CH7 The Termination of contracts: Discharge

- Contracts end when:

 one or both parties are discharged from any further obligation under the contract
 one of the parties breached the contract
- Contract discharge:-
1. Discharge by performance
A. Degree of performance:
o If parties have fulfilled their duties under the terms of the contract as promised.
o Tender of performance: offer to perform the obligations of a contract
o Full performance: when both parties do all they agreed to do under a contract
o Substantial (essential) performance: performance in good faith of all the terms of
the contract except the small details of it.
B. Performance to personal satisfaction of another
o If the other person is satisfied with the performance
2. Agreement of parties
o By mutual agreement on the specified date the agreement ends in
o By a new agreement that will discharge or modify the obligations of one or both
parties under the original agreement. [rescission/novation/accord and satisfaction]
A. Rescission: The parties may mutually agree to call off the contract before either party
has performed and revert back to the position they were in prior to forming their
agreement. This is called legally rescind of the contract.
 Rescind: to cancel a contract and return parties to the position that existed prior to
the making of the contract.
A. Novation(substitution of obligation): after entering into a contract the parties may agree
to release one party form the obligation to perform. A new third party would be
substituted who would then assume this obligation by means of a novation. The original
contract is actually terminated and a new contract formed between the remaining party
of the original contract and the new party.
A. Accord and satisfaction:
 Accord: An agreement to accept performance different from that performance in
original contract.
 Satisfaction: performance of the terms of a new agreement resulting from an accord.
3. Operation of law
A. Impossibility: an unforeseen event that prevents a party from performing a contract
as promised
 destruction of the subject matter of the contract
 death, serious illness or other incapacity in a personal services contract.
 change in law.
B. Bankruptcy: A person who is hopelessly in debt
C. Statute of limitation: law fixing a time limit within which lawsuits must be started.
D. Material alteration of a written contract : An alteration is a material change in a
contract’s terms(rights or duties) by one party without the consent of the other
party.
4. Breach of contract
o Anticipatory
o Material