Accord and satisfaction is a defense to breach of contract. The defense of accord and satisfaction exists where the parties to the contract agree that a contract is satisfied, or completed, based on new terms—terms that are different than the terms in the original contract. A finding of accord and satisfaction bars a plaintiff from recovering on a breach of contract action based on the original contract or obligation.
Under Texas law, an accord and satisfaction defense exists when parties agree to discharge an existing obligation in a manner other than based on the terms of their original contract. The defense involves a new contract, either express or implied, through which the original obligation is released by agreement of the parties.
For purposes of the defense of accord and satisfaction, an “accord” is a new agreement in which one party agrees to give or perform something different from what she is obligated to do, and the other party agrees to accept something different from what she is entitled to. “Satisfaction” is the performance of the agreement.
In Texas, the defense of accord and satisfaction will bar a plaintiff from recovering on a breach of contract claim if the following elements are proven:
- The parties disagreed about the original obligations in the contract.
- The parties agreed to discharge the original contractual obligation for a different, usually lesser obligation.
- The new contractual obligation is completed and accepted.
Need assistance in managing the business planning processes? Freeman Law advises clients with corporate and other entity formations and reorganizations. Restructuring entities—through conversions, mergers, and liquidations—can involve particularly complex tax and regulatory considerations. Freeman Law provides experienced tax and business counsel, helping our clients achieve their organizational goals in a tax-efficient manner. Schedule a consultation or call (214) 984-3000 to discuss your corporate structuring or business and tax planning concerns.
