An Accord and Satisfaction clause records that parties agree to accept some new performance (or payment) in place of the original obligation, thereby settling a dispute or claim. Key is to state that upon fulfilling the “accord” (e.g. pay a lesser sum, perform substitute service), it satisfies all claims arising from the original contract or incident. Include clarity that if the accord (new obligation) isn’t performed, the original rights revive (or other consequence). Also often accompanied by a mutual release of claims once satisfaction occurs.

Classic example: A debtor owes $100,000. The creditor agrees in writing to accept $70,000 (accord) as full satisfaction. Once paid, the creditor cannot sue for the remaining $30k. Courts have held a cleared check marked “paid in full” can constitute accord and satisfaction if the debt was unliquidated or disputed e.g., cashing a “full payment” check settles the claim by law under UCC §3-311. This is a common trivia point: accord and satisfaction can occur through such actions, so drafters sometimes include clauses preventing accord via unintentional means (e.g. requiring explicit agreement).

The key elements of accord and satisfaction clause in a commercial contract include:

• Mutual Agreement: This clause requires the parties' mutual consent to an alternative resolution, such as different performance or compensation.
• Consideration: It specifies the consideration exchanged as part of the accord, ensuring fairness in the resolution.
• Release of Claims: It typically includes a release clause, absolving parties from further claims related to the original obligation.
• Execution and Performance: This clause outlines the steps required for executing the accord and satisfying the agreed-upon terms.

Examples of accord and satisfaction in a commercial contract include:

• In a debt settlement agreement, an accord and satisfaction clause may allow the debtor to fulfill the obligation through a lump-sum payment, resolving the debt.
• A dispute resolution agreement may contain an accord and satisfaction clause, enabling parties to settle disagreements by agreeing to alternative terms.
• A modification to a contract may include an accord and satisfaction clause, allowing parties to adjust obligations or compensation terms without formal legal action.

The Accord and Satisfaction Clause provides a valuable mechanism for resolving disputes by offering alternative resolutions to contractual obligations. By emphasizing mutual agreement, consideration, release of claims, and execution details, it promotes fair and efficient conflict resolution, fostering contractual harmony.

Jurisdiction specific notes:

• U.S.: Generally enforceable if there’s a bona fide dispute or unliquidated debt and clear agreement that the new performance discharges the old obligation. Some states’ laws (or UCC) require conspicuous statement “paid in full” for check-based accords.
• ‍U.K.: Similar principle; part payment of undisputed debt is not satisfaction without fresh consideration (per Foakes v. Beer), so accord and satisfaction often requires something extra (earlier payment, payment by third party, etc.). Using a deed can circumvent the consideration issue.

‍Practice tip: Always document the accord in writing. In both jurisdictions, include a clause that the settlement is not an admission of liability (important for ESG or reputation management in disputes).