Summary of Clark v. Elza
Ct. of App. Maryland, 1979
Pre-existing Duty Rule
Relevant Facts: Pl Elza and his wife were injured in an automobile accident alleged to have resulted from the negligence of dfs Clark and Woodward. The parties verbally agreed upon $9500; the judge was notified of the settlement and the case was removed from the calendar. Df forwarded a release and order of satisfaction to pl atty and later sent a settlement draft. These papers were returned unexecuted with a refutation of the settlement as being no longer adequate. Df found the injuries were more extensive than previously known.
Legal Issue(s): Whether the verbal settlement agreement functioned as an executory accord or a substitute contract?
Court’s Holding: Executory accord.
Procedure: Trial ct refused to enforce a settlement agreement. Df appealed to Ct. of Special Appeals, dismissed “as premature." Df petitioned Ct . of App for certiorari, granted. Reversed special ct. w/ instructions to reverse circuit ct. and remand for further proceedings.
Law or Rule(s): An executory accord is an agreement for the future discharge of a pre-existing claim for performance, and does not discharge the underlying claim until it is performed.
Court Rationale: An executory accord is an agreement for future discharge of an existing claim by a substituted performance. It is presumed that the parties each intended to surrender their old rights and liabilities only upon performance of the new agreement. We agree with the trial ct that this is an executory accord and not a substitute contract. This is supported by a “release," that was to be executed upon performance of the settlement contract. Unless the df neither breaches nor provides a reasonable basis for concluding df will not perform, the pl has no right to enforce the underlying cause of action. The pl’s right to pursue the original cause of action is held in abeyance. If the df breaches or repudiated the settlement the original action may go forward. As such the original action should not have proceeded until the settlement accord was breached or repudiated by the df.
Plaintiff’s Argument: The agreement was an executory accord and not subject to judicial enforcement until after the original cause of action was final.
Defendant’s Argument: The agreement was a substitute contract and if not then as an executory accord it is subject to judicial enforcement.
An agreement to compromise is binding. The agreement was to pay $9500 after, and in exchange for an executed release and satisfaction.