Clark v. Elza

Brief Fact Summary.

Clark and Elza were involved in car accident but agreed to settle.

Synopsis of Rule of Law.

An agreement to settle that discharges a preexisting claim will be treated an executory accord which will only suspend the duty under the preexisting claim unless there is clear and convincing evidence otherwise.

Facts.

Clark and the Elzas were involved in a car accident. However, the parties agreed to settle the matter which discharged any tort claim that could be brought by the Elzas. However, the Elzas later changed their mind and decided they wanted to proceed with the tort claim. Clark filed a motion to enforce the settlement agreement but the trial court ruled the parties only agreed to an executory accord and thus the Elzas could proceed with their tort claim

Issue.

Whether an agreement to settle that discharges a preexisting claim will be treated an executory accord which will only suspend the duty under the preexisting claim unless there is clear and convincing evidence otherwise.

Held.

Yes. An agreement to settle that discharges a preexisting claim will be treated an executory accord which will only suspend the duty under the preexisting claim unless there is clear and convincing evidence otherwise.

Discussion.

When parties settle to discharge a preexisting claim it is referred to as an executory accord, which does not discharge that preexisting claim until the promised performance has been performed. However, if the parties merely intend to create a substitute contract then that will discharge the claim immediately. Here, the parties did not intend to immediately release each other from the preexisting claim because under the settlement agreement, the Elzas were still required to sign a release, which means the parties claims were not immediately discharged.