Monday, February 28, 2005
CREDITWRENCH and legal terms
In a discussion this past July, CREDITWRENCH CEO Bill Bauer stated "sometimes the accord and satisfaction is also known as a novation." Not at all true!
An accord is an agreement by parties bound to a contract to allow a change of performance required under the contract, but does not extinguish the original contract.
For example: Say you took out a loan of $3000 and agreed to repay it in monthly payments of $300. At a later point in time you are unable to pay $300, but you can pay $150. If the creditor agrees now to take monthy payments of $150, that is an accord. If you continue to pay the $150 until the total amount payable is paid back, you then have satisfied the accord. Hence the term "accord and satisfaction".
An accord itself is an enforceable contract. And, if you fail to live up to the terms of the accord the creditor can choose to enforce either the original contract or the accord; it's their choice.
However, as long as you live up to the terms of the accord, the original contract is not enforceable.
A novation, on the other hand, completely replaces and extinguishes an original agreement. If the terms of the new agreement aren't met, only the terms of the new agreement can be enforced. There is no way the orginal contract can ever be enforced once a novation takes place.
CREDITWRENCH CEO Bill Bauer stating that an accord and satisfaction is sometimes called a novation is false and misleading.
An accord is an agreement by parties bound to a contract to allow a change of performance required under the contract, but does not extinguish the original contract.
For example: Say you took out a loan of $3000 and agreed to repay it in monthly payments of $300. At a later point in time you are unable to pay $300, but you can pay $150. If the creditor agrees now to take monthy payments of $150, that is an accord. If you continue to pay the $150 until the total amount payable is paid back, you then have satisfied the accord. Hence the term "accord and satisfaction".
An accord itself is an enforceable contract. And, if you fail to live up to the terms of the accord the creditor can choose to enforce either the original contract or the accord; it's their choice.
However, as long as you live up to the terms of the accord, the original contract is not enforceable.
A novation, on the other hand, completely replaces and extinguishes an original agreement. If the terms of the new agreement aren't met, only the terms of the new agreement can be enforced. There is no way the orginal contract can ever be enforced once a novation takes place.
CREDITWRENCH CEO Bill Bauer stating that an accord and satisfaction is sometimes called a novation is false and misleading.
