In Oregon, an “accord” is an agreement between two parties to give and accept something in satisfaction of a right of action that one has against the other, which when performed is a bar to all actions upon the account.[i] An “accord and satisfaction” is a method of discharging a contract, or settling a cause of action arising either from a contract or a tort, by substituting for such contract or cause of action an agreement for the satisfaction thereof and an execution of such substituted agreement.
An accord and satisfaction may occur in one of two ways such as:
- The two parties may first make an accord executory, a contract for the future discharge of the existing claim by a substituted performance still to be rendered. There is said to be an accord and satisfaction when this executory contract is fully performed as agreed. Thereafter, the previously existing claim is discharged.
- A debtor may offer the substituted performance in satisfaction of his/her debt and the creditor may receive it, without any binding promise being made by either party.[ii].
Moreover, to constitute a valid accord and satisfaction, it is also essential that what is given or agreed to be performed shall be offered as a satisfaction and extinction of the original demand, that the debtor shall intend it as a satisfaction of such obligation, and that such intention shall be made known to the creditor in some unmistakable manner.[iii]
[i] State ex rel. Bayer v. Funk, 105 Ore. 134 (4th Cir. S.C. 1921)
[ii] McDowell Welding & Pipefitting, Inc. v. United States Gypsum Co., 345 Ore. 272 (Or. 2008)
[iii] Coover v. G & J Electric, Inc., 285 Ore. 247 (Or. 1979)