Chapter 12. Discharge By Assent Or Alteration (273-287)

Question 1

A, whom B owes $1,000 for goods delivered, gives B a signed writing that states, “I hereby irrevocably give, transfer, assign and release my right to the $1,000 that you owe me.” Is B’s debt discharged?

Answer 1

B’s debt is not discharged. Compare § 284 with § 332(1)(a). Restatement 2d of Contracts § 273(a)

Question 2

A pays B $1,000 in return for B’s promise to paint a landscape for A. Before B is to begin, A says, “I don’t want the painting, but you can keep the $1,000.” B relies on A’s statement by making conflicting commitments to do other work. Is B’s duty discharged?

Answer 2

B’s duty to A is discharged. Compare § 275. Restatement 2d of Contracts § 273(b)

Question 3

A contracts to sell to B a particular machine that B has in his possession as bailee in return for B’s promise to pay $1,000. Before B pays the $1,000, A says, “You can keep the machine as a gift.” Is B’s duty discharged?

Answer 3

Since A has made an effective gift of the machine to B, B’s duty to pay for it is discharged. Compare § 276. Restatement 2d of Contracts § 273(b)

Question 4

A makes B a promise to pay $1,000 that is enforceable because it is in a sealed writing delivered to B (§ 95). B redelivers the writing to A and says “You don’t owe me anything.” Is A’s duty discharged?

Answer 4

A’s duty to pay B is discharged. Restatement 2d of Contracts § 274(a)

Question 5

A makes a written contract with B under which B pays A $15,000 and promises to pay A $10,000 more for land conveyed by A. Later A gratuitously delivers to B the written contract, signed by B, with the expressed intent of discharging B’s duty to pay the balance of the price. Is B’s duty discharged?

Answer 5

B’s duty to pay A the $10,000 is discharged. Restatement 2d of Contracts § 274(a)

Question 6

A and B make a contract under which A promises to sell land to B and B promises to pay A $100,000. A delivers to B a deed to the land, saying as he does so, “This is a gift.” Is B’s duty discharged?

Answer 6

B’s duty to pay A $100,000 is discharged. Restatement 2d of Contracts § 275(a)

Question 7

A and B make a contract under which A promises to build a fence and B promises to pay A $1,000. As A begins to build the fence, he says to B, “The price we agreed on was too high, and you need pay only $900 for the fence.” A then builds the fence. Is B’s duty discharged?

Answer 7

B’s duty to pay A to the extent of $100 is discharged and B owes A only $900. See also § 89. Restatement 2d of Contracts § 275(a)

Question 8

A and B make a contract under which A promises to convey title to land by a warranty deed. A tenders a deed to B under which A warrants only against incumbrances made or suffered by himself. B, when paying the price, tells A, “That is all right, I will accept it as full performance instead of a warranty deed.” Is A’s duty discharged? How might it be otherwise?

Answer 8

A’s duty to convey good title to the land is discharged. If B remains silent, without more, however, A’s duty is not discharged. Restatement 2d of Contracts § 275(a)

Question 9

A contracts to sell to B a particular machine that A has in his possession. B pays the price but before B takes delivery, he says to A, “I give you that machine.” Is A’s duty discharged?

Answer 9

A’s duty to deliver the machine is discharged. Restatement 2d of Contracts § 276(a)

Question 10

A and B make a contract under which A promises to employ B and B promises to work for A for six months beginning on June 1. After B has begun work, A wrongfully discharges B. B writes A, “I am glad to leave you and I give up any right to sue you.” Are A’s duties discharged?

Answer 10

A’s duty to pay B damages for total breach is discharged. A’s duty to pay B wages earned during the time B has worked is not discharged. Restatement 2d of Contracts § 277(b)

Question 11

A contracts to sell and B to buy wheat to be delivered on June 1. A fails to deliver the wheat on that day. After sufficient delay to discharge B’s remaining duties of performance, B writes A, “Since you are so late in delivery, I cancel our deal and waive all my rights against you.” Is A’s duty discharged?

Answer 11

A’s duty to pay B damages for total breach is discharged. Restatement 2d of Contracts § 277(b)

Question 12

A and B make a contract under which A promises to build a house on B’s land and B promises to pay A $50,000. A fails to follow the plans in some particulars, giving B a claim against A for damages for partial breach. After B takes possession of the house, he gives a signed writing to A stating, “I do not care about these specified defects in your performance. you have done pretty well on the whole, and I am satisfied with the house.” Is A’s duty discharged?

Answer 12

A’s duty to pay B damages for partial breach is discharged. As to B’s right to restitution, see § 253. Restatement 2d of Contracts § 277(b)

Question 13

A and B make a contract under which A promises to build a house on B’s land and B promises to pay A $50,000. A fails to follow the plans in some particulars, giving B a claim against A for damages for partial breach. Before B takes possession of the house, he orally states to A, “I do not care about these specified defects in your performance. you have done pretty well on the whole, and I am satisfied with the house.” Is A’s duty discharged?

Answer 13

A’s duty to pay B damages for partial breach is discharged. The result does not depend on whether or not B has paid the price in full before his renunciation. As to B’s right to restitution, see § 253. Restatement 2d of Contracts § 277(c)

Question 14

A and B make a contract under which A promises to employ B and B promises to work for A for six months. After B has begun work, he commits a breach of the contract giving A a claim for damages for partial breach. A says, “Never mind, I excuse that failure in view of your generally excellent performance,” and B continues to work for A. Is A’s claim discharged? How might it have been otherwise?

Answer 14

A’s claim for damages for partial breach is discharged. The result would be different if A’s renunciation occurred after B had finished working for A. Restatement 2d of Contracts § 277(c)

Question 15

A and B make a contract under which A promises to build a house on B’s land and B promises to pay A $50,000. A fails to follow the plans in some particulars, giving B a claim against A for damages for partial breach. After B takes possession of the house, he orally states to A, “I do not care about these specified defects in your performance. you have done pretty well on the whole, and I am satisfied with the house.”Is A’s duty discharged? How might the court hold otherwise?

Answer 15

A’s duty to pay damages for partial breach is not discharged. If, however, A relied on the statement by moving from the site men and material that might have been used to remedy the defects, a court might hold that A’s reliance was such that his duty to pay B damages for partial breach was discharged. Restatement 2d of Contracts § 277(d)

Question 16

A owes B $1,000. A offers B a machine in full satisfaction of his debt, and B accepts it. Is A’s debt discharged?

Answer 16

A’s debt is discharged. The result is the same if, before accepting the machine, B writes A that he does not accept it in full satisfaction of the debt. Restatement 2d of Contracts § 278(a)

Question 17

A owes B $1,000. C offers B a machine in full satisfaction of A’s debt, and B accepts it. Is A’s debt discharged?

Answer 17

A’s debt is discharged. Restatement 2d of Contracts § 278(b)

Question 18

A owes B a liquidated and undisputed matured debt of $1,000. A offers B $500 in full satisfaction of the debt, and B accepts the $500. Is A’s debt discharged?

Answer 18

A’s debt is discharged only to the extent of $500. Restatement 2d of Contracts § 278(c)

Question 19

A owes B a liquidated and undisputed matured debt of $1,000. C, a third person––instead of A––offers B $500 in full satisfaction of the debt, and B accepts the $500. Is A’s debt discharged?

Answer 19

A’s debt is discharged in full. Restatement 2d of Contracts § 278(c)

Question 20

A is under a duty to deliver a tractor to B on July 1. On June 1, A offers to deliver a bulldozer to B on July 1 if B will accept his promise in satisfaction of A’s duty to deliver the tractor, and B accepts. Is there a contract? Are A’s duties discharged?

Answer 20

The contract is a substituted contract. A’s duty to deliver the tractor is discharged. If A does not deliver the bulldozer, B can enforce the duty to deliver it but not the original duty to deliver the tractor. Restatement 2d of Contracts § 279(a)

Question 21

A and B make a contract under which A promises to build on a designated spot a building, for which B promises to pay $100,000. Later, before this contract is performed, A and B make a new contract under which A is to build on the same spot a different building, for which B is to pay $200,000. Is there a contract? Are A and/or B’s duties discharged?

Answer 21

The new contract is a substituted contract and the duties of A and B under the original contract are discharged. Restatement 2d of Contracts § 279(a)

Question 22

A owes B a liquidated and undisputed matured debt of $1,000. A offers to pay B $500 in 30 days if B will accept his promise in full satisfaction of the debt, and B accepts. Is A’s debt discharged?

Answer 22

A’s debt is not discharged. See Illustration 3 to § 278. Restatement 2d of Contracts § 279(b)

Question 23

A is under a duty to deliver a tractor to B on July 1. On June 1, A offers to deliver a bulldozer to B on July 1 if B will accept his promise in satisfaction of A’s duty to deliver the tractor. A by fraudulent misrepresentations induces B to make the contract for delivery of the bulldozer. What recourse does B have?

Answer 23

B may avoid the substituted contract and enforce the original contract, or he may enforce the substituted contract. Restatement 2d of Contracts § 279(b)

Question 24

A owes B $1,000. B promises A that he will discharge the debt immediately if C will promise B to pay B $1,000. C so promises. Is A’s duty discharged? Why?

Answer 24

There is a novation under which B’s and C’s promises are consideration for each other and A is discharged. Restatement 2d of Contracts § 280(d)

Question 25

A owes B $1,000. B promises C that he will discharge the debt immediately if C will promise him to pay him $1,000. Intending to benefit A, C so promises. Is A’s duty discharged? Why?

Answer 25

There is a novation under which B’s and C’s promises are consideration for each other, and A’s duty to pay B is discharged. A is an intended beneficiary of B’s promise (§ 302) and can by disclaimer render the transaction, including the discharge, inoperative from the beginning (§ 306). The result is the same if B’s promise is made in return for C’s promise to pay $500. See Illustration 4 to § 278. Restatement 2d of Contracts § 280(d)

Question 26

A owes B a duty to service B’s machine for a year. A sells part of his business to C, who promises A that he will assume A’s duty to B if B promises to accept it immediately and in substitution for A’s duty. B so promises A. Is B’s duty discharged? Why?

Answer 26

There is a novation under which B’s and C’s promises are consideration for each other, and A’s duty to service B’s machine is discharged. B is an intended beneficiary of C’s promise (§ 302), but cannot disclaim because he has assented. The result is the same if B’s promise is made to C. Restatement 2d of Contracts § 280(d)

Question 27

A owes B $1,000. B promises A that he will discharge the debt immediately if A will promise C to perform stated services to C. A so promises C. Is A’s duty discharged? Why? What would make it otherwise?

Answer 27

There is a novation under which A’s and B’s promises are consideration for each other and A’s duty to pay B is discharged. If B’s promise were to discharge A when A performed the services, there would be an accord rather than a novation. Restatement 2d of Contracts § 280(e)

Question 28

A owes B $1,000. Intending to benefit C, B promises A that he will discharge the debt immediately if A will promise him to perform stated services to C. A so promises B.

Answer 28

There is a novation under which A’s and B’s promises are consideration for each other and A’s duty to pay B is discharged. C is an intended beneficiary of A’s promise (§ 302) and can by disclaimer render the transaction, including the discharge, inoperative from the beginning. Restatement 2d of Contracts § 280(e)

Question 29

A owes B $1,000 and B owes C $1,000. A promises B and C that he will assume B’s debt to C if B promises to discharge A’s debt to B and if C promises to discharge B’s debt to C and accept A as his debtor. B and C so promise. Is A’s duty discharged? What about B’s duty? Why?

Answer 29

There is a novation under which A’s promise and B’s and C’s promises are consideration for each other, and A’s debt to B and B’s debt to C are discharged. Restatement 2d of Contracts § 280(f)

Question 30

A and B make a contract under which A promises to deliver a tractor to B and B promises to pay A $1,000. A promises to deliver a bulldozer to C and to discharge B’s duty if B promises to discharge A’s duty and C promises to pay A $2,000. B and C so promise. Is B’s duty discharged? Why?

Answer 30

There is a novation and A’s duty to deliver a tractor to B and B’s duty to pay $1,000 are discharged. Restatement 2d of Contracts § 280(f)

Question 31

A owes B $10,000. They make a contract under which A promises to deliver to B a specific machine within 30 days and B promises to accept it in satisfaction of the debt. Does A have a duty? What happens to A’s debt? Why?

Answer 31

The contract is an accord. A’s debt is suspended and is discharged if A delivers the machine within 30 days. Restatement 2d of Contracts § 281(b)

Question 32

A owes B $10,000. In consideration of $10 paid by A, not as part of the debt, B promises to accept in satisfaction of the debt a specific machine from A within 30 days. Does A have a duty? What happens to A’s debt? Why?

Answer 32

The contract is an accord. A’s debt is suspended for 30 days and is discharged if A delivers the machine within 30 days, although A is under no duty to deliver the machine. Restatement 2d of Contracts § 281(b)

Question 33

A, B and C, who are creditors of D, enter into a voluntary composition with D under which D promises to pay and A, B and C promise to accept 50% of their debts in full satisfaction. What happens to D’s debt? Why?

Answer 33

The composition is an accord. D’s debts are suspended and are discharged if D pays the 50%. Restatement 2d of Contracts § 281(b)

Question 34

A owes B $10,000. In consideration of $10 paid by A, not as part of the debt, B promises to accept in satisfaction of the debt a specific machine from A within 30 days. A fails to deliver the machine within 30 days and tells B that he will not deliver it. What recourse does B have?

Answer 34

B can enforce either the original $10,000 debt or the duty to deliver the machine. Restatement 2d of Contracts § 281(b)

Question 35

A owes B $10,000. In consideration of $10 paid by A, not as part of the debt, B promises to accept in satisfaction of the debt a specific machine from A within 30 days. A tenders the machine within 30 days, but B refuses to receive it. What recourse does A have?

Answer 35

If B then sues on the original $10,000 debt, A can obtain a decree of specific performance providing for the concurrent delivery of the machine and the discharge of the debt. Restatement 2d of Contracts § 281(c)

Question 36

A contracts with B to have repairs made on A’s house, no price being fixed. B sends A a bill for $1,000. A honestly disputes this amount and sends a letter explaining that he thinks the amount excessive and is enclosing a check for $800 as payment in full. B, after reading the letter, indorses the check and deposits it in his bank for collection. Is B’s action binding? Why?

Answer 36

B is bound by an accord under which he promises to accept payment of the check as satisfaction of A’s debt for repairs. The result is the same if, before indorsing the check, B adds the words “Accepted under protest as part payment.” The result would be different, however, if B’s claim were liquidated, undisputed and matured. See § 74. Restatement 2d of Contracts § 281(d)

Question 37

A regularly sells goods to B. From time to time B returns some of the goods for credit and makes payments for the rest. At the end of each month, A sends B itemized statements of B’s outstanding balance. One of the statements incorrectly gives an outstanding balance of $5,500 because of A’s oversight in failing to debit B with a $1,000 delivery and to credit B with a $500 payment both made during the preceding month. Before either mistake is discovered, B writes A that the statement is “correct.” What recourse does A have? What, if anything, does B owe to A?

Answer 37

There is an account stated, but it does not prevent A from proving the $1,000 delivery or B from proving the $500 payment. B owes A $6,000. Restatement 2d of Contracts § 282(c)

Question 38

A regularly sells goods to B. From time to time B returns some of the goods for credit and makes payments for the rest. At the end of each month, A sends B itemized statements of B’s outstanding balance. One of the statements incorrectly gives an outstanding balance of $5,500 because of A’s failure to credit B with a $1,000 payment that was stolen by one of A’s employees. B writes A that the statement is “correct” without verifying it, and the resulting delay in discovering the mistake prevents A from obtaining restitution from the employee. What recourse does B have? What, if anything, does B owe to A?

Answer 38

B is precluded from showing the mistake. B owes A $5,500. Restatement 2d of Contracts § 282(c)

Question 39

A regularly sells goods to B. From time to time B returns some of the goods for credit and makes payments for the rest. At the end of each month, A sends B itemized statements of B’s outstanding balance. One of the statements incorrectly gives an outstanding balance of $5,500 because of A’s failure to credit B with a $1,000 payment that was stolen by one of A’s employees. B holds on to the statement, and the resulting delay in discovering the mistake prevents A from obtaining restitution from the employee. What does B’s unreasonable retention manifest? What, if anything, does B owe to A?

Answer 39

B’s retention of the statement for an unreasonable time is a manifestation of assent to it. B owes A $5,500. Restatement 2d of Contracts § 282(c)

Question 40

A and B make a contract under which A promises to paint B’s house and B promises to pay A $1,000. A finds, after beginning the work, that he will lose more money by finishing than by giving up at once and makes B an offer to rescind the contract. B accepts. Is any party’s duty discharged?

Answer 40

There is an agreement of rescission and the duties of both A and B are discharged. Restatement 2d of Contracts § 283(a)

Question 41

A and B make a contract under which A promises to paint B’s house and B promises to pay A $1,000. After A has finished the work, B’s financial condition has become impaired, and A tells B, “You need never pay me the $1,000 that you owe me.” Is B’s duty discharged?

Answer 41

There is no agreement of rescission and B’s duty to pay A $1,000 is not discharged. The result is the same if the original contract results from B’s offer to pay A $1,000 if A paints B’s house and A’s acceptance by doing the work. Restatement 2d of Contracts § 283(a)

Question 42

A and B make a contract under which A promises to sell B land for $100,000, payable in five installments of $20,000 each. B pays the first installment and takes possession under the contract. A and B then make an agreement of rescission. What will determine whether A’s duty is discharged?

Answer 42

Whether A has a duty to return the $20,000 payment, either in full or less the fair rental value of the land for the time that B was in possession, is a question of interpretation of the agreement of rescission. Restatement 2d of Contracts § 283(c)

Question 43

A owes B $1,000. B delivers to A, in a state where the seal retains its effect, a sealed writing stating that B releases A from the debt. Is A’s duty discharged?

Answer 43

The writing is a release. A’s duty to pay B is discharged whether it was due when the release was given or not. The result is the same if the release is not under seal but is supported by consideration. Restatement 2d of Contracts § 284(b)

Question 44

A owes B $1,000. B delivers to A, in a state where the seal retains its effect, a sealed writing stating that B releases A from the debt if B dies before it is due. How might A’s debt be discharged?

Answer 44

The writing is a conditional release. The debt is discharged if B dies before it is due. Restatement 2d of Contracts § 284(b)

Question 45

A, who is engaged in business transactions with B, receives from B a writing supported by consideration stating that B releases A from all debts that A owes or may in the future owe to B. One month later B sells goods to A, for which A promises to pay $10,000. With respect to debts not yet in existence, the writing is not a release but a contract to discharge A. Does A have a duty?

Answer 45

The subsequent inconsistent contract operates as a modification of this earlier contract and A is under a duty to pay B $10,000. Restatement 2d of Contracts § 284(b)

Question 46

A and B are bound jointly to pay C $1,000. C delivers to A a writing supported by consideration stating that C releases A from the debt but that C reserves his rights against B. Why might this release not be interpreted as a release?

Answer 46

If a release of A would discharge B under the rules stated in § 294, the writing will be interpreted as a contract not to sue and not as a release. Restatement 2d of Contracts § 284(c)

Question 47

A owes B $1,000 payable immediately. B assigns his right to C, receiving in return C’s promise not to sue A for one year. Is this binding?

Answer 47

C cannot maintain an action against A before the end of the year. Restatement 2d of Contracts § 285(a)

Question 48

A and B make an integrated agreement for the sale of goods to be delivered by A for which B is to pay the price of $1,100 on July 1. A fraudulently erases “July 1” and substitutes “June 1.” Is B’s duty discharged? Why?

Answer 48

The alteration is both fraudulent and material, and B’s duty is discharged. Restatement 2d of Contracts § 286(b)

Question 49

A and B make an integrated agreement for the sale of goods to be delivered by A for which B is to pay the price of $1,100 on July 1. A fraudulently erases $1,100 and substitutes “$1,000” to enable him to sue in a local court whose jurisdiction is limited to claims not exceeding $1,000. Is B’s duty discharged? Why?

Answer 49

The alteration is both fraudulent and material, and B’s duty is discharged. Restatement 2d of Contracts § 286(b)

Question 50

A and B make a partially integrated agreement for the sale of goods to be delivered by A for which B is to pay the price of $1,100 on July 1. The agreement contains a blank for the amount of interest if the price is not paid when due. A fraudulently and without authority from B inserts “8%‘ although they had agreed on 6%. Is B’s duty discharged? Why?

Answer 50

The insertion without authority is an alteration that is both fraudulent and material, and B’s duty is discharged. Restatement 2d of Contracts § 286(b)

Question 51

A and B sign a memorandum that satisfies the Statute of Frauds with respect to their oral contract for the sale of land from A to B for $10,000, the date of closing to be July 1. B fraudulently erases “July 1” and substitutes “June 1.” Is A’s duty discharged? Why?

Answer 51

The alteration is both fraudulent and material, and A’s duty is discharged. Restatement 2d of Contracts § 286(b)

Question 52

A and B sign a memorandum that satisfies the Statute of Frauds with respect to their oral contract for the sale of land from A to B for $10,000, the date of closing to be July 1. B innocently erases “July 1” and substitutes “June 1,” in the erroneous belief that they agreed on June 1 and that the words “July 1” are the result of a mistake. Is A’s duty discharged? Why?

Answer 52

Because the alteration, although material, is not fraudulent, A’s duty is not discharged, and A is bound by the contract made before the alteration. Restatement 2d of Contracts § 286(b)

Question 53

A and B sign a memorandum that satisfies the Statute of Frauds with respect to their oral contract for the sale of land from A to B for $10,000, the date of closing to be July 1. C, with whom B has left the writing for safekeeping, fraudulently erases “July 1” and substitutes “June 1” with the fraudulent intent of aiding B. Is A’s duty discharged? Why?

Answer 53

Because the alteration, although fraudulent and material, is not made by one to whom a duty is owed under the contract, A’s duty is not discharged, and A is bound by the contract without the alteration. Restatement 2d of Contracts § 286(b)

Question 54

A and B make an integrated agreement under which B promises to employ A for one year from the date of the contract at a stated monthly salary. B fraudulently erases “one year” and substitutes “two years.” A, on learning of the alteration, writes B, “I shall be glad to work for you for two years at the stated salary.” Is there a contract? Why?

Answer 54

Although the alteration was both fraudulent and material, A’s manifestation of assent is equivalent to an acceptance of an offer by B to employ A for two years, and both A and B are bound by a contract on those terms. Restatement 2d of Contracts § 287(a)

Question 55

A and B make an integrated agreement under which B promises to employ A for one year from the date of the contract at a stated monthly salary. B fraudulently erases “one year” and substitutes “two years.” A, on learning of the alteration, tells B over the telephone, “I shall be glad to work for you for two years at the stated salary.” Is there a contract? Why?

Answer 55

A’s assent is not enforceable against him because of the Statute of Frauds (§ 130). Restatement 2d of Contracts § 287(a)

Question 56

A and B make an integrated contract for the sale of goods to be delivered by A for which B promises to pay a price of $1,000. A fraudulently erases “$1,000” and substitutes “$1,100.” B, on learning of the alteration, writes A that he must deliver the goods as promised. Is there a contract? Why?

Answer 56

Although the alteration is both fraudulent and material, A can enforce the contract against B. Restatement 2d of Contracts § 287(b)

Question 57

A and B make an integrated contract for the sale of goods to be delivered by A for which B promises to pay a price of $1,000. A fraudulently erases “$1,000” and substitutes “$1,100.” B, on learning of the alteration, writes A that he forgives the alteration. Is there a contract? Why?

Answer 57

Although the alteration is both fraudulent and material, A can enforce the contract against B. Restatement 2d of Contracts § 287(b)