DEFINITION of 'Accord And Satisfaction'
A legal contract whereby two parties agree to discharge a tort claim, contract or other liability for an amount or based on terms that differ from the original amount of the contract or claim. Accord and satisfaction is also used to settle legal claims prior to bringing them to court.
INVESTOPEDIA EXPLAINS 'Accord And Satisfaction'
The accord is the agreement on the terms, and the satisfaction is the performance of the agreement. When there is an accord and satisfaction, and the performance (or satisfaction) has been executed, all prior claims relating to the matter are extinguished.
An accord and satisfaction may occur in debt negotiations whereby the original credit agreement between the bank and Company A is revised (by stretching out payments, or reducing an interest rate) and Company A delivers on the new terms. If for some reason Company A does not deliver on the new terms, it may be liable for the original contract, because it did not satisfy the terms of the accord.
A temporary postponement of mortgage payments.
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