2015-10-13
336
In addition to discharge by complete or substantial performance, a contract may be discharged by:
1 agreement
2 impossibility of performance
3 operation of law.
By agreement
When the parties prepare their contracts, they may agree that it will terminate:
a) on a specified date or upon the expiration of a specified period of time;
b) upon the happening of a specified event;
c) upon the failure of a certain event to happen;
d) when one partner decides to retire from business and gives the required notice.
The parties who have made a contract may later mutually agree to change either the terms of the contract or the nature of their relationship. They may do so without any liability for breach.
By rescission the contracting parties may agree to terminate the existing contract entirely, returning any consideration received and placing the parties in their original positions. Or they may agree that the present contract is not what they want, and so they may replace it with a new one. This is discharge by substitution. The parties may also agree to change the obligation required by the original contract. An agreement to make such a change is known as an accord. Performance of the new obligation is called a satisfaction. A compromise of a disputed claim or a composition of creditors is an accord. Carrying out the new agreement is the satisfaction. Thus, the previous obligation is discharged by an accord and satisfaction. Also, a contract can be terminated, and a new one formed, through novation.
