What is an Accord and Satisfaction?

Accord and satisfaction is a legal term that denotes accepting compensation in lieu of some contractual obligation from another party.

How Does an Accord and Satisfaction Work?

An accord is an agreement with conditions. Satisfaction means that the parties to the agreement fulfill their obligations under the accord. When there is accord and satisfaction under a contract, the parties to the contract have fulfilled their obligations and the contract has fulfilled its purpose.

For example, if Company XYZ borrows $1,000,000 from Bank ABC and does not pay it back, there is no satisfaction of the accord yet. If Bank ABC renegotiates the terms of the loan so that Company XYZ has more time to pay, the terms of satisfaction have changed.

Why Does an Accord and Satisfaction Matter?

Accord and satisfaction is typically what discharges a contract or settles a dispute over a contract.

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Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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