7. Changes to Contract Terms

Question 1

RESCISSION:

Answer 1

Rescission of contract serves to discharge duties under contract:

♣ Occurs when parties agree to rescind their contract.
♣ Agreement to rescind is itself a new, binding contract supported by consideration.

Question 2

RESCISSION:

Limitations

Answer 2

♣ Mutual recission may be made orally
• EXCEPTION: writing required if the contract to be rescinded is subject to the statute of frauds

♣ Parties cannot rescind a contract if the rights of a third party beneficiary have vested

Question 3

RESCISSION:

Unilateral Rescission

Answer 3

♣ When only one party wants to rescind contract

• Usually only granted where there is a defense to contract enforcement or formation (e.g. mistake, misrepresentation, duress, lack of consideration)

Question 4

Modification

Answer 4

♣ Parties agree to discharge original contract terms in favor of new terms

♣ Requirements:
• 1. Mutual assent: mutual assent of the parties; and
• 2. Consideration: generally found to be present because each party has limited her right to enforce the original contract.

♣ UCC: no consideration required for a good-faith modification
• Modification must be in writing if it falls within the SoF

Question 5

Novation

Answer 5

♣ Parties agree to substitute a new party to perform
• Parties create a new contract substituting a new party, who gets benefits and assumes duties that belonged to an original party to the contract
♣ Requiremetnts:
• 1. All parties, including new party, agree to the new contract; and
• 2. New contract extinguishes contract duties between original parties
♣ The original party is excused from performance and no longer has any contract obligations or liabilities.

Question 6

Accord

Satisfaction:

Answer 6

Accord and satisfaction occurs when both parties to an existing contract agree to accept different performance in satisfaction of the original existing obligation.

♣ Accord: agreement to accept alternative performance in satisfaction of the existing obligation

♣ Satisfaction: completion of the alternative performance

Question 7

Effects of Accord and satisfaction:

Answer 7

♣ Excuses the original obligation
♣ If the accord is not satisfied, a party may sue on either the original obligation or the accord
• BUT an accord suspends the original agreement until satisfaction (parties cannot sue under the original agreement if there has been an accord)