Accord and Satisfaction

In one minute

Accord and satisfaction is a way of ending a claim in tort by agreement. The injured person agrees to accept something different from, or less than, what he could claim. That agreement is the accord. When the promised thing is actually given and accepted, that is the satisfaction.

The claim ends only when both have happened. A promise to pay, not yet kept, leaves the original claim alive. In exams, this is a short note with the executory accord point.

Legal provision

• Section 63, Indian Contract Act, 1872: a promisee may dispense with or remit performance, wholly or in part, extend the time, or accept instead of it any satisfaction which he thinks fit.
• Illustration (b) to section 63: a debtor pays Rs 2,000 of a debt of Rs 5,000 at the proper time and place and the creditor accepts it in satisfaction of the whole debt. The whole debt is discharged.
• Illustration (c) to section 63: a third person pays Rs 1,000 and the creditor accepts it in satisfaction of his claim against the debtor. The whole claim is discharged.
• Section 62, Indian Contract Act: if parties agree to substitute a new contract, the old one need not be performed. Courts use these sections by analogy for claims in tort.

Meaning and definition

Accord is the agreement by which the injured person consents to accept something different from, or less than, his original claim. Satisfaction is the actual giving and accepting of what was agreed. The two together discharge the claim.

A promise to give the substitute, without giving it, is an executory accord. It does not discharge the claim.

Detailed explanation

Step 1: the three parts

1. An existing claim. There must be a claim for a tort, which may be disputed or uncertain.
2. An accord. The injured person freely agrees to take something else, such as a smaller sum, goods, or work.
3. Satisfaction. The substitute is given and accepted.

Step 2: accord without satisfaction

If the repair is promised but never done, the accord is executory. The original claim survives, and Raju may sue for the Rs 40,000. He may instead sue on the promise. The court looks at what the parties meant, and whether the accord was meant to replace the claim at once or only after performance.

Step 3: the Indian rule on part payment

Under section 63 and its illustrations, a creditor who accepts part payment in full satisfaction of a debt is bound, and the whole debt is discharged. English law is stricter. In Pinnel's Case (1602) and Foakes v. Beer (1884), the House of Lords held that payment of a smaller sum does not discharge a larger debt unless something fresh is given in return. The Indian Contract Act departs from this rule.

Step 4: who may give the satisfaction

The substitute may come from a third person, as in illustration (c). The injured person must accept it in satisfaction of the claim.

Step 5: conditions for validity

• The injured person must agree freely. Pressure, fraud or misrepresentation make the accord voidable (sections 15, 16 and 19).
• The injured person must understand that he is giving up the whole claim.
• An uncertain claim can be settled for a fixed sum (illustration (d)).
• A cheque or voucher marked "in full settlement" only has this effect if accepted on those terms.

Don't confuse: accord, satisfaction and release

Point	Executory accord	Accord and satisfaction	Release
What has happened	Only an agreement to accept something else	Agreement and performance	A formal discharge, often for payment
Effect on the claim	Survives until performed	Ends	Ends
Example	A promise to repair a vehicle	The vehicle repaired and accepted	A signed discharge for Rs 3 lakhs

Common mistakes

• Saying an agreement alone ends the claim. Performance is also needed, unless the parties meant the promise itself to replace the claim.
• Applying the English rule of Foakes v. Beer in India. Section 63 allows part payment accepted in full satisfaction.
• Forgetting that a third person's payment can be satisfaction.
• Mixing accord and satisfaction with release.

Apply it

Leading case laws

• Foakes v. Beer (1884), House of Lords

  Facts. A debtor owed a judgment debt and the creditor agreed to take payment by instalments and not to take any proceedings on the judgment. She later claimed interest on the judgment debt.

  Principle. The House of Lords held that a promise to take less than the sum owed, without fresh consideration, does not bind the creditor. This follows Pinnel's Case (1602).

  Why it matters. It is the English rule that section 63 of the Indian Contract Act departs from.

How to write this answer in the exam

Key points to remember

• Accord is the agreement. Satisfaction is the performance. Both end the claim.
• An executory accord leaves the original claim alive.
• Section 63, Contract Act: the promisee may accept any satisfaction he thinks fit.
• Part payment accepted in full satisfaction discharges the whole debt in India.
• English law (Foakes v. Beer) needs fresh consideration.
• Consent must be free.

Quick self-test

Related topics

• Extinction of liability
• Waiver and Acquiescence
• Release
• Joint Liability – Liability of Joint Tortfeasors