‘Accord and satisfaction’ is a two-pronged legal doctrine which was defined concisely by Gummow J in Thompson v Australian Capital Television Pty Ltd [1996] 186 CLR 574 as consisting of an ‘agreement or consent (accord) to accept something in place of the full remedy to which the recipient is entitled (satisfaction)’.
Through gradual finessing of this principle through case law, three species of this doctrine are said to exist: ‘accord executory’, ‘accord and conditional satisfaction’ in addition to the original and completed ‘accord and satisfaction’. They may be thought of as sitting on a spectrum spanning from a full ‘accord and satisfaction’ to the preliminary stage of ‘accord executory’, with ‘accord and conditional satisfaction’ sitting between the two.
The three variants of this doctrine each give rise to different rights and standing to the respective parties in relation to commencing proceedings, either in relation to the recipient’s original cause of action, or both parties’ standing to sue in relation to the compromise that encompasses the accord and satisfaction.
‘Accord executory’ encapsulates the state of the recipient’s cause of action and rights where the recipient has merely consented to accept the satisfaction in consideration of releasing the other party from the cause of action. This is when the agreement to compromise does not constitute an enforceable agreement and does not give rise to any new rights or obligations pending the performance of the obligation. Secondly, there is accord and conditional satisfaction, where the compromise amounts to an enforceable agreement between the parties and which does give rise to new rights and obligations, but where the new obligation has not yet been performed and thus the original cause of action remains alive. And thirdly, there is full accord and satisfaction, where the recipient has received performance of the new agreement, thus terminating their original cause of action.
The third principle often comes into play when a respondent party in a civil proceeding claims the applicant has abandoned a cause of action against them. When assessing whether accord and satisfaction has taken place, the courts will consider what the parties have agreed to and whether the threshold for an accord and satisfaction has been satisfied. A party to a proceeding labelling a set of facts as accord and satisfaction does not simply make it so. For the requisite threshold to be met, the recipient possessing the cause of action must have first consented that fulfillment of the new obligation will be accepted in place of its cause of action (the accord), and secondly the responding party must perform the new obligation (satisfaction). Until the accord is satisfied, the original cause of action remains alive. Likewise, once both elements of the doctrine have been fulfilled, the recipient’s rights to pursue their original cause of action is extinguished.
Note: This is a general guide only. Circumstances may vary and advice should be sought about your specific circumstances.
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