Accord and satisfaction occurs when there is an agreement (accord) between two parties (an obligor and an obligee) for alternative performance to discharge a pre-existing duty, and the obligor subsequently completes such performance (satisfaction). Accord and satisfaction is an affirmative defense. See, e.g., Rose Inn of Ithaca, Inc. v. Great American Ins. Co., 75 A.D.3d 737 (N.Y. App. Div. 2010).
An accord and satisfaction is one way around the common law pre-existing duty rule, under which performance of an obligation already owed cannot be adequate consideration for a change to an existing contract (or the creation of a new one), making the agreement voidable. To be effective, the alternative performance must be different in some way, and mere partial completion of the existing obligation does not suffice.
- For example, if Party A owes Party B $100 cash, a later agreement to accept $75 cash is voidable by Party B because it is merely a partial performance of the existing duty. If, on the other hand, the parties make a later agreement for payment in the form of concert tickets, there is a valid accord and satisfaction when the tickets change hands, even if the tickets are worth less than $100, because the tickets are new consideration to support the second agreement.
Accord and satisfaction is distinct from contract modification, which immediately discharges a pre-existing duty under an existing contract between the parties. Accord and satisfaction does not discharge the pre-existing duty until the alternative performance occurs, and there may not always be existing privity of contract between the parties (e.g., when the obligee is a third-party beneficiary).
As it concerns the law of negotiable instruments in the United States, accord and satisfaction by instrument is governed by Section 3-311 of the Uniform Commercial Code (U.C.C.).
[Last reviewed in October of 2024 by the Wex Definitions Team]