DOCTRINE OF ACCORD AND SATISFACTION SIMPLIFIED

By K. Prasanna
B.A. LL.B. (Hons.) National Law University, Lucknow
The doctrine of accord and satisfaction is one of the more essential elements of contractual
jurisprudence. It is one of the more common ways of discharge of contracts. But there is also
great confusion while understanding this concept. This article is an attempt to simplify the
concept so as to avoid ambiguities in its understanding in the law of contracts.
Accord and satisfaction is the purchase of a release from an obligation which may be arising
under contract or tort by means of any valuable consideration, not being the actual performance
of the obligation itself. The accord is the agreement by which the obligation is discharged. The
satisfaction is the consideration which makes the agreement operative. The consideration may be
executory. To take a simple example, suppose there is a debt obligation for Rs. 1,000 payable in
one year. The creditor puts a condition that the debtor would be released if he can pay Rs. 500 in
say, seven months. The performance of this condition of paying Rs. 500 in seven months can
release the debtor from further obligation. Thus, we can say that accord and satisfaction is a
method of discharge of contract. In fact, accord and satisfaction has been held to be a really good
defense against an action for non-performance of a contract. The defense in such cases is not that
the contract has come to an end but that its breach has been satisfied by accord and satisfaction.
Now, we will specifically deal with the doctrine of accord and satisfaction in accordance with
Section 63 of the Indian Contract Act, 1872.

Section 63- Every promisee may dispense with or remit, wholly or in part, the performance of the
promise made to him, or may extend the time for such performance, or may accept instead of it
any satisfaction which he thinks fit.
In Snow View Properties Ltd. v. Punjab & Sind Bank it was held thatDischarge by "accord and satisfaction" means, that the contract is discharged by reason of
performance of certain substituted obligations. The agreement by which the original obligation is
discharged is the accord, and the discharge of the substituted obligation is the satisfaction. A
contract can be discharged by the same process which created it, that is, by mutual agreement. A
contract may be discharged by the parties to the original contract either by entering into a new
contract in substitution of the original contract; or by acceptance of performance of modified
obligations in lieu of the obligations stipulated in the contract.
In case of an accord and satisfaction, the oblige agrees to forego part of the obligation in
exchange for some consideration from the obligor. The consideration is intended to be the
obligors performance of the new promise. The old agreement exists until the performance is
completed and can be revived if the same is not completed.
There is no accord and satisfaction in cases where the acceptance is not made freely for the full
and final settlement. Mere accord without satisfaction is not enough to discharge the liability
arising on account of the breach of contract. Equitable considerations may arise on part
performance of the accord and the parties cannot be restored to their initial position they had
before such performance.
In order to distinguish it from a substituted contract, we must have a look at section 62 of the
same Act.

Section 62- If the parties to a contract agree to substitute a new contract for it, or to rescind or
alter it, the original contract need not be performed.
Before understanding the difference, we have to first understand the concept of novation as given
in the Indian Contract Act, 1872.
Novation as under Section 62 has been defined as that by which there already being an existing
contract, a new agreement takes place to substitute the existing one, with the mutual
consideration being the discharge of the old contract. This is one of the ways of accord and
satisfaction. It comprises of two elementsa. Discharge of one debt or debtor
b. Substitution of a new debt or debtor
In case of a substituted contract, parties may rescind their old contract at any time and enter into
a new contract. They mutually discharge their duties under the old contract and accept the new
duties. Each promise in this contract is a good consideration for the other. Thus in such a case, a
new contract is separately entered into with new obligations. The old contract no longer exists,
but is extinguished as soon as the new contract is entered into.
To distinguish between the two concepts, the courts consider the following1. Whether the parties formed the new contract before the breach of the original.
2. If after the breach, whether the breach was disputed
3. If after the breach, the amount claimed for the breach was liquidated or not.
In cases of 1 it is a substituted contract and in cases of 2 and 3, it is accord and satisfaction.

This doctrine gives a very invaluable way of discharge as it can lead to peaceful settlement of
disputes between parties in cases of breach of the contract. In fact this doctrine is based on the
principles of mutual consent and compromise and can reduce the number of cases that come to
the courts in the instances where there is a breach of sorts. It is a very strong law but is also
subject to the proof of circumstances. This doctrine is not as ambiguous as it may seem and as
seen in many legal systems, this is an important method of discharge of contractual obligations.
This law is fully developed and needs no more change and is a good law.

BIBLIOGRAPHY:
1. Statute referred:
Indian Contract Act, 1872 [Act No. 9 of 1872]
2. Books referred:
a. Pollock and Mulla, Indian Contract & Specific Relief Acts, Volume 1, Thirteenth
Edition, Lexis Nexis Butterworths, 2006.
b. P C Markanda, Law of Contract, Volume 1, Second Edition, 2008.
c. Chitty on Contracts, Sweet and Maxwell, Thirtieth Edition, 2008.
3. Web source:
a. A

primer

on

accord

and

satisfaction,

Scott

J.

Burnham,

Ref.

at

http://www.papers.ssrn.com/sol3/papers.cfm?abstract_id=1960127 (accessed on 31st

July,2013)
b. www.scconline.co.in (accessed on 1st August, 2013)
c. www.manupatra.com (accessed on 1st August, 2013)