and the creditor accepts the same.[i] An executory accord is an agreement for the future discharge of an existing claim by a substituted performance.[ii]
If the accord constitutes a binding contract and it is fully performed or satisfied, the parties will be discharged from the original liability.[iii] An agreement constituting an accord and satisfaction need not be expressed. The court will look into the conduct of the parties to ascertain if the parties had fully performed their duties pursuant to the alleged accord.[iv]
In a scenario where the parties agree that the promise itself will constitute satisfaction of the prior debt, and the new agreement is based on sufficient consideration and is accepted in satisfaction, then it discharges the original claim and is a defense to an action based upon such claim.[v]
[i] Becker v. F & H Restaurant Group, Inc., 413 N.W.2d 202, 205-206 (Minn. Ct. App. 1987)
[iii] Don Kral, Inc. v. Lindstrom, 286 Minn. 37 (Minn. 1970)
[iv] Total Equipment Leasing Corp. v. La Rue Inv. Corp., 357 N.W.2d 347 (Minn. Ct. App. 1984), pet. for rev. denied (Minn. Feb. 19, 1985)
[v] Ward v. Allen, 138 Minn. 1 (Minn. 1917)