Paralegal Advanced Competency Exam (PACE) Practice Exam

What does "accord and satisfaction" refer to?

1. A settlement of a dispute that includes an admission of guilt

2. A process by which one party accepts compensation in lieu of contract enforcement

3. The initial agreement made before considering legal action

4. A formal change made to an existing contract

The correct answer is: A process by which one party accepts compensation in lieu of contract enforcement

"Accord and satisfaction" refers to a legal concept where one party agrees to accept performance different from what was originally agreed upon, as a way to resolve a dispute without proceeding with enforcement of the original contract. This concept emphasizes the idea that a new agreement, or "accord," is made that provides an alternative to the original obligations. The "satisfaction" part involves the acceptance of that new agreement, where the party may agree to receive a lesser amount of payment or a different form of consideration than what was initially owed, thus settling the existing dispute. In this context, it’s important to understand that while it resolves a disagreement, it does not imply an admission of guilt or liability by the party providing the alternative compensation. The other choices pertain to different concepts; for instance, an admission of guilt would not fit the definition of accord and satisfaction, nor would a formal change to an existing contract, which typically involves all parties agreeing to amend the original terms rather than resolving a dispute through a new agreement.