A. What is a discharge by agreement of the parties? List and summarize the situations where a contract is discharged by such an agreement. b. What is a discharge by operation of law? Name situations where a contract is discharged by operation of law


a. Discharge by agreement of the parties occurs when the parties to the contract agree to discharge each other from performance under the contract. The parties may do this by rescission, by substituted contract, by an accord and satisfaction, or by novation. Mutual rescission is an agreement between the parties to terminate their respective duties under the contract; it is a contract to end a contract. A substituted contract is a new contract accepted by both parties in satisfaction of their duties under the original contact. 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 a satisfaction, and it discharges the original duty. 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 with a new one.
b. Discharge by operation of law is the termination of contractual duties by operation of law rather than through the actions of one or both of the parties to the contract. Discharge by operation of law may occur by reason of subsequent illegality, impossibility of performance, destruction of the subject matter, the occurrence of supervening circumstances which make impossible the fulfillment of the purpose both parties had in mind (frustration of purpose), and bankruptcy. The running of the period of the statute of limitations does not operate to discharge the obligation, but it bars the creditor's right to bring an action.

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