This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
The definitions of accord and satisfaction are of two different types. In the earlier definition the emphasis is laid upon the satisfaction alone, rather than upon the accord and satisfaction as two distinct ideas. "Accord is a satisfaction agreed upon between the party injuring and the party injured, which, when performed, is a bar of all actions upon this account."1 In other definitions emphasis is laid upon the idea of the accord as distinct from the satisfaction. An accord is said to be an agreement between two persons, one of whom is under some legal liability to another, which may grow either out of tort or out of contract, by which the party who is subject to such liability agrees to give to the other, or to forbear for the other, some legal right in satisfaction of such original legal liability; and satisfaction is said to be the performance of the accord.2
"From this definition it follows that there must have been (1) a previous valid obligation; (2) an agreement of all the parties thereto, to the new contract or obligation; (3) an agreement that it was an extinguishment of the old contract or obligation; and (4) that the fact must be that the new contract or obligation was a valid one between the parties thereto. Pope v. Vajen, 121 Ind. 317, 330, 22 X. E. 308. 6 L. R. A. 688; Morris v. Whitmore. 27 Ind. 418; McCIellan v. Robe, 03 Ind. 298; Clark v. Biilings, 59 Ind. 508." Hopkins v. Jordan, - Ala. - , 77 So. 710.
3 See Sec. 2547 et seq.
4 See ch. LXXXI.
5 Monitor Drill Co. v. Mercer. 163 Fed. 943, 20 L. R. A. (N.S.) 1065; Kins-man v. Stanhope, 50 Mont. 41, L. R. A. 1916C. 443, 144 Pac. 1083; Morecraft v. Allen, 78 N. J. L. 729, L. R. A. 1915B, 1, 75 Atl. 920; Stuckey v. Middle States Loan, Bldg. & C. Co., 61 W. Va. 74, 8 L. R. A. (N.S.) 814, 55 S. E. 996.
6 Hughes v. Mattes. 104 La. 218, 28 So. 1006.
7State Bank v. Sewing Machine Co.. 99 Va. 411, 39 S. E, 141.
8 Henry v. Caruthers, 196 111. 136. 63 X. E. 629 [affirming, 95 111. App. 562]; In re Gardner's Estate, 199 Pa. St. 524, 49 Atl. 346.
1 3 Blackstone's Comm., 15.
The difference between these two types of definition is rather one of emphasis, however, than of substance. The first definition is never so construed as to permit the injured party to terminate liability by offering or delivering something in satisfaction of his liability, unless the adversary party agrees to accept the thing thus offered.3 On the other hand, the other definition does not mean that there must necessarily be two separate transactions at separate times; the first by which the accord is entered into, and the second by which the accord is performed and satisfaction is rendered. If a thing is offered as a satisfaction, and it is so received, the transaction amounts to an accord and satisfaction, although there has been no prior accord.4
Accord and satisfaction is therefore a means by which a prior liability of some sort is discharged by voluntary agreement. It is a form of discharge by new contract; but it is distinct from the ordinary types of such discharge for two reasons. On the one hand, it is a means of discharge which applies to tort as well as to contract. On the other hand, accord and satisfaction, considered historically,5 antedates the simple executory contract, and accordingly it operated as a discharge of pre-existing liabilities long before such liabilities could be discharged by the ordinary form of new contract. For these reasons the distinction between the ordinary type of new contract and accord and satisfaction is still insisted upon, although as will be seen subsequently,6 the original distinction between accord and satisfaction, and discharge by new contract, after simple executory contracts were recognized at common law, is gradually disappearing.
2 Colorado. Colorado Tent & Awning Co. v. Denver Country Club, - Colo. - , 176 Pac. 494.
Illinois. Canton Union Coal Co. v. Parlin & Orendorff Co., 215 111. 244, 106 Am. St. Rep. 162, 74 N. E. 143.
Kansas. Harrison v. Henderson, 67 Kan. 194, 100 Am. St. Rep. 386, 62 L. R. A. 760, 72 Pac. 875; Lantry Contracting Co. v. Atchison, T. & S. F. Ry. Co., 102 Kan. 799, 172 Pac. 527.
Missouri. Zinke v. Knights of the Maccabees, 275 Mo. 660, 205 S. W. 1.
New York. Reilly v. Barrett, 220 N. Y. 170, 115 N. E. 453.
Ohio. Frost v. Johnson, 8 Ohio 393; Ellis v. Bitzer, 2 Ohio St. 89.
Wisconsin. Rettinghouse v. Ashland, 106 Wis. 595, 82 N. W. 555.
See also, Swan v. Great Northern Railway Co., - N. D. - , L. R. A. 1918F, 1063, 168 N. W. 657.
"To constitute a valid accord and satisfaction, there must be two debts contracted, one of which must precede the other in point of time, and be extinguished by the substitution of the latter in performance or acceptance." Gunn v. Fryberger, - Okla. - . 176 Pac. 248.
"An accord and satisfaction is said to be an agreement between two persons, one of whom has a right of action against the other, that the latter should do or give, and the former accept, something in satisfaction of the right of action different from, and usually less than, what might be legally enforced. When the agreement is executed, and the satisfaction has been made, it is called an 'accord and satisfaction.' " Reliance Life Insurance Co. v. Garth, 192 Ala. 91, 68 So. 871 [cited in Brown v. Lowndes County, - Ala. - , 78 So. 815].
On the subject of accord and satisfaction generally, see Accord and Satisfaction, by Samuel Williston, 17 Harvard Law Review, 459.
3 See Sec. 2503.
While it is sometimes said that accord and satisfaction presupposes a dispute of some sort, and is therefore in effect a compromise of a disputed claim,7 this is never taken as literally true. Many cases of accord and satisfaction are undoubtedly cases involving disputes as to the existence or the amount of the claim.8 At the same time this is by no means an essential element of accord and satisfaction. If a legal right which amounts to a valuable consideration is offered, and accepted as satisfaction of a pre-existing claim, an accord and satisfaction exists, although the preexisting claim was undisputed and although the amount thereof was liquidated.9 Emphasis on a previous dispute is made in cases in which there is no new and additional consideration for the accord and satisfaction, and in which, therefore, the consideration must be found in the compromise of an existing dispute, if the accord and satisfaction is to be upheld.
Colorado. Colorado Tent & Awning Co. v. Denver Country Club. - Colo. - , 176 Pac. 494; Stanley-Thompson Liquor Co. v. Southern Colorado Mercantile Co., - Colo. - , 178 Pac. 677.
Illinois. Canton Union Coal Co. v. Parlin & Orendorff Co., 215 111. 244, 106 Am. St. Rep. 162, 74 N. E. 143; Janci v. Cerny, 287 111. 359, 122 N. E. 50*7.
Maryland. Seheffenacker v. Hoopes, 113 Md. 111, 20 L. R. A. (N.S.) 205, 77 Atl. 130.
Missouri. Zinke v. Knights of the Maccabees, 275 Mo. 660, 205 S. W. 1.
Ohio. Seeds, Grain & Hay Co. v. Conger, 83 O. S. 169, 32 L. R. A. (N.S.) 380, 93 N. E. 892.
5 See Sec. 2502.
6 See Sec. 2515.
7 "An accord is an agreement, an adjustment, a settlement of former difficulty, and presupposes a difference, a disagreement, as to what is right. A satisfaction, in its legal significance in this connection, is a performance of the terms of the accord. If such terms require a payment of a sum of money, then that such payment has been made. "In this case there is no evidence of any disagreement between the parties prior to the sending of the account and remittance accompanying it. Plaintiff in error contends, however, that, because such remittance was denominated 'a balance,' its acceptance constituted an accord and satisfaction, and cites a number of authorities where courts have held that a remittance made as a balance, and the acceptance of the same, amounted to an accord and satisfaction. These cases have all been carefully examined, and in every one there appears to have been a prior disagreement, a contention as to what amount was due, so that a remittance, being denominated a balance, carried with it to the creditor, as a fair conclusion, that it was intended by the debtor to be in full of all demands. Without the requirement being made by the debtor that, if the creditor accepts and retains the proffered amount, he must do so in full satisfaction of his demand, or "without accompanying and surrounding circumstances fairly indicating that such was the purpose and object of the debtor in making the remittance, a creditor can not be said so to have accepted a payment. To constitute an accord and satisfaction in law, dependent upon the offer of the payment of money, it is necessary that the money be offered in full satisfaction of the demand or claim of the creditor, and be accompanied by such acts or declarations as amount to a condition that, if the money be accepted, it is to be in full satisfaction, and be of such character that the creditor is bound so to understand such offer." Harrison v. Henderson, 67 Kan 194, 100 Am. St. Rep. 386, 62 L. R. A. 760, 72 Pac. 875.