Contracts and Sales Multistate Bar Practice Exam

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What does an accord and satisfaction typically involve?

Settling a dispute over performance due
Establishing a new agreement without original terms
Creating an additional liability to the parties
Transferring obligations to a third party

The correct answer is: Settling a dispute over performance due

An accord and satisfaction involves the resolution of a dispute regarding the performance of a contractual obligation. This legal concept is primarily used when one party believes they have not been fully compensated or that there's an issue with the performance under the original contract. In this context, "accord" refers to the new agreement reached by the parties, wherein one party agrees to accept something different from what was originally owed, while "satisfaction" refers to the fulfillment of this new agreement. This process effectively discharges the original obligation by replacing it with the new terms agreed upon in the accord. It is a mechanism to settle disputes, thereby avoiding litigation or further conflict. Therefore, the essence of accord and satisfaction centers around the negotiation of fulfillment to resolve issues that arise during contract performance, making the first option the most fitting explanation. The other options, while they describe relevant contract actions, do not capture the specific interplay of reconciling differences in performance obligations that characterize an accord and satisfaction.