A . List and summarize the situations where a contract is discharged by agreement of the parties. b. List and summarize the situations where a contract is discharged by operation of law
a . Discharge by agreement of the parties may occur by rescission, by substituted contract, by novation, or by an accord and satisfaction. Rescission is an agreement between the parties to end their respective duties under the contract. A substituted contract is a new contract accepted by both parties in satisfaction of the parties' duties under the original contract. A novation is a substituted contract that involves an agreement among three parties to substitute a new promisee for the existing promisee or to replace the existing promisor. An accord is a contract by which an obligee promises to accept a stated performance in satisfaction of the obligor's existing contractual duty. The performance of the accord is the satisfaction, which discharges the original duty.
b. Discharge by operation of law may occur by subsequent illegality, impossibility of performance, frustration of purpose, commercial impracticability, bankruptcy, and the tolling of the statute of limitations. If performance of a contract that was legal when formed becomes illegal because of a subsequently enacted law, the duty of performance is discharged. Objective, not subjective, impossibility discharges contractual duties. Thus, death or illness discharges a person from rendering personal services, and destruction of the subject matter of a contract without the fault of the promisor discharges performance. Frustration of purpose discharges a contract if supervening circumstances make impossible fulfilling the contractual purpose. Under the Restatement and the Code, commercial impracticability, or unforeseen and unjust hardship, excuses nonperformance. Bankruptcy discharges certain contractual duties. The statute of limitations, while not ordinarily discharging contractual obligations, bars a creditor's right to sue.
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