a legal agreement whereby two parties agree to execute a contract based on conditions that differ from the original terms or amount of the claim or contract. An accord is an agreement between two partners to settle a contract or debt using a completely different term than initially agreed but still considered settled.
An accord comes into play when you want to settle a debt, perform an obligation, or provide a client with a product or service in a different way than initially agreed upon, and the second party agrees to this new arrangement. Reaching an accord means that the recipient agrees to accept another product or service from you than what you had previously offered; as long as you fulfil this new performance, the old contract remains suspended. You can consider the old agreement fulfilled when you satisfy the terms in the accord, but when you fail to perform the new agreement's dictates, the receiving party can claim the former deal's value or compensation. Since an accord is a substitute for a prior arrangement, it also comes with the basic features of a legitimate agreement or contract, including:
- Involvement of at least two parties
- Legal subject matter
- Offer and acceptance
- Fulfilment and consideration
When you breach an accord agreement, the same laws apply as in a breach of contract because you failed to satisfy the terms, and so, the injured party can take legal actions against you. You can also consider an accord as an agreement within an agreement. Instead of abandoning a contract altogether, you and the other party involved can create an accord agreement to fulfil that agreement, which will resolve the overall arrangement. You can use an accord agreement to settle a contract dispute or debt negotiations.
If you're involved in a contract with someone and fail to fulfil your end of the agreement, the receiving party can take legal actions against you to force compensation for the unfulfilled promise. However, you can agree on an accord to solve the dispute without going to court. You can use an accord as a form of compromise that will benefit you and the other party when you cannot fulfil the contract's original terms. When you reach an accord to discharge a debt, you as the creditor will still receive some payment for the debt while the debtor will benefit by not being held to the total obligation.
Examples Of Accord
You can apply accord to everyday life as well as corporate finance. For example, you want to renovate your home, and you hire a contractor to do it for $20,000. The contractor requires a $7,000 down-payment, $7,000 during the renovation process, and $6,000 upon completion of the renovation.
However, when they finish the renovation, you find the work shoddy and refuse to pay the balance. You and the contractor can reach an accord whereby you agree to pay $2,000. Essentially, you're getting a discount on the price of the shoddy construction in return for giving up your right to sue. The renovator is paying $4,000, so you don't sue him and give up his right to sue for the total $6,000.