Accord and satisfaction in United Kingdom

Accord and satisfaction in the Business Encyclopaedia and Legal Adviser

Based on the Business Encyclopaedia and Legal Adviser , by W.S.M. Knight, Barrister –at – Law.

Accord and Satisfaction is a satisfaction agreed upon between the party having a claim, and the party from whom the claim is due. When the agreement is performed, the satisfaction is complete; and that, together with the accord, is a valid defence to all actions in respect of the claim. Unless the accord and satisfaction is by agreement under seal, it must rest upon a valuable consideration. accordingly, where one Wane owed Cumber £15. Cumber, being anxious to settle the matter, told Wane he would accept £5. The latter thereupon gave his creditor a non-negotiable promissory note for the £5. Afterwards Cumber sued Wane for the residue of £10, and got it. This result was based upon the fact that the agreement to accept the smaller sum in satisfaction of the larger, was of no effect, being without consideration. But whenever there is a benefit, or legal possibility of one, to the creditor, the case is different. accordingly, where the payment is of something of a different nature though of less value, e.g. an old picture (which may or may not have a fancy value) may be satisfaction of a debt of 1910C.). So also, a negotiable instrument, as a negotiable bill or cheque, instead of payment in cash—even though the amount of the bill or cheque is less than that of the debt. So also, payment though less in amount than the debt, but at a different place or at an earlier date. By payment under bankruptcy, too; and so when it can be proved that the difference in amount is a gift, or the amount of a counter-claim, or set-off.

If, however, the claim of Cumber against Wane had been in respect of a sum the amount of which was unliquidated, such as damages for injuries, the result would have been different. In such cases, any sum of money may be given and taken in full satisfaction—the receipt not even being under seal. And such an accord and satisfaction would be a complete answer to the action. But in the light of a recent case, it would now be unwise to rely alone upon the rule as above. In such cases, where the person liable wishes to settle with the claimant, he should see that the latter has at the time independent legal advice; a knowledge of the present state of his case, as well as future possible developments; and generally a full appreciation of the whole effect of a complete settlement such as the one proposed.