<Tr> <Td> <Ul> <Li> </Li> <Li> </Li> <Li> </Li> </Ul> </Td> </Tr> <Ul> <Li> </Li> <Li> </Li> <Li> </Li> </Ul> <P> Accord and satisfaction is a settlement of an unliquidated debt . For example, a builder is contracted to build a homeowner a garage for $35,000 . The contract called for $17,500 prior to starting construction, to disburse $10,000 during various stages of construction, and to make a final payment of $7,500 at completion . At completion, the homeowner complained about inferior work quality and refused to make the final payment . After a mutual settlement agreement, the builder accepted $4,000 as full payment . Thereby, a new contract was formed by offer, acceptance, and consideration . The consideration is that for a $3,500 savings, the homeowner gives up that which he is entitled, a well - constructed garage . The builder gives up his right to full price to avoid suit for inferior performance . When accord and settlement has occurred, the homeowner and builder have given up his right to sue for more money under this settlement agreement . </P> <P> Another example would be where a lender agrees to lend $100,000 at 5.0% interest for 30 years, and at the closing the loan documents are all drawn up for a loan with a 6.0% interest rate . If the lender agrees to reduce the closing costs by an extra $1000 and the borrowers agree, then there has been an accord and satisfaction . If the borrowers later sue for breach of contract, the settlement (offer and acceptance of the $1000) constitutes an accord and satisfaction and is a valid defense to the borrower's lawsuit . </P>

What is accord and satisfaction in contractual terms
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