accord and satisfaction

The accord is the agreement by which the creditor agrees to accept a different performance in place of the original obligation; the satisfaction is the actual giving of that performance. Once both are complete, the original claim is discharged and cannot be revived.

English law generally requires fresh consideration, so part payment of a debt does not discharge the whole. Indian law differs: under s.63 of the Contract Act a promisee may dispense with or remit performance wholly or partly, or accept any satisfaction he thinks fit, without consideration. A cheque accepted in full and final settlement, without protest, can therefore discharge a larger claim. Distinguish novation, where a new contract is substituted.

Example

When the supplier accepted Rs. 80,000 as full settlement of a Rs. 1 lakh bill, the debt was discharged by accord and satisfaction under s.63, even though there was no fresh consideration.

In Indian law

• Section 63, Indian Contract Act, 1872 (promisee may dispense with or remit performance)
• Section 62, Indian Contract Act, 1872 (novation, rescission and alteration)

See also

novation · rescission · breach of contract · consideration

Read more in the study notes

• Rule of law and droit administratif (Administrative Law)
• Methods of dispute resolution: adversarial, inquisitorial and ADR (Alternative Dispute Resolution Systems)
• Arbitrators: qualities, appointment, challenge and substitution (Alternative Dispute Resolution Systems)
• Arbitral award and setting aside under section 34 (Alternative Dispute Resolution Systems)
• Enforcement of arbitral awards and foreign awards (Alternative Dispute Resolution Systems)
• Holder and holder in due course, parties to instruments, their liability and payment in due course (Banking Law)